Workday’s forecast for quarterly subscription revenue disappoints

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(Reuters) -Workday raised its annual subscription revenue forecast on Thursday, but an in-line outlook for the current quarter sent the human resources software provider’s shares down nearly 4% in extended trading.

Workday’s customers rely on the company’s single cloud-based platform, which provide applications to manage services including recruitment, payroll, accounting and audit.

In an uncertain economy, customers are tightening their spending on platforms like Workday as they reassess budgets and timing.

Workday’s AI-driven tools help organizations automate tasks such as screening job applications, scheduling interviews, and streamlining workforce planning.

The company on Thursday also announced it will buy Paradox, giving Workday an AI-powered talent acquisition suite to help customers more efficiently find, hire, and onboard employees. It did not provide financial details of the deal.

Workday competes with Oracle, SAP and payroll providers such as Automatic Data Processing and Dayforce. Its customers include United Airlines, Visa and FedEx.

For the third quarter, Workday expects subscription revenue of $2.24 billion, in line with analysts’ average estimate, according to data compiled by LSEG.

It raised its fiscal 2026 subscription revenue forecast to $8.82 billion, compared to its prior forecast of $8.80 billion.

Workday’s total revenue for the second quarter ended July 31 stood at $2.35 billion, compared with an estimate of $2.34 billion.

Subscription revenue rose 14% to $2.17 billion.

(Reporting by Jaspreet Singh in Bengaluru and Juby Babu in Mexico City; Editing by Maju Samuel)