Workday stock slips on light quarterly margin guidance

Workday’s shares experienced a drop of over 5% in after-hours trading on Tuesday following the company's announcement of quarterly margin guidance that fell short of Wall Street expectations. The software provider, specializing in finance and human resources solutions, projected an adjusted operating margin of at least 28.5% for the fourth quarter, alongside an anticipated subscription revenue of $2.355 billion. This forecast was below the consensus estimates, which called for a 28.7% margin and $2.35 billion in subscription revenue. In the quarter ending October 31, Workday reported a year-over-year revenue increase of approximately 13%. The net income rose to $252 million, or 94 cents per share, compared to $193 million, or 72 cents per share, from the same period last year. The company’s subscription revenue for the third quarter was recorded at $2.24 billion, with an adjusted operating margin matching the forecasted 28.5%. Analysts had expected similar figures for subscription revenue and a slightly lower margin of 28.1%. During this fiscal quarter, Workday made headlines by announcing the introduction of AI agents designed to evaluate employee performance and financial stability. Additionally, the company disclosed plans to acquire AI and learning software startup Sana for $1.1 billion. Notably, activist investor Elliott Management revealed that it holds a stake in Workday valued at over $2 billion. Despite these developments, Workday’s stock has faced challenges this year, with discussions around the impact of generative AI tools on the growth prospects of established cloud software firms. Thus far in 2025, the company's shares have declined by 9%, contrasting with a 19% gain in the Nasdaq Composite index.