Workday (WDAY) Stock Soars on Earnings Beat, Goldman Sachs Sees Acceleration Across All Metrics
Shares of Workday (NASDAQ: WDAY) are up more than 7% in premarket trading Tuesday after the software company reported an upbeat subscription revenue forecast for 2023.
Workday reported Q4 2022 earnings, posting adjusted EPS of 78c, up from 73c in the year-ago period and above the consensus estimates of 72c per share. Revenue came in at $1.38 billion in the fourth quarter, up 22% YOY and slightly above the expected $1.36 billion.
Subscription revenue was $1.23 billion in the period, up 22% YOY and just above the estimated $1.22 billion. Professional services generated revenue of $147 million, up 17% YOY and above the consensus estimates of $145.6 million. The total subscription revenue backlog was $12.81 billion, topping the analyst consensus of $11.94 billion.
Adjusted operating margin in the quarter was 17.2%, down from 18.6% YOY and above the expected 16.7%. For FY 2023, Workday raised non-GAAP operating margin guidance to 18.5%.
"Our exceptional fourth quarter and full-year fiscal 2022 results reflect the broad-based momentum that we see across the business," said Barbara Larson, CFO of Workday.
Needham & Company analyst Scott Berg lowered the price target to $300.00 per share from the prior $360.00.
“Overall demand for WDAY's modules selling into the office of the CFO including Planning, and Spent Management were elevated (and in line with our recent WDAY work), with pipeline commentary suggesting the trends are not transitory. Raised FY23 operating margin guidance to an 18.5% midpoint continues to highlight how we believe WDAY can be one of the most profitable SaaS companies as growth slows at massive scale,” Berg said in a client note.
Goldman Sachs analyst Kash Rangan took note of “a very strong beat and raise quarter” and the one that “stands out amidst our software coverage.”
“Workday is entering fiscal 23 on an accelerating note across several important metrics, including net new bookings, backlog growth rate, strong net new business back to the base and net new ACV growth for emerging products especially procurement and sourcing… Post Fiscal 23, we see Workday starting to expand margins and accelerate FCF. As Workday becomes an increasingly strategic enterprise applications provider, we see opportunities for continued near term and long term upside to report financials,” Rangan said.
By Senad Karaahmetovic | [email protected]