Home News Workday Stock Plunges Amid Soft Subscription Revenue Guidance

Workday Stock Plunges Amid Soft Subscription Revenue Guidance

by SuperiorInvest

Key takeaways

  • Workday shares traded sharply lower in extended trading Thursday after the cloud-based professional services company provided softer-than-expected current-quarter and full-year subscription revenue guidance .
  • The company lowered its full-year subscription revenue forecast, citing increased sales scrutiny and lower customer headcount growth.
  • Separately, the company announced a partnership with the Defense Intelligence Agency to modernize the government agency's human resources efforts.
  • Monitor how Workday's share price responds to support near a key horizontal line around $238 that closely aligns with a major price gap in November.

Workday (WDAY) stock plunged more than 11% in extended trading Thursday after the cloud-based professional services company provided subscription revenue guidance for the current quarter and full year plus softer than expected.

For the current quarter ending July 31, the company guided subscription revenue to $1.895 billion, missing estimates of $1.903 billion. Looking at full fiscal 2025, the company cut its subscription revenue forecast to between $7.7 billion and $7.725 billion from its previous range of $7.725 billion to $7.775 billion.

“Our updated subscription revenue guidance reflects the heightened sales scrutiny and lower customer growth we experienced during the quarter,” Workday Chief Financial Officer Zane Rowe said in the company's earnings statement.

However, Workday said its increased efficiency helped it increase its annual adjusted operating margin by half a percentage point to 25%.

For the three-month period ending April 30, the company posted net sales of $1.99 billion, slightly above the consensus view of $1.97 billion. Earnings-wise, it posted an adjusted profit of $1.74 per share, beating analysts' expectations of $1.58 per share.

Separately, Workday announced Thursday night that the Defense Intelligence Agency (DIA) had selected it to modernize its human resources efforts, helping the company expand its presence in the public sector.

Monitor the reaction at this level in between

Since completing a double bottom pattern in November 2022, Workday stock has been trending up, with momentum accelerating after the 50-day moving average (MA) crossed above the 200-day MA to generate a golden cross sign early last year. Most recently, the stock suffered a more than 20% correction, but found support around the 200-day MA.

With shares positioned to open sharply lower on Friday morning following the company's soft underwriting guidance, investors should monitor how the price responds to support near a key horizontal line around $238 that is aligns closely with a significant price gap in November. A decisive close below this crucial level could lead to a deeper pullback towards longer-term support in the $205 region.

Workday shares fell 11.2% to $231.60 in after-hours trading.

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As of the date of writing this article, the author does not hold any of the above securities.

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