Workday Inc (NASDAQ:WDAY) shares fell more than 6% in after-hours trading despite the company reporting better-than-expected fourth quarter results, as investors focused on a more cautious subscription revenue outlook for fiscal 2027.
For the fourth quarter of fiscal 2026, Workday posted total revenue of $2.532 billion, up 14.5% year-over-year. Subscription revenue, which makes up the bulk of its business, rose 15.7% to $2.360 billion.
Non-GAAP diluted earnings per share came in at $2.47, exceeding analyst estimates of $2.30. That compares with $1.92 a year earlier. On a GAAP basis, diluted net income per share was $0.55, up from $0.35 in the same period last year.
Operating income was $174 million, or 6.9% of revenue, compared with $75 million, or 3.4% of revenue, a year earlier. Non-GAAP operating income reached $774 million, representing a 30.6% margin, up from 26.4% in the prior-year quarter.
For the full fiscal year, operating cash flow totaled $2.939 billion, an increase of 19.4% year-over-year.
"Our fourth quarter results reflect the deep trust customers place in Workday to manage their most critical assets," Workday chief financial officer Zane Rowe said in a statement.
Looking ahead, Workday guided to subscription revenue of $2.335 billion for the first quarter of fiscal 2027, representing growth of 13%, along with a non-GAAP operating margin of 30.5%.
For the full fiscal year 2027, the company expects subscription revenue of $9.925 billion to $9.950 billion, implying growth of 12% to 13%, and a non-GAAP operating margin of 30%.