Workday Rallies On 'Low Bar' Beat As AI Starts To Show Up In Contract Value

Shares of Workday Inc (NASDAQ:WDAY) climbed in early trading on Friday, after the company reported upbeat first-quarter results.

Here are the key analyst insights:

• Needham analyst Scott Berg maintained a Buy rating, while slashing the price target from $300 to $180.
• BTIG analyst Allan Verkhovski reiterated a Buy rating and price target of $175.

Check out other analyst stock ratings.

Needham: Workday reported revenue of $2.54 billion and earnings of $2.66 per share. It topped estimates of $2.52 million and $2.49 per share, respectively. Subscription revenue growth of 14.3% propelled total revenue growth 13.5%. Subscription cRPO (current remaining performance obligations) grew to $8.81 billion. This was a deceleration to 15.5% year-on-year, from 15.8% growth in the previous quarter.

The stock climbing after the release of quarterly results "feels more like a relief rally against a low bar since cRPO midpoint outperformance was better than a not-good-4Q," Berg wrote. Workday announced Sana ITSM Agent and Sana Travel Agent, indicating that its new agent strategy has expanded beyond core human capital management and financial management systems, he further stated.

BTIG: With Aneel Bhusri returning Workday's CEO, the company delivered significantly better-than-expected quarterly results, Verkhovski said. The company generated the strongest new ACV (annual contract value) growth in five years, he added.

Workday's cRPO growth of 15.5% exceeded guidance by 50 basis points (bps), driven by AI, which accounted for over 25% of new ACV from customer base expansions, with this being the first quarter in which both Sana and Paradox were fully integrated, the analyst stated. "We also came away with the view that WDAY can deliver more margin expansion than previously expected, as management raised non-GAAP operating margin guidance by 50 bps to 30.5% and is targeting headcount to exit the year as close to flat as possible relative to Q1 levels," he further wrote.

WDAY Price Action: Shares of Workday had risen by 4.14% to $126.89 at the time of publication on Friday.