Shares in Workday Inc. surged in late trading after the enterprise resource planning software giant delivered an earnings beat and revised its operating margin outlook amid strong growth.

For its second quarter ended July 31, Workday reported a profit before costs such as stock compensation of 83 cents per diluted share, down from $1.23 at the same time last year. Revenue rose 22%, to $1.54 billion. Analysts had expected earnings per share of 79 cents on revenue of $1.52 billion.

Subscription revenue in Workday’s second quarter rose almost 23% from a year ago, to $1.37 billion. The company’s operating loss was $34.1 million, way up from an operating loss of $1.1 million. Adjusted operating income rose to $301.6 million, from $291.8 million a year ago.

Highlights in the quarter included Wordday achieving FedRAMP Authorized status at the Moderate security impact level. The Federal Risk and Authorization Management Program is a standardized approach to security assessment and the awarding of the status gives Workday official entry into the U.S. federal government market.

“Our continued momentum is a testament to our strategy, which focuses on delivering significant value to our customers and helping them adapt and grow in today’s dynamic environment,” Chano Fernandez, co-chief executive officer of Workday, said in a statement. “As we look to the future, we will continue to invest in key industries and our global opportunity, as well as grow our footprint with existing customers and our partner ecosystem.”

For the third quarter, Workday expects subscription revenue of $1.418 billion to $1.42 billion, up 21% year-over-year. For fiscal 2023, subscription revenue is expected to be in the range of $5.537 billion to $5.557 billion, representing 22% year-over-year growth.

Barbara Larson, chief financial officer at Workday, commented that the “updated outlook reflects the momentum in our business and the mission-critical nature of our solutions while also balancing the current macro environment.” Larson added that Workday is now raising the company’s fiscal 2023 adjusted operating margin outlook to 19%, “reflecting the scalability of our model and our commitment to longer-term margin expansion.”

Investors liked the earnings beat and revised adjusted operating margin outlook. Workday shares surged as much as 13% after the bell before settling slightly, up more than 10%.

Photo: Workday