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Workday forecasts strong revenue as subscriptions jump

Workday Inc. Chairman, Co-Founder and Co-CEO Aneel Bhusri (center R) and Co-Founder and Co-CEO Dave Duffield (center L) ring the opening bel
Workday Inc. Chairman, Co-Founder and Co-CEO Aneel Bhusri (center R) and Co-Founder and Co-CEO Dave Duffield (center L) ring the opening bel

By Soham Chatterjee

(Reuters) - Workday Inc, a provider of Web-based human resources software, guided fourth-quarter revenue well above expectations after reporting a 76 percent jump in quarterly sales, helped by strong growth in subscriptions from financial customers.

Workday's shares rose as much as 8 percent after the bell.

The company, which makes software to manage employee performance, payroll and expense, said it expects revenue of $133-$138 million in the fourth quarter. Analysts on average were expecting $128.9 million.

Northland Capital Markets analyst Scott Berg said the company reported its largest sequential increase in deferred revenue since its IPO, helped by strong growth in billings.

"Guidance was above expectations and would appear to be fairly conservative given the momentum in billings," Evercore analyst Kirk Materne said.

Workday, which had a blockbuster listing last October, competes with Oracle Corp and Germany-based SAP AG in the fast-growing cloud software market, but is yet to turn a profit.

Businesses are increasingly turning to cloud computing technology, which lets them access data from remote servers and is faster and cheaper than traditional in-house infrastructure.

The cloud software and services market is expected to grow 18.5 percent this year to $131 billion worldwide, according to research firm Gartner.

Workday's customers include companies such as TripAdvisor Inc and Yahoo Inc.

For the quarter ended October 31, the company's net loss narrowed to $47.5 million, or 27 cents per share, in the third quarter, from $41.5 million, or 67 cents per share, a year earlier.

On an adjusted basis, the company reported a loss of 12 cents per share.

Revenue jumped 76 percent to $127.9 million. Subscription sales rose 82 percent to $93.9 million.

Analysts had expected a loss of 17 cents per share on revenue of $117.7 million.

The company said it expects subscription revenue of $105-$108 million in the fourth quarter.

"It was a really good all round quarter on the top line and expense controls. They did a good job on margins," Susquehanna Financial Group analyst Derrick Wood said.

Workday's shares have risen more than 34 percent this year. They closed at $73.28 on Monday on the New York Stock Exchange.

(Reporting by Soham Chatterjee; Editing by Saumyadeb Chakrabarty)

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