Workday (WDAY) shares plummeted 6.72% in after-hours trading on Thursday following the release of its first-quarter earnings report and second-quarter revenue guidance. Despite beating analyst expectations for Q1, the company's outlook for Q2 fell short of estimates, raising concerns among investors about potential slowing growth in the human capital management software market.

The company reported Q1 adjusted earnings per share of $2.23, surpassing the analyst consensus of $2.01, and revenue of $2.24 billion, slightly above the Street estimate of $2.22 billion. However, Workday's projection for Q2 subscription revenue of $2.16 billion fell below the analyst estimate of $2.34 billion, signaling potential challenges ahead.

Adding to investor worries, news of a collective action lawsuit against Workday emerged earlier in the day. The lawsuit alleges that the company's job applicant screening technology is discriminatory, particularly against individuals over the age of 40. While Workday denies these claims, the legal challenge could pose reputational and financial risks for the company. As the market digests these developments, investors appear to be reassessing their positions in Workday stock, leading to the significant after-hours decline.