The initiatives to enhance user experience through innovations in the portfolio have helped the company retain its client base and attract more customers. Considering Workday’s growing footprint in overseas markets, especially in Europe and Asia, there will be an uptick in international revenues in the third quarter.
Stable Demand
The company’s human capital and financial management solutions continue to witness solid demand in key markets, including advanced offerings like Workday Prism Analytics and Adaptive Insights, even as more and more enterprises shift to cloud platforms. The trend is estimated to have lifted third-quarter revenues, in-line with the forecasts.
Cost Woes
On the negative side, margins might come under pressure from high costs, mainly those related to promotional activities and human resources.
The company recently witnessed multiple rating actions, with the latest being a downgrade by Morgan Stanley to equal-weight from overweight, citing a potential slowdown in subscription growth due to lower enterprise spending. Earlier this week, Bank of America and Wedbush reiterated their buy and hold ratings, respectively, on the company.
Looking Back
In the second quarter, earnings increased to $0.44 per share on revenues of $887.8 million, and the results surpassed analysts’ forecast. Subscription revenue, which accounts for about 85% of total revenues, grew 34%. Buoyed by the positive results, the management raised its revenue guidance for fiscal 2020.
Also see: Workday Q2 2020 Earnings Conference Call Transcript
At the stock market, it has been a dismal show by Workday since hitting a peak mid-year. The stock declined 14% in the past six months and traded below the $180-mark this week.