Workday shares slid more than 5% in extended trading Tuesday after the finance and human resources software maker issued quarterly margin guidance that came in below Wall Street projections.
Here's how the company did in comparison with LSEG consensus:
- Earnings per share: $2.32 adjusted vs. $2.18 expected
- Revenue: $2.43 billion vs. $2.42 billion expected
The company forecast a fourth-quarter adjusted operating margin of at least 28.5% and $2.355 billion in subscription revenue, according to a statement. The StreetAccount consensus was a 28.7% margin and $2.35 billion in subscription revenue.
Workday's revenue grew about 13% year over year in the fiscal third quarter, which ended on Oct. 31. Net income of $252 million, or 94 cents per share, was up from $193 million, or 72 cents per share, in the same quarter a year ago.
Subscription revenue in the third quarter totaled $2.24 billion, with an adjusted operating margin of 28.5%. Analysts polled by StreetAccount had anticipated $2.24 billion in subscription revenue and a 28.1% margin.
During the fiscal third quarter, Workday announced artificial intelligence agents for analyzing employee performance testing financial health, and the company revealed plans to buy AI and learning software startup Sana for $1.1 billion. Also, activist investor Elliott Management said it had built a Workday stake worth over $2 billion.
Workday encountered some turbulence with higher education institutions that rely on U.S. funding, CEO Carl Eschenbach said on a conference call with analysts.
Workday has seen its stock decline this year as pundits discuss the risk of generative AI tools threatening the growth prospects for cloud software incumbents. Company shares have fallen 9% so far in 2025, while the Nasdaq Composite index has gained 19%.
"The narrative we've been hearing in the last couple of quarters is changing, and it's coming back to those who are highly penetrated in the enterprise already providing value and are deeply trusted by our customers," Eschenbach said.
Despite rounds of layoffs that companies have been carrying out in recent months, the headcount in Workday's customer base is up year over year, he said.
WATCH: Workday CEO Carl Eschenbach: There's a narrative that AI is eating into software, that is false
