Workday beats revenue estimates on payroll demand, announces $1 billion buyback plan

:Workday beat Wall Street expectations for second-quarter revenue on Thursday and announced a $1 billion stock buyback plan, sending the shares of the human resource software provider up around 11 per cent in extended trading.
Corporate spending on human resource and payroll has been rising especially in small-to-medium business segments, according to analysts, despite a cooling labor market.
However, lower hirings weighed on Workday’s outlook as it forecast third-quarter subscription revenue below estimates.
Analysts also expect longer sales cycles due to higher borrowing costs and inflation. “We see a macroeconomic environment consistent with last quarter,” CFO Zane Rowe said.
Company executives said in a post-earnings call that Workday is revising its medium-term plans to accelerate margin expansion, while moderating the pace of subscription revenue growth.
“There were some positive nuggets in management’s outlook including… a 17 per cent increase in subscription revenue and a $1 billion share buyback program,” said Michael Ashley Schulman, chief investment officer at Running Point Capital.
Workday raised its forecast for full-year adjusted operating margin to 25.25 per cent from 25 per cent. It forecast third-quarter subscription revenue of $1.96 billion, compared with expectations of $1.97 billion, according to LSEG data.
Subscription revenue of $1.90 billion was in line with second-quarter estimates. Total revenue of $2.09 billion, however, beat expectations of $2.07 billion.
Adjusted operating margin stood at 24.9 per cent, while the Visible Alpha consensus was 24.6 per cent.
The company earned 49 cents per share, compared with 30 cents a year ago.