Workday stock rises as software vendor expands 2027 profit target | Wilnesh News

working day Shares of the financial and HR software maker soared 14% on Friday, a day after it reported fiscal second-quarter results that beat analysts’ expectations and announced plans to further expand adjusted operating margins in 2027.

Here’s how the company performed compared to the London Stock Exchange consensus:

• Earnings per share: Adjusted $1.75, expected $1.65
• income: $2.085 billion vs. $2.071 billion expected

Workday’s revenue rose about 17% annually in the quarter ended July 31, according to one company statement. Subscription revenue grew 17%. Net income was $132 million, or 49 cents a share, up from $79 million, or 30 cents a share, a year earlier.

In terms of guidance, Workday currently expects fiscal 2025 adjusted operating margin to be 25.25%, compared with the forecast it provided of 25% in May.

Workday Chief Financial Officer Zane Rowe said on a conference call with analysts on Thursday that he expects the company’s adjusted operating margin to expand to 30% in fiscal 2026 and 2027, with annual subscription revenue growing 15%. September 2023, working days explain The company targets adjusted operating margins of 25% in fiscal 2027 and subscription revenue growth of between 17% and 19%.

“As we review our product and go-to-market plans, we remain committed to scaling all processes across the company,” said Rowe. “Our growth investments are also becoming increasingly targeted, balancing product development with go-to-market resources.”

Deutsche Bank analysts led by Brad Zelnick raised their 12-month price target on Workday stock to $275 from $265. They have a hold rating on the stock.

“The target of 30% operating margin improvement is a huge upside surprise as it now promises to be faster and bigger than most expected,” the analysts wrote.

Analysts at Citi, Evercore ISI and Piper Sandler also raised their price targets for Workday following the company’s report.

However, conditions were not perfect for the workday. Organizations are still being more cautious than usual before agreeing to sign contracts, Luo said, adding that headcount growth among existing client bases has slowed.

Many other software companies also pointed to tougher economic conditions in recent quarters. But on Friday, Federal Reserve Chairman Jerome Powell said “the time has come for policy adjustments,” suggesting the central bank would lower its benchmark interest rate. This may benefit growing cloud software companies such as Workday. Investors abandoned these assets in 2022 and opted for more defensive investments as they expected rising interest rates to fend off inflation.

WisdomTree Cloud Computing Fund, an exchange-traded fund that includes Workday, rose about 2% in Friday’s trading session.

But Workday CEO Carl Eschenbach stopped short of suggesting market conditions would improve soon.

“In fact, we don’t think the current IT spending environment and our sales environment is just something that has emerged over the past few quarters,” he said. “We think this is the new normal going forward. We’re ready because we have a great product.”

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