Companies are slowing down their hiring of new employees as they grapple with the pressures of a prolonged period of high interest rates and surging inflation.
If the losses continue, Workday’s market capitalization is expected to decline by about $9 billion.
The company said after the market closed on Thursday that it now expects subscription revenue to be between $7.7 billion and $7.73 billion in fiscal 2025, down from its previous forecast of $7.73 billion to $7.78 billion.
Analysts now expect full-year subscription revenue of $7.73 billion, according to LSEG data. “Growth will slow gradually, but we believe the drivers are macro, not company-specific,” Bernstein analysts wrote in a note. U.S. job growth slowed more than expected in April, and annual wage growth fell below 4% for the first time in nearly three years. Analysts also noted that large companies, especially in Europe, are taking longer to close deals, hurting Workday’s forecasts.
“Workday experienced pressure in Europe, job cuts due to contract renewals, and increased scrutiny of its large transactions during the quarter,” Morningstar analysts wrote in a note.
The company closed fewer large deals in the first quarter compared to the same period last year, especially in Europe, the Middle East and Africa, Chief Executive Officer Karl Eschenbach said on an earnings conference call on Thursday.
Workday’s total quarterly revenue was $1.99 billion, beating analyst expectations of $1.97 billion.
“The environment is challenging for most industries globally, and particularly in Europe,” Workday co-president Douglas Robinson said Thursday.
At least 15 brokerages cut their target prices for the stock on Friday. (Reporting by Arshiya Bajwa in Bengaluru; Editing by Shilpi Majumdar)
