Workday’s second quarter was better than expected as revenue posted growth of 16.7%. The company also moved to build out its Workday Payroll services.
The cloud HR and finance firm, reported second-quarter earnings of 49 cents a share on revenue of $2.085 billion, up 16.7% from a year ago. Non-GAAP earnings were $1.75 a share.
Wall Street was expecting Workday to report earnings of $1.65 a share on revenue of $2.07 billion.
Workday CFO Zane Rowe said the company is “focused on balancing targeted investments across our growth areas along with driving efficiencies across the company as we leverage the power of the platform.”
Rowe added that the macroeconomic backdrop in the second quarter was on par with the previous quarter. Workday reiterated its previous outlook for fiscal year 2025 subscription revenue and raised its non-GAAP operating margin. Workday projected fiscal 2025 subscription revenue of $7.7 billion to $7.725 billion, up 17%. Non-GAAP operating margin will be 25.25%.
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For the third quarter, Workday projected subscription revenue of $1.955 billion, up 16% from a year ago.
Constellation Research analyst Holger Mueller said:
"Workday delivers solid results, but stays on a constant pace of around 15% growth. The question for the second half is this: Will there be an AI acceleration for Workday, and will it propel its growth in the 20% range? If Workday delivers to forecast where is growth missing that is being compensated by AI growth? Or – hard to believe – is the growth not coming from AI? With the platform readiness on the Extend side for AI powered Next Generation Applications – we will know soon."
Ahead of earnings, Workday and Equifax forged a partnership to provide employment and income verification through the HR and finance platform. Workday said it will integrate Workday Payroll and The Work Number employment and income verification from Equifax. Workday's new opt-in Employment Verification Connector For Equifax integration is expected to be available to all U.S. Payroll customers in 2025.
Workday launched Global Payroll Connect, which integrates with payroll providers, so customers can integrate payroll with Workday’s platform. Workday said the pre-built API integrations in Global Payroll Connect cut implementation costs by up to 50%. Workday also outlined Workday Payroll provided by Strada to HCM customers.
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On a conference call with analysts, Carl Eschenbach, CEO of Workday, said enterprises "are focusing their investments on the areas that will help them increase productivity and improve their operations."
Eschenbach said Workday is winning more full suite deals. He also said that Workday Financial now has more than 2,000 customers.
Other notable items from the conference call:
- Workday Rising will feature a heavy dose of the company's AI vision and a show case of innovations across applications, platform and user experience.
- The partner ecosystem has been driving ACV. Partner-driven ACV more than doubled in the second quarter sequentially.
- The Equifax partnership is an example of Workday's alliance strategy. Eschenbach also touted the recently announced strategic alliance with Salesforce.
