By Elsa Ohlen

Workday stock tumbled Friday after its latest earnings, but analysts were far more relaxed than investors about the software company's prospects.

Shares dropped 7% to $252.92 in premarket trading Friday while futures tracking the S&P 500 were flat. If losses hold into ordinary trading, that'll bring Workday stock into the red for the year.

On Thursday after the bell, the company reported a mixed but solid first quarter of its 2026 fiscal year.

What might be a drag on shares is the uncertain macro environment and how that could hamper IT spending, even as the company reiterated its current full-year guidance.

"There's a couple of industries we're keeping our eye on, specifically SLED [state, local and education]," said CEO Karl Eschenbach in a call with investors Thursday. He highlighted headwinds in the higher education industry based on funding cuts from the federal government, although noted that this isn't yet materially affecting results.

Quarterly adjusted earnings per share came in at $2.23 on revenue of $2.24 billion, compared with expectations of adjusted EPS of $2.01 on revenue of $2.22 billion, according to analysts polled by FactSet. Subscription revenue, a key industry metric, came in at $2.06 billion, up 13.4% compared with the same period last year.

Evercore analysts said the earnings beat was slim and "not a huge surprise" as they maintained an Outperform rating on shares with a $275 price target.

"The after-market pullback seems a bit overdone for what was essentially a slight beat/keep quarter," the analysts led by Kirk Materne said. "The lack of upside in [fiscal first quarter] is unlikely to break the bull/bear tug of war in the near-term so bulls are going to need some patience."

Workday guided for subscription revenue of $2.16 billion in the second fiscal quarter, representing a growth of 13.5% year on year.

A handful of brokers reiterated ratings on Workday stock following the earnings report, most of them with a Buy-equivalent rating. Out of 43 analysts covering the stock, 77% rate it Buy, according to FactSet, compared with the average Buy-rating of S&P 500 stocks of 55%.

Write to Elsa Ohlen at elsa.ohlen@barrons.com

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May 23, 2025 07:32 ET (11:32 GMT)

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