Workday, Inc. WDAY is set to release second-quarter fiscal 2027 results on Aug. 27, after the closing bell. In the trailing four quarters, the company delivered an earnings surprise of 7.22%, while in the last reported quarter, it delivered an earnings surprise of 6.83%.
The company is expected to report year-over-year revenue growth, supported by increased adoption of its artificial intelligence (AI)-powered products and expansion across HR, finance and other enterprise workflows. However, higher AI-related expenses, competitive pressure and cautious enterprise spending are likely to have weighed on margins and profitability.
Factors at Play
During the quarter, the company expanded Workday Learning, powered by Sana, as an AI-native learning solution. The offering is likely to have supported fiscal second-quarter revenues by increasing AI adoption and creating additional opportunities to expand sales among existing HCM customers.
During the quarter under review, Workday brought its Sana Self-Service Agent for HR and Finance into Microsoft 365 Copilot, expanding access to its AI capabilities. The integration is likely to have supported revenue growth by driving Sana adoption and strengthening demand for Workday’s HR and finance solutions.
Workday also announced Sana for IT Service Management and a new Travel Agent, expanding its AI offerings into additional enterprise workflows. The new products are expected to have a positive impact on revenues in the July quarter by increasing cross-selling opportunities and broadening Workday’s addressable market.
However, strong competition and rising product development expenses might have created pressure on Workday’s performance during the to-be-reported quarter. Implementation challenges could have delayed customer adoption, while AI-related legal, privacy and trust concerns might have led some customers to remain cautious about AI investments.
For the July quarter, the Zacks Consensus Estimate for revenues is pegged at $2.63 billion, indicating an increase from the year-ago quarter’s $2.35 billion. The consensus estimate for adjusted earnings per share is pegged at $2.62, implying growth from $2.21 reported in the prior-year quarter.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Workday for the fiscal second quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, this is not the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -2.36%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Workday carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Workday, Inc. Price and EPS Surprise
Workday, Inc. price-eps-surprise | Workday, Inc. Quote
Stocks to Consider
Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:
Oracle Corporation ORCL has an Earnings ESP of +2.08% and carries a Zacks Rank of 2 at present. It is set to release its first-quarter fiscal 2027 numbers on Sept. 8.
The Earnings ESP for NetApp, Inc. NTAP is +3.77%, and it carries a Zacks Rank of 2 at present. The company is scheduled to report first-quarter fiscal 2027 numbers on Sept. 2.
The Earnings ESP for Hewlett Packard Enterprise Company HPE is +9.96%, and it carries a Zacks Rank of 2 at present. The company is scheduled to report third-quarter fiscal 2026 numbers on Sept. 2.
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Workday, Inc. (WDAY): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).