Workday shares rose sharply in premarket trading on Friday after the enterprise software company reported stronger-than-expected quarterly results, giving investors a reason to pause concerns that artificial intelligence challengers could quickly weaken demand for traditional business software.
The Pleasanton, California-based company reported total revenue of $2.54 billion for the quarter ended April 30, up 13.5% from a year earlier. Subscription revenue rose 14.3% to $2.35 billion, Workday said in its earnings release.
Adjusted earnings came in at $2.66 a share, above Wall Street expectations of about $2.51, according to Reuters. Analysts had expected revenue of about $2.52 billion.
The stock move followed months of pressure on software companies whose business models have come under renewed scrutiny as investors assess whether generative AI systems can replace parts of enterprise software workflows. Reuters reported that Workday shares had fallen about 43% this year before the earnings reaction.
Workday sells finance, human resources and planning software used by large organizations. Its products sit inside core business operations, including payroll, hiring, workforce planning and financial management. That position has helped the company defend its role as AI tools move into corporate software.
Subscription revenue remained the key number in the report. Workday said its 12-month subscription revenue backlog rose 15.5% from a year earlier to $8.81 billion. Total subscription revenue backlog increased 10.9% to $27.29 billion.
The backlog figures gave investors a view of contracted demand beyond the quarter. They also showed the limits of the report. Barron’s reported that total subscription backlog came in below Wall Street’s expectation of about $28.38 billion, even as near-term subscription revenue and earnings topped estimates.
Workday reaffirmed its annual subscription revenue outlook. Reuters said the company’s results eased concern over whether newer AI companies such as Anthropic could rapidly disrupt demand for older enterprise software vendors.
Chief Commercial Officer Rob Enslin said net new business drove about 40% of subscription revenue growth, Reuters reported. That point matters because investors were not only looking for renewal strength. They were looking for evidence that customers are still signing new business with Workday while AI-native tools enter the market.
The company is trying to answer the AI threat by adding more AI features into its own products. Reuters reported that Workday has been investing in tools such as a recruiting agent and Sana, a conversational AI layer launched in March. Those products are aimed at helping customers automate tasks such as job-application screening and workforce planning.
That approach gives Workday a different argument from newer AI software companies. Instead of selling AI as a separate replacement for enterprise systems, Workday is placing AI inside systems that companies already use to manage employees and finances.
Investors appeared willing to accept that argument after the quarter. Reuters reported that Jefferies analysts said Workday is relatively insulated from AI disruption because of its large user base, strong retention and position as a system of record.
The phrase “system of record” is central to Workday’s defense. Companies may experiment with AI assistants, chatbots and workflow tools, but replacing the software that stores employee records, payroll data, finance information and planning systems is harder than adding a new interface on top of them.
Workday co-founder Aneel Bhusri, who returned as chief executive this year, framed AI as an opportunity rather than a direct threat. On the post-earnings call, he said some believe AI can disrupt Workday, but that he sees a chance for Workday to be a disruptor with AI, according to reports on the call.
The company’s valuation also helped the reaction. Reuters reported that Workday traded at a 12-month forward price-to-earnings multiple of 10.90, below Salesforce’s 12.80. That comparison suggested investors were not paying as much for Workday’s earnings as for some enterprise software peers.
The earnings reaction does not end the debate over AI and software spending. Enterprise software vendors still face pressure to show that AI features can increase value rather than simply defend existing revenue. Customers may also push for better pricing, faster automation and clearer productivity gains as AI products become more common.
Workday’s quarter showed that demand has not broken. Revenue grew, subscription revenue beat expectations, earnings topped estimates and backlog remained large. The stock response showed investors were prepared to reward evidence that AI has not yet displaced the company’s core business.
The next test will be whether Workday can turn AI features into stronger growth rather than only a protection against disruption. The company has millions of users, large enterprise relationships and software embedded in important corporate functions. It also operates in a market where customers are being told that AI can simplify or replace older software categories.
Friday’s move showed relief. It did not remove the longer question facing Workday and its peers: whether established enterprise software vendors can use AI to strengthen their platforms before AI-first rivals change the terms of competition.