Workday shares jump as AI demand eases investor concerns

A person types on a keyboard in Portland, Ore. (AP Photo/Jenny Kane)

Workday shares jumped nearly 12 per cent premarket on Friday after the enterprise software maker beat first-quarter revenue and profit ​estimates, easing concerns that AI rivals such ‌as Anthropic could rapidly disrupt demand for traditional software vendors.

Subscription revenue at the Pleasanton, California-based company jumped 14.3 per cent to US$2.35 billion, ​with net new business driving 40 per cent of ​that growth, according to Chief Commercial Officer Rob ⁠Enslin.

Workday, however, retained its annual subscription revenue forecast.

“We ​are not sure these results will be a thesis ​changer but provide comforting data points nonetheless,” said Barclays’ analysts.

The stock has fallen over 43 per cent year-to-date while the S&P 500 ​software and services index is also down about ​14 per cent in the same period.

A line chart with the title ‘How software stocks have performed’

Workday has been adding AI features ‌across ⁠its platform to remain competitive including the March launch of Sana, its conversational AI layer.

Quarterly revenue came in at US$2.54 billion, compared with analysts’ average estimate of US$2.52 billion, ​according to ​data compiled ⁠by LSEG. Its quarterly adjusted per-share profit came in at US$2.66, well above analysts’ ​estimate of US$2.51.

“We believe Workday is relatively insulated ​from ⁠AI disruption due to its 80 million users, strong retention, and status as a system of record,” said ⁠analysts ​at Jefferies.

Workday’s 12-month forward price-to-earnings multiple ​is 10.93, compared with peer Salesforce’s 12.8.

Reporting ​by Kanchana Chakravarty in Bengaluru; Editing by Nivedita Bhattacharjee