By Kit Norton

Shares of Workday jumped late Thursday after the software company's fiscal 2027 first-quarter earnings surpassed Wall Street expectations, with subscription numbers that fly in the face of the market sentiment that artificial intelligence will disrupt the industry.

Workday stock surged 12% in after-hours trade after ending regular market trading on Thursday down 3.8% to $121.85. Shares have dropped 43% in 2026 amid investor fears around how AI could make some software offerings obsolete.

The enterprise-management software company posted adjusted earnings of $2.66 a share for the quarter ended April 30, compared to $2.23 a share a year ago and above Wall Street's $2.51 a share expectation. Revenue grew 13% to $2.54 billion, slightly topping the analyst consensus call for $2.52 billion, according to FactSet.

Workday also reported subscription revenue totaling $2.35 billion, up 14% compared with a year ago and beating analyst expectations of $2.33 billion. The company's 12-month subscription revenue backlog was $8.81 billion, up 16% compared with a year ago, and Workday's total subscription revenue backlog at the end of the quarter grew 11% to $27.29 billion, coming in below the $28.384 billion Wall Street predicted.

For the fiscal second quarter, Workday forecasts subscription revenue of $2.455 billion, in line with analysts' $2.45 billion expectations. The software company also reiterated its full-fiscal year guidance from February for subscription revenue totaling $9.925 billion to $9.950 billion, with adjusted operating margin of 30%. Wall Street expects fiscal 2027 subscription revenue of $10.66 billion.

Workday is attempting to navigate the AI moment under the helm of Co-founder Aneel Bhusri, who returned to the company as CEO in February, replacing former CEO Carl Eschenbach.

The fear is that AI tools will both lessen the need for specialized software applications and reduce headcount at the organizations which currently rely on them. Workday, which is primarily known for its human resources software, has integrated AI agents into its offerings, much like its peer Salesforce, but investors have remained skeptical this year.

"Workday is ready for this AI moment. Our core business is strong, our AI strategy is working, and we're moving with the speed and focus required to lead," Bhusri said in the earnings release.

"I am very excited about Workday's position and our path ahead. We have the platform, the trust, and the innovation to lead this next chapter, just as we did when we founded the company," Bhusri added.

Write to Kit Norton at kit.norton@barrons.com

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May 21, 2026 17:02 ET (21:02 GMT)

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