Enterprise software provider Workday Inc. beat expectations on earnings and revenue today as it posted its fourth-quarter financial results, but its guidance for the coming quarter came up light and its stock fell almost 3% in extended trading.

The company reported a net loss for the quarter of $125.7 million, with earnings before certain costs such as stock compensation coming to 99 cents per share, up from 78 cents a year earlier. Revenue for the quarter rose 20% from a year ago, to $1.65 billion.

The results were good, since Wall Street had been targeting earnings of just 78 cents per share on sales of $1.63 billion.

Workday also reported subscription revenue rose 22%, to $1.5 billion, just ahead of the consensus estimate of $1.49 billion. For the full fiscal 2023 year, revenue rose 21%, of $6.22 billion, and subscription revenue rose 22%, to $5.5 billion.

Workday is a pioneer in human resources software as a service. It sells cloud software that specializes in applications for human capital management, financial management and enterprise resource planning. Using its software, companies can automate human resources and business tasks such as payroll and expenses, while tracking employee data.

Workday co-founder and co-Chief Executive Aneel Bhusri said the company closed a successful year, reinforcing the strength of its value proposition in helping enterprises manage their people and finances. “Despite the unpredictable environment, we remain well-positioned to drive the future of work for our more than 10,000 customers,” he said, partly thanks to its “unique approach to embedding artificial intelligence and machine learning into the very core of our platform.”

The company was coming off a busy quarter that saw a lot of changes take place, both in its executive leadership and elsewhere. In December, investors were surprised by the sudden news that former co-CEO Chano Fernandez would immediately stepp down from his role.

The same day, Workday announced a replacement, board member Carl Eschenbach (pictured), a former executive of VMware Inc. At the time, Bhusri reiterated that he still intends to step down from his own role in January 2024, meaning that Eschenbach is expected to take over as sole CEO from that point on.

Eschenbach wasn’t long in the hot seat when he had to make a tough decision, announcing in January that Workday would let go 3% of its workforce, or about 525 people, citing a global economic environment that has proven “challenging” for companies of all sizes.

Holger Mueller of Constellation Research Inc. praised Workday, saying it delivered a strong performance both in the quarter and the last fiscal year. “That’s a good result in a difficult economic environment,” he said. “However, Workday’s growth came at a cost and it posted an overall net loss for 2023, having previously managed a small profit in the prior fiscal year. So Carl Eschenbach, who is likely to take over as Workday’s sole CEO next year, has a lot of work to do if he’s to make the company profitable again.”

The challenge Workday is facing is evident in its guidance for the current quarter and full year, which came up short of expectations. For the first quarter, the company forecast total revenue of between $1.665 billion and $1.668 billion, below Wall Street’s forecast of $1.7 billion. For fiscal 2024, Workday sees revenue of between $7.155 billion and $7.225 billion, while analysts are targeting $7.26 billion.

“Our outlook reflects our strong fourth-quarter execution and the scale of our model, balanced with our expectation that the environment will remain uncertain in the near-term,” Workday Chief Financial Officer Barbara Larson said in a statement.

Photo: SiliconANGLE