What Happened:
Workday, a company that provides finance and HR software, reported impressive Q1 results that beat analysts’ expectations for key metrics, such as total billings, revenue, and subscription revenue. Shares rose 11% in the afternoon following the announcement. Gross margin and non-GAAP operating income were also strong. However, free cash flow margin was down and did not meet estimates. In addition, the company announced that Zane Rowe, formerly the CFO of VMware, would become its new CFO. Workday maintained its non-GAAP operating margin guidance for fiscal year 2024 and provided inline guidance for Q2 total revenue. It also increased the low end of fiscal 2024 subscription revenue guidance. The earnings release emphasized AI capabilities and the commitment to integrating AI throughout the product portfolio.
What is the market telling us:
The market perceives Workday’s shares as somewhat volatile, with 15 moves greater than 5% over the past year. However, the significant increase following the Q1 results indicates that the market views the news as having a significant impact on the company’s performance. Since the beginning of the year, Workday’s shares have risen 27%, yielding a return of $1,650 for investors who bought $1,000 worth of shares five years ago.
Investors looking to buy Workday’s shares can access a free full analysis of the earnings results here.
