Shares of enterprise software company Workday surged almost 12% in premarket trading Friday following the firm’s announcement of first-quarter financial results that exceeded Wall Street expectations, helping to calm investor anxiety about artificial intelligence competitors like Anthropic potentially threatening established software companies.
The Pleasanton, California-based firm reported subscription revenue growth of 14.3% reaching $2.35 billion, with Chief Commercial Officer Rob Enslin noting that new business acquisitions accounted for 40% of this increase.
Despite the strong performance, Workday maintained its existing annual subscription revenue projections.
“We are not sure these results will be a thesis changer but provide comforting data points nonetheless,” said Barclays’ analysts.
The company’s shares have declined more than 43% so far this year, while the broader S&P 500 software and services index has dropped approximately 14% during the same timeframe.
To stay competitive, Workday has been incorporating artificial intelligence capabilities throughout its platform, including introducing Sana, its conversational AI feature, in March.
Total quarterly revenue reached $2.54 billion, surpassing the analyst consensus estimate of $2.52 billion compiled by LSEG. The company’s adjusted earnings per share of $2.66 significantly exceeded analyst projections of $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.
The company’s 12-month forward price-to-earnings ratio stands at 10.93, compared to competitor Salesforce’s ratio of 12.8.
