November 29, 2018 / 9:19 PM / 8 months ago

Workday results top estimates on subscription services growth

(Reuters) - Workday Inc reported a better-than-expected quarterly profit on Thursday, and forecast sales in its biggest business for the next fiscal year above analysts’ estimates, as more companies signed up for its cloud-based finance and human resources management software.

The software maker’s shares rose 10 percent to $159.5 after the bell and were on track to open at a record high.

The company has been benefiting from a trend of enterprises shifting to cloud-based applications to manage their payroll and human resources.

Another cloud software maker, Inc also posted upbeat results earlier this week, with its executives expressing confidence about the global macro trends and ‘aggressive’ investments from CEOs.

Workday said it expects fiscal 2020 subscription services revenue, which accounts for a major portion of the company’s total revenue, between $3 billion and $3.01 billion. Analysts were expecting $2.97 billion, according to IBES data from Refinitiv.

“Results and guidance suggest solid uptake in financials, with healthy top-line reacceleration across the business and subscription backlog growing organically more than 28 percent year-over-year,” Credit Suisse analyst Brad Zelnick wrote in a note.

With the acquisition of cloud-based business performance management software maker Adaptive Insights in August, Workday attempts to become a one-step solution for all back-office services for small and medium sized businesses in this fiercely competitive market.

Subscription services revenue rose 34.7 percent to $624.4 million in the third quarter ended Oct. 31, while professional services revenue rose 29.4 percent to $118.8 million.

Revenue rose 34 percent to $743.2 million, above analysts’ estimate of $723 million, according to IBES data from Refinitiv.

Excluding items, the company earned 31 cents per share beating analysts’ average estimate of 14 cents per share.

Reporting by Sayanti Chakraborty in Bengaluru; Editing by Shailesh Kuber

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