What Happened:
Shares of finance and HR software company Workday (NASDAQ:WDAY) jumped 11% in the afternoon session after the company delivered an impressive "beat and raise" first quarter, surpassing analysts' expectations across key topline metrics such as total billings, total revenue, and subscription revenue. Profitability metrics also came in strong as gross margin and non-GAAP operating income were ahead of Consensus. However, there was a decline in free cash flow margin, which also fell short of estimates. Looking ahead, next quarter's total revenue guidance was roughly inline, though the low end of fiscal 2024 subscription revenue guidance was raised. Additionally, the company maintained fiscal 2024 non-GAAP operating margin guidance of 23%. The company announced Zane Rowe as the new Chief Financial Officer (CFO). He was formerly the CFO of VMware, assuming the position in 2016. Overall, the company demonstrated strong performance driven by solid revenue and profitability while guidance was reassuring. There was also qualitative emphasis in the earnings release on AI capabilities and the commitment to integrating AI throughout the product portfolio.
What is the market telling us:
Workday's shares are somewhat volatile and over the last year have had 15 moves greater than 5%. But moves this big are very rare even for Workday and that is indicating to us that this news had a significant impact on the market's perception of the business.
Workday is up 27% since the beginning of the year. Investors who bought $1,000 worth of Workday's shares five years ago would now be looking at an investment worth $1,650.
Is now the time to buy Workday? Access our full analysis of the earnings results here, it's free.