Workday Inc (WDAY) Boosted Despite Its Red Ink

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The second-quarter results for cloud application provider Workday Inc (NYSE:WDAY) are in, and WDAY stock holders are cheering the results. Workday shares are up 5% as of this writing.

Workday Inc (WDAY) Boosted Despite Its Red Ink, WDAY stockThe results came after the close Wednesday, with revenue growth taking center stage amid strong mid-market results and a “confusing” acquisition of Netsuite Inc (NYSE:N) by Oracle Corporation (NYSE:ORCL).

But not everything was exactly peachy for the cloud firm.

Workday Earnings Rundown

On the revenue front, WDAY grew quarterly sales by 34% year-over-year to $377.7 million. That beat estimates for $372.7 million. Subscription revenues were up 37% to $306.2 million.

According to Workday CEO Aneel Bhusri:

“We delivered record second-quarter results with solid customer momentum and strong competitive win rates. The results were well balanced across our key initiatives, as we saw consistent strength across product lines, industries, and geographies, and we are proud to welcome our new largest customer based in the APJ region.”

However, the company lost 4 cents per share on an adjusted basis compared to a profit of 2 cents per share in the year-ago quarter. It also missed the consensus estimate for a 2-cent loss. And to top it off, WDAY provided weak guidance for Q3 — $398 million to $400 million against the consensus for $401.1 million.

So why exactly is WDAY stock up more than 5%?

Opportunity for WDAY Stock

If investors cared more about this quarter’s top line than profit, the lowered Q3 guidance kind of throws that whole “sales are better than profits” argument out the window. Rather, it was the mid-market opportunity powering the wheels on the WDAY stock train.

According to Workday Co-President Phil Wilmington, Oracle acquired Netsuite to keep up with Workday’s progress in luring in financial customers. The cloud firm actually hit its second-strongest quarter for boosting its financial management customer stats. Workday believes Oracle is “doubling down” in the mid-market with Netsuite, and in doing so, it is also providing a bit of a confusing product:

“Any time a company is confused as to which product is to buy from a competitor, and we’re very clear about which one we have, we only have one code line. I think it bodes well for us. And that’s based on what happened when Taleo was acquired and SuccessFactors was acquired that both of those have led to a lot of defections over to Workday.”

Of course, when the confusion clears up and the synergies between Oracle and Netsuite become more apparent, Workday is going to have its work cut out for them. But until then, there’s an opportunity to snag more market share.

As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/workday-wday-stock-boosted-despite-red/.

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