HR software firm Workday reports revenue rise, flags strong AI uptake

By Juby Babu

Aug 27 (Reuters) - Workday reported a nearly 13% rise in revenue on Thursday and said its AI solutions were seeing strong adoption and driving customer wins, easing investor fears of artificial intelligence disruption to its business.

The finance and human resources software provider has been embedding AI across its platform to automate tasks from payroll processing to financial forecasting, aiming to boost efficiency for its clients.

"Across large and medium enterprises, Al is a key reason companies are modernizing their core on Workday. Over half of our net new wins in the second quarter signed up for one or more Al solutions," Chief Commercial Officer Rob Enslin said on a post-earnings call.

Shares of the company were up marginally in extended trading, after falling as much as 5% initially, as investors weighed its in-line second-quarter revenue and third-quarter subscription revenue forecast.

The rapid evolution of generative AI has raised investor concerns about potential disruption and the high cost of research and development required to keep pace with Big Tech players also targeting the enterprise software market.

Workday, however, is seeing AI as a driver for application sales which is the "opposite of the 'SaaSpocalypse' theme," said Rebecca Wettemann, CEO of industry analyst firm Valoir.

The company's pipeline depends on winning new core deployments and proving AI adoption on top of them, Wettemann added. "The AI pitch is strong enough that it's pulling some customers into a platform switch."

Chief Financial Officer Zane Rowe said on the call that Workday expects fiscal 2028 subscription revenue to grow by nearly 11%, in line with its projected growth rate for the second half of fiscal 2027.

Workday posted total revenue of $2.65 billion for the second quarter ended July 31, compared with analysts' average estimate of $2.64 billion, according to data compiled by LSEG.

Quarterly subscription revenue grew 13.9% to $2.471 billion.

It forecast subscription revenue of $2.52 billion for the current quarter, which will end on October 31.

(Reporting by Juby Babu in Mexico City; Editing by Vijay Kishore)