Workday beats first-quarter estimates on steady software demand

By Juby Babu

May 21 (Reuters) - ‌Workday exceeded Wall ​Street ​expectations for first-quarter revenue and profit on Thursday, as demand for its AI-powered finance and human resources software services gathered ‌pace, sending its shares up 9% in extended trading.

The company, ⁠which specializes in HR and payroll software, has been adding AI features across its platform, ‌betting that tools to automate ‌tasks, generate job descriptions, or analyze spending patterns will drive customer adoption and deepen usage.

Workday supported 14 million hiring processes with its recruiting ​agent during the quarter, up 44% from a year earlier, Gerrit Kazmaier, president of product and technology, said on a post-earnings call.

The ⁠cloud software provider reported quarterly revenue of $2.54 billion, compared with analysts' average estimate of $2.52 billion, according to ​data compiled by LSEG.

Subscription revenue, a key metric for Workday, jumped 14.3% to $2.35 billion, with net new business driving ​40% of that growth, according to Chief ‌Commercial Officer Rob Enslin.

In March, the company launched Sana from Workday, its conversational AI layer, creating a unified entry ⁠point for executives, managers and employees to retrieve information, initiate tasks, review data and engage with AI agents.

With rivals such as ServiceNow, Salesforce and hyperscalers all ⁠competing for a share of Workday customers' agentic AI spending, it will "need to both ​innovate and differentiate why Workday's AI delivers comparatively more value," said Rebecca Wettemann, CEO of industry analyst firm Valoir.

"This is really critical to Workday breaking out of the ‌SaaSpocalypse narrative."

Advanced coding tools by Anthropic and OpenAI have sparked a selloff in software stocks in recent months, leading ‌to what Wall Street has dubbed "SaaSpocalypse" — a term reflecting the gloom around ⁠software-as-a-service companies.

Workday's quarterly adjusted per-share ‌profit came in at $2.66, ​well above analysts' estimate of $2.51.

The company reiterated its annual subscription revenue forecast.

(Reporting by Juby Babu in Mexico City; Editing by ‌Shilpi Majumdar)

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