Workday Inc (NASDAQ:WDAY) shares rose 8% after the enterprise software company reported first quarter results that topped Wall Street expectations and raised its full-year profitability outlook.
The company reported adjusted earnings of $2.66 per share for the quarter, ahead of analyst estimates of $2.49 per share. Revenue increased 13.5% year over year to $2.54 billion, exceeding consensus expectations of $2.52 billion.
Subscription revenue, which accounts for the majority of Workday’s business, rose 14.3% to $2.35 billion, slightly above estimates of $2.34 billion.
Operating income improved to $338 million, or 13.3% of revenue, compared with $39 million, or 1.8% of revenue, in the prior-year period. Non-GAAP operating margin expanded to 31.8% from 30.2% a year earlier.
Diluted earnings per share were $0.87, compared with $0.25 in the same quarter last year, while non-GAAP diluted EPS increased to $2.66 from $2.23.
Workday also reported stronger cash generation, with operating cash flow rising to $696 million from $457 million a year ago. Free cash flow increased to $616 million from $421 million.
The company said its 12-month subscription revenue backlog grew 15.5% year over year to $8.81 billion, while total subscription backlog rose 10.9% to $27.29 billion.
During the quarter, Workday repurchased about 12 million shares for $1.6 billion.
"We had a great Q1, and it makes one thing clear: Workday is ready for this AI moment,” Workday CEO Aneel Bhusri said in a statement.
“Our core business is strong, our AI strategy is working, and we're moving with the speed and focus required to lead.”
Looking ahead, Workday reiterated its fiscal 2027 subscription revenue guidance of $9.93 billion to $9.95 billion and raised its full-year non-GAAP operating margin outlook to 30.5%.
For the second quarter, the company expects subscription revenue of $2.456 billion and a non-GAAP operating margin of 30%.