Workday earnings top estimates, plans to acquire AI HR company

Workday (WDAY) reported its fourth-quarter results after the market close on Monday. Adjusted earnings per share of $1.57 was better than the $1.47 estimate, while revenue of $1.9 billion was in line with expectations. However, its subscription revenue forecast was a little disappointing. The company also announced it's planning on buying talent solutions firm HiredScore.

Yahoo Finance's Julie Hyman and Josh Lipton break down the report.

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Editor's note: This article was written by Stephanie Mikulich

Video Transcript

JULIE HYMAN: The workplace management software company saying fourth-quarter sales coming in line with estimates. It beat on the bottom line. The outlook for subscription revenue left it room to miss the Street's expectations. And Workday also announcing its intention to buy Hired Score, which is a company that uses AI to provide talent solutions. Right now, the shares are moving down by about 5 and 1/2%, but they've sort of been bouncing around a little bit here.

That subscription revenue forecast I mentioned. The company's forecasting subscription revenue for the full year of $7.73 billion to $7.78 billion. $7.77 billion is what analysts had projected. In other words, if you look at the midpoint of that, it's below what analysts were anticipating, even as its revenue met last quarter and earnings beat estimates. But the subscription revenue seems to be a source of disappointment, Josh.

JOSH LIPTON: Yeah, and this stock also had been such a rocket ship, Julie. It was up, you know, I think around 10% already this year. It was up around 70% over the past 12 months heading into the print. Their bread and butter is still HCM, which is their cloud-based HR suite. They're also focused on kind of financial management applications. So it'll be interesting, kind of the puts and takes there, what they say on the call.

You're right. The big number for them is always subscription revenue because that's the money they earn from the software they're selling. So it'll be interesting on the call how they explain some of what they're seeing looking ahead.

It could be, you know, there's so much uncertainty still around the macro, Julie. I wonder how perhaps when they're forecasting guidance too, they're just trying to be a bit more prudent here as well. But we'll see on the call.

JULIE HYMAN: Yeah. Well, and it seems as though this is a reiteration of that forecast. So if there's disappointment, it's that they did not raise it, I suppose.

JOSH LIPTON: Yeah. When the stock's up that much, you know, expectations running hot for that print for sure.

JULIE HYMAN: Yes, for sure.