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Enterprise services provider Workday (Nasdaq: WDAY) recently announced its second-quarter results that surpassed market expectations. The better-than-expected earnings outlook sent the stock soaring 12% in the after-hours trading session.

Workday’s Financials

Workday’s second-quarter revenues grew 17% to $2.09 billion, ahead of the Street’s forecast of $2.08 billion. Non-GAAP-EPS was $1.75, ahead of the Street’s expected earnings of $1.63.

By segment, Subscription services revenues grew 17% to $1.903 billion, marginally ahead of the Street’s forecast of $1.89 billion. Professional services revenues came in at $182 million compared with $163 million reported a year ago and were ahead of the market’s estimated $174.6 million.

For the third quarter, Workday expects Subscription services revenues of $1.955 billion in line with estimates. Workday expects to end the year with subscription revenues of $7.7-$7.725 billion, compared to the market’s expectations of $7.76 billion.

The market was pleased with Workday’s earnings outlook. The company expects to expand its operating margin to 30% for the fiscal years 2026 and 2027 compared with earlier targets of 25% by fiscal 2027. Workday believes that despite tough market conditions, it will be able to continue to review its product and go-to-market initiatives to drive these margins. It is becoming “increasingly more targeted” in its growth decisions to ensure that it delivers a healthy balance of product development with go-to-market resources.

Workday’s AI Expansion 

Workday continues to enhance its offerings to expand the overall use cases for its platform. Last quarter, it announced AI innovations to help customers hire the right talent faster. The AI capabilities in its HCM product identify emerging skills and simplify job profile management to accelerate skills-based talent strategies. It announced the integration of its earlier acquisition of HiredScore with the launch of HiredScore AI for Recruiting and HiredScore AI for Talent Mobility. These offerings are now available for purchase under one unified contract.

Recently, Workday announced the general availability of Workday AI Marketplace, giving customers access to AI solutions from Workday and its partners in one centralized place. Currently, there are more than 15 AI partner solutions available in Workday AI Marketplace that span areas such as accounting, contracts, fraud detection, recruiting, and skills transformation.

It released updates to its developer platform Workday Extend, that will help simplify the ability for developers to build custom applications on its platform.  Extend is among its fastest-growing SKUs and has recorded a 75% growth in its average contract value. It also unveiled several new AI services via Workday AI Gateway. Some of the planned new AI services include Intelligent Answers that leverages generative AI to enable users to get answers on existing documents or multiple files through a natural language search engine, HCM Recommender that simplifies career growth and development capabilities by using ML for recommendations, and Data Query that uses generative AI to simplify the data query process.

Workday believes that there is significant opportunity to increase the value to its customers by reimagining end-to-end HR and finance processes through AI. For instance, within Workday Adaptive Planning, it is working on conversational planning, a tool that will integrate generative AI with conversational user interface to deliver a personalized experience that is built on data insights and offers the ability to collaborate with others. In the coming months, it will introduce some of these possibilities in its annual developer conference.

Workday’s stock is trading at $249.21 with a market capitalization of $66 billion. It fell to a 52-week low of $199.81 in October last year and a 52-week high of $311.28 in February this year.

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