IT companies haven’t felt as much of a negative impact on their business performances as have companies from other sectors. Among IT and technology companies, one major theme that is currently playing out is cloud technology. Businesses all over the world are shifting from an onsite server-based setup to an online cloud environment. Most of the top software companies have major cloud initiatives. Workday is a company founded in 2005 that is one of the leaders in human capital management software delivered through a cloud-based setup.
Workday’s Positive 3Q2020 Results
Workday reported its third-quarter 2020 earnings results in November recently. Subscription revenues were up 21% year-on-year to $969 million. The company managed to achieve a high retention level of 95% on a gross basis. Workday also has a subscription revenue backlog of $8.87 billion which provides plenty of visibility. This backlog grew 23% on a Y-o-Y basis. While Workday is well-known for its human capital management software, the company reached 1,000 customers for its financial management software solutions as well.
Company CFO Robynne Sisco provided forward-looking guidance. She forecasted, ” We are raising our FY ’21 subscription revenue estimate to be in the range of $3.773 billion to $3.775 billion or a 22% growth. We expect our Q4 subscription revenue to be $991 million to $993 million, 18% growth. We continue to expect professional services revenue to be $525 million in fiscal ’21 and $121 million in Q4.”
So which software stock should you be buying now? Workday’s price has gone from around $71 5 years ago to $248 in December 2020. Paycom Software, a peer of Workday, has grown from $33 to $462 in December 2020. Cloud document specialist Docusign has grown from around $40 in 2018 to $244 in December 2020. Adobe, a popular software stock, has grown from $87 5 years ago to almost $500 in December 2020.