According to a Gartner report published earlier this year, the global cloud application services, which consists of Software-as-a-Service (SaaS) offerings, is expected to grow 20% this year to $37.7 billion. The market is estimated to have grown 16% in 2015 to $31.4 billion. This growth is attributed to the shift in the models of software vendors who are transitioning from on-premises licensed software to public cloud-based offerings. SaaS-based enterprise application services provider Workday (NYSE: WDAY) is already seeing the benefits of this growth. While the transition is old news at this point, the metrics of this shift are staggering.
Workday’s second quarter revenues grew 34% over the year to $377.7 million compared with the market’s forecast of $373 million. Net loss of $0.04 per share was worse than the market’s prediction of a loss of $0.02 per share.
By segment, subscription revenues grew 37% to $306.2 million and professional services revenues grew 21% to $71.5 million. During the quarter, Workday signed new contracts with major customers including IBM, French luxury goods giant Kering, and Spanish energy giant Repsol. Workday will be providing its HR solution to IBM to manage its global workforce of over 350,000 employees.
For the current quarter, Workday projected revenues of $398 million-$400 million, short of the Street’s forecast of $401 million. The company improved its forecast for the year from $1.87 billion-$1.885 billion to $1.88 billion-$1.89 billion.
Recently, Workday announced the acquisition of operational analytics and data discovery tools provider Platfora. San Mateo, California-based Platfora offers companies a way to do business intelligence on data stored in the Hadoop open source Big Data software. Platfora has partnerships with Hadoop distribution companies including Cloudera, Hortonworks, and MapR. Terms of the deal were not disclosed. Through the acquisition, Workday will be able to enhance the analytic capabilities of its Workday Financial Management and Workday Human Capital Management offerings.
Earlier this summer, Workday also announced the acquisition of online learning company Zaption. San Francisco-based Zaption has an online and a mobile presence to allow teachers and companies to host videos or use existing videos for teaching purposes. Its service allows teachers to overlay questions on top of videos from multiple sources such as YouTube or Vimeo and then capture responses and run analytics on engagement data. The company also offers pre-built lessons on a few subjects. The terms of the deal were not disclosed again. Workday believes that the acquisition will help it improve its position within the educational institutions industry. Presumably, this will enhance Workday’s corporate learning capabilities.
Workday’s IBM Partnership
Earlier this month, Workday announced a partnership with IBM. Through the agreement, IBM Cloud will become the foundation for Workday’s development and testing environment globally. The move will help Workday accelerate innovation and provide capacity expansion to support its increasing development and testing requirements.
The market is pleased with Workday’s performance. Its stock is trading at 52-week high levels of $83.10 with a market capitalization of $16.4 billion. It has recovered from the 52-week low of $47.32 it had fallen to in February this year.
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