(Reuters) - Workday Inc reported better-than-expected quarterly profit and revenue on Tuesday, as it enrolled more companies for its cloud-based financial and human resources software.
Subscription services revenue, which accounts for 85% of the company’s total revenue, rose 34.3% to $701 million, beating analysts’ estimates of $693.9 million, according to IBES data from Refinitiv.
Workday has been benefiting from a trend of enterprises shifting to cloud-based applications to manage their payroll and human resources.
With the acquisition of cloud-based business performance management software maker Adaptive Insights last year, Workday has been trying to become a one-step solution for all back-office services for small and medium sized businesses in a fiercely competitive market.
Analysts from Wedbush Securities and Needham & Co said some investors may be worried about commentary on deal flow and bookings likely to be a bit more weighted towards fourth-quarter.
“Some may view this as deals “slipping” into later periods but the company’s new business has been shifting towards a heavier weighting in fourth quarter for several years,” Scott Berg, analyst at Needham & Co, told Reuters.
The company forecast current quarter subscription revenue between $746 million and $748 million. Analysts on average were expecting $741.7 million.
Workday also raised its 2020 subscription revenue outlook to a range of $3.045 billion to $3.060 billion. Analysts were expecting $3.047 billion.
During the quarter, the company added Carl Zeiss AG, Cisco Systems, Old Mutual Limited and Procter & Gamble among others, as new human capital management (HCM) customers.
“We continue to see a healthy pace of cloud migrations across HR and finance, but as we look at the full year, we are seeing more opportunities move into the back part of the year, specifically shifting into the fourth quarter,” said Robynne Sisco, Chief Financial Officer.
“This pattern reflects our increasing seasonal trends towards larger fourth quarter.”
The company’s net loss widened to $116.3 million, or 52 cents per share, in the first-quarter ended April 30, from $74.4 million, or 35 cents, a year earlier.
Excluding items, Workday earned 43 cents per share, beating analysts’ average estimate of 41 cents per share.
Professional revenue grew 28.5% to $124 million, above estimates of $120 million.
Total revenue rose 33.4% to $825.1 million, above analysts’ estimate of $814.3 million.
The Pleasanton, California-based company’s shares reversed course to fall 0.64% to $211.5 after rising 2.62% in extended trading.
Reporting by Sayanti Chakraborty in Bengaluru; Editing by Shailesh Kuber