Workday jumps 10% as it bumps up margin forecast on AI strength

Workday's stock experienced a remarkable rise, climbing as much as 11% in after-hours trading on Thursday, following a surprisingly strong earnings report. The finance and human resources software company not only surpassed expectations but also raised its margin forecast for the fiscal year. In its fiscal first quarter ending April 30, Workday reported a 13% increase in revenue. The company's net income soared to $222 million, translating to 87 cents per share, compared to $68 million, or 25 cents per share, from the previous year. Looking ahead, Workday has set a goal of achieving a 30% adjusted operating margin and $2.46 billion in subscription revenue for the upcoming fiscal second quarter. This outlook aligns closely with analysts' predictions, which expected a 30% margin and $2.45 billion in subscription revenue. In a significant move, Workday also revised its full-year margin forecast upward, now projecting a 30.5% adjusted operating margin, an increase from the previously stated 30%. The company continues to anticipate growth between 12% and 13% for the year. Despite this positive news, it’s important to note that Workday has faced challenges this year, with stocks down 43% as of Thursday's close, marking its worst performance since going public in 2012. This decline is occurring even as the S&P 500 index has seen an increase of about 9% in the same timeframe. During the recent quarter, Workday announced a leadership change, with co-founder Aneel Bhusri taking over as CEO from Carl Eschenbach. The company also revealed that its Sana AI agents are now available to clients, a move that reflects its commitment to leveraging artificial intelligence. Bhusri emphasized the strength of the company's core business and the effectiveness of its AI strategy, stating, "Our core business is strong, our AI strategy is working, and we're moving with the speed and focus required to lead." The number of clients utilizing Workday's AI agents has more than doubled from the previous quarter, with over 4,000 customers now using at least one agent. Executives are set to elaborate on these results in a conference call with analysts at 4:30 p.m. ET.