Quarterly profit and revenue extended long streaks of beats as demand for AI offerings grows.
Shares of Workday Inc. tumbled in after-hours trading Tuesday, as an extension of the company's long streak of quarterly earnings beats was overshadowed by a downbeat outlook for subscription revenue.
The finance and human-resources software company (WDAY) said it now expects fiscal 2025 subscription revenue of $7.703 billion, compared with guidance provided in August of between $7.700 billion and $7.725 billion.
The updated full-year outlook comes as Workday reported fiscal third-quarter subscription revenue that grew 15.8% to $1.96 billion, which was in line with the FactSet analyst consensus.
The stock was down 10% in Tuesday's after-hours session, after closing the regular session up 0.9% at $270.19.
Meanwhile, total revenue for the quarter ended Oct. 31 rose 15.8% from the same period a year ago to $2.16 billion, above the FactSet consensus of $2.13 billion. That marked at least the 21st straight quarter of top-line beats for the company, according to available FactSet data.
"A solid quarter, but overall, believe the lack of raise to the updated [fiscal 2025] guide is giving investors some pause in terms of thinking through potential upside to FY26 growth," Evercore ISI analyst Kirk Materne wrote in a note to clients.
For net income in the quarter, Workday reported growth to $193 million, or 72 cents a share, from $114 million, or 43 cents a share, in the year-earlier period.
Excluding nonrecurring items such as share-based compensation expenses, adjusted earnings per share rose to $1.89 from $1.56, to top the FactSet consensus of $1.71. That was the 10th straight quarter the company beat bottom-line expectations.
Workday said it has been benefiting from growing demand for its artificial-intelligence innovation, which more organizations are using to cut costs, simplify operations and improve the employee user experience.
"AI is top of mind for every CEO right now, and they're all looking for the right partner to guide them through this transformation," said Chief Executive Carl Eschenbach on a postearnings conference call with analysts, according to a FactSet transcript. "That's where Workday comes in."
The stock has slipped 2.1% year to date through Tuesday's close, while the S&P 500 index SPX has rallied 26.2%.
Comments