Updated:

Workday Inc. today continued a dubious string of quarters in which it beat Wall Street analysts estimates only to see its shares fall.

The maker of cloud-based human capital management and enterprise financial software reported fiscal second-quarter revenues of $671.1 million, up nearly 28 percent from a year ago, with 30 percent growth in subscription revenue, to $565.7 million. Workday reported earnings per share of 31 cents, easily beating analysts’ estimates of 25 cents.

But gross margins came in slightly below forecasts and the company issued cautious guidance on operating margins for the third quarter, blaming the variance on seasonal factors and its upcoming user conference. Although Workday raised estimates for the third quarter and full year, investors sent the company’s stock price down more than 3 percent after hours. Update: Shares were falling nearly 8 percent Wednesday morning.

Profit-taking was probably a factor, given that shares have climbed nearly 30 percent since the end of July, but management’s lack of visibility into some of details of future performance continues to concern investors. Co-President and Chief Financial Officer Robynne Sisco acknowledged as much, saying the company’s push upward into large enterprises has resulted in some “lumpiness” in the business.

There was nothing lumpy about closely watched subscription sales, which presage future earnings. They grew even more strongly than expected. Workday bested subscription sales estimates by $7 million and raised the third-quarter forecast to between $609 million and $611 million, well above analysts’ forecasts of $586.5 million.

For the full year, Workday expects to haul in subscription revenues of $2.34 billion, better than estimates of $2.29 billion. Twenty-six percent backlog growth, to $5.5 billion, prompted executives to tamp down expectations that such growth can continue. “I wouldn’t expect backlog growth acceleration because the number is so large,” Sisco said.

The company is particularly high on its recent acquisition of Adaptive Insights Inc., a developer of corporate performance management software. The deal has boosted Workday’s credibility with enterprise prospects, who value the planning expertise that Adaptive brings to the table and are thus more inclined to look at the applications.

“We were two or three years behind where the market wanted us to be,” said Co-President Chano Fernandez. “With Adaptive, we got the double bonus of being viewed as a leader in its space as well as opening up the doors to larger core financial management business.” Workday signed a record eight Fortune 500 customers in the quarter and said 35 percent of the Fortune 500 are now using its human resources products.

The company was so impressed with Adaptive, in fact, that it plans to shut down its own workforce planning platform and move it to the acquired company’s. “As we dug into it and saw the breadth and power of the platform, it made sense to put all our eggs in that basket,” Fernandez said.

Workday doesn’t break out revenues by product line, but its new line of financial applications is growing as a percentage of overall sales, said Chief Executive Aneel Bhusri. Diversifying beyond the human resources market has helped boost the company’s average selling price by attracting existing customers back for more.

“That first dollar spent on core HCM can lead to two or three being spent on financials or recruiting,” Fernandez said. “Our customer base sellback is much stronger than it was two or three years ago.”

Image: Workday