As the cloud computing market matures, more and more organizations are now deploying their applications on cloud. The global cloud service market is anticipated to reach $14.71 billion for the human resource (HR) management segment by end of 2016. The market size was $10.21 in 2010, meaning growth of about 40%. Workday (WDAY, Financial) provides human capital management, financial management, and analytics applications designed for the world’s largest organizations. Ever since the inception of the company in 2005, it has grown tremendously and has won the hearts of many tech stock investors. The growth was primarily due to its policy of constantly adding features to its services and staying upbeat with the market scenario. Hundreds of companies ranging from medium-sized businesses to Fortune 500 enterprises have selected Workday.
Strong growth in the quarter
The company generates revenue from its SaaS (Software as a Service) application deployed on cloud. In the recent months, it reported second quarter results of fiscal 2015, which were growth-oriented. It posted total revenue of $186.8 million, up 74% year over year. The revenue also surpassed the management’s upper guidance range of $173-178 million that was declared in the first quarter.
The financial year began on a high note for the organization with solid client interest for its most recent application, Workday Recruiting, and two-fold client gain for Workday Financial Management. The technology innovations, including its latest move to a single code line for development, empowered Workday to upgrade all clients on Workday 22 in less than six hours. The Workday 22 is featured with 347 new HR and finance features and 68 of these features were suggested by customers. This signifies that Workday takes all its customer feedback serious and it believes the users can provide the best feedback. Workday's profits still stay inaccessible as they keep on putting resources into product enhancement with new features and extra amount on sales and advertising.
WDAY: Continues to benefit from Cloud
The company has been more focused on the subscription as it provides recurring revenue for the company. In the second quarter, 76.9% of the revenue was generated from cloud-enabled software licenses. It posted subscription revenue $143.7 million, up 77% year over year.
Outlook
Workday is relied upon to develop at a strong pace going ahead. Workday expects that the second half of the financial year will be quite strong. For the third quarter, it anticipates revenues to be in range of $200-205 million or growth of 56-60% as contrasted with the former year. Guidance for the fiscal year has been also revised to be in the range of $760-770 million.
Bigger names regularly added in client list
Over the past couple of quarters, Workday has done well in securing expansive multi-million dollar bargains. At the point when contrasted with bigger players like Oracle (ORCL), Workday accepts it can offer somewhat better services at reduced price to a tune of 50% less than Oracle. Also, it can offer this service which additionally saves cost, as it come without licenses and long haul support contracts. Acxiom and Travelex are two big players that were recently added on Workday's client list and will influence the top and bottom line of the company.
Conclusion
Investors are focused on the organization's second quarter earnings to be released on Tuesday. Looking into the growth and market strength of Workday, it won’t be surprising that Workday meets all the anticipated guidance for the second quarter. Workday has performed well in this division as billings have kept afloat for the past couple of quarters. Some of this has been the consequence of hostile discounting and various promotional activities. This can be the right time for investing into Workday, especially when second quarter earnings will be released soon.
