Workday Warns of ‘Elevated Sales Scrutiny’ in Warning for Software

(Bloomberg) — Workday Inc. shares dropped the most in more than four years after the software company cut its full-year forecast for subscription revenue and said customers were being more cautious with orders.

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Subscription sales will be as much as $7.73 billion in the fiscal year ending in January, compared with an earlier outlook for as much as $7.78 billion, the Pleasanton, California-based company said Thursday. Subscription revenue is a key metric for Workday, which provides software for business tasks, such as managing personnel.

The shares fell 13% to $227.06 at 10:36 a.m. in New York, the biggest intraday decline since March 2020. The stock has fallen 18% this year.

“Our updated subscription revenue guidance reflects the elevated sales scrutiny and lower customer headcount growth we experienced during the quarter,” Chief Financial Officer Zane Rowe said in a statement.

Chief Executive Officer Carl Eschenbach, who took over as sole CEO in February, is looking for growth by expanding sales overseas and pushing into new US industries.

For the fiscal first quarter, subscription sales gained 19% to about $1.82 billion, in line with analysts’ average estimate. Profit, excluding some items, was $1.74 a share. Analysts, on average, projected $1.58, according to data compiled by Bloomberg.

“Clearly the in-line results and lowered outlook were below what investors were looking for,” wrote Kirk Materne, an analyst at Evercore ISI, in a note after the earnings were released.

(Updates with scope of share move from first paragraph)

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