Workday's Q3 subscription revenue forecast disappoints as payroll spending slows
Aug 22 (Reuters) -Human resource software provider Workday WDAY.O forecast its third-quarter subscription revenue slightly below Wall Street estimates on Thursday, hurt by tepid demand for payroll and IT services as clients slash tech budgets in an uncertain economy.
The Pleasanton, California-based company also announced a plan to repurchase up to $1 billion worth of Workday's class A common stock.
Still, shares of Workday were trading nearly 5% down after the bell.
The company's results reflect sluggish enterprise spending on its payroll and human resource services on account of a cooling labor market and slower hiring activity.
Analysts also expect longer sales cycles owing to a choppy macro environment to add to the pressure.
"We see a macroeconomic environment consistent with last quarter," CFO Zane Rowe said in a statement.
Workday came off a weak first quarter when it slashed its full-year 2025 subscription revenue forecast on the back of higher deal scrutiny from clients.
The company forecast third-quarter subscription revenue of $1.96 billion, compared with analysts' average estimate of $1.97 billion, according to LSEG data.
Subscription revenue for the second quarter came in at $1.90 billion, in line with estimates. Total revenue of $2.09 billion, however, beat expectations.
Adjusted operating margin for the second quarter stood at 24.9%, while the Visible Alpha consensus was 24.6%.
The company reported net income per share of 49 cents, compared with 30 cents a year ago.
Reporting by Zaheer Kachwala in Bengaluru; Editing by Shilpi Majumdar
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