Even as stock markets have performed well in 2023, some investors have remained on edge. The breadth of the market rally this year has been quite narrow, with just a handful of stocks accounting for the lion's share of gains for major market benchmarks. Ideally, bullish market participants would prefer to see more stocks rise as part of a more sustained rally.
From that perspective, tech investors got some good news on Wednesday morning. Tech stocks beyond the giga-cap giants scored some hard-earned gains, including human resources software specialist Workday (NASDAQ: WDAY) and data storage company NetApp (NASDAQ: NTAP). Here's a closer look at what these two companies said and why their shareholders are excited at the news.
Workday gets to work
Shares of Workday were up more than 8% on Wednesday morning. The enterprise software company specializing in finance and human resources reported fiscal third-quarter financial results for the period ended Oct. 31, and investors liked what they saw in the report.
Workday said that total revenue came in at $1.87 billion during the quarter, up 17% from year-ago levels. Of that, subscription revenue rose 18% year over year to $1.69 billion, and the company boasted a subscription revenue backlog of $18.45 billion. The backlog figure was 31% higher than it had been 12 months earlier. Those figures translated into adjusted earnings of $1.53 per share, up 54% from year-ago levels.
Co-founder/co-CEO Aneel Bhusri was pleased to see Workday's strategic vision play out. As Bhusri sees it, Workday's move to integrate artificial intelligence (AI) into its product suite has gotten a highly favorable reception from customers. Moreover, with huge investments in generative and conversational AI, Workday believes that its platform will deliver big productivity gains through streamlined business processes and better decision making.
Workday raised its revenue and margin guidance in light of the strong quarter. With AI innovation just getting started, Workday could have a long growth runway ahead as it approaches its all-time highs from late 2021.
NetApp is connecting with clients
Elsewhere within tech, NetApp shares were up 14% early Wednesday morning. The provider of data infrastructure products and services reported results for the fiscal second quarter that ended Oct. 27, and although not all of the numbers looked all that good in comparison to last year's figures, investors were generally pleased with where the company stands right now.
NetApp's results for the period were mixed. Net revenue dropped 6% year over year to $1.56 billion, due largely to a drop in sales from NetApp's hybrid cloud segment. Billings also struggled, falling 9% to $1.45 billion. However, annualized revenue run rates for NetApp's public cloud product inched higher by 1%, and adjusted earnings of $1.58 per share were higher by $0.10 per share from the year-ago period.
NetApp projected that it should continue to see quarterly performance close to what it delivered in the just-ended quarter. Fiscal third-quarter projections call for the company to post sales of between $1.51 billion and $1.67 billion, with adjusted earnings of $1.64 to $1.74 per share. For the full year, revenue is likely to drop about 2%, but earnings of between $6.05 and $6.25 per share on an adjusted basis could be enough to give investors more optimism about NetApp's longer-term future.
Cloud computing remains a popular theme. If clients keep engaging in digital transformation, then NetApp is positioning itself to get sales growing again and boost its profitability over time.
10 stocks we like better than Workday
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Workday wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of November 28, 2023
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NetApp and Workday. The Motley Fool has a disclosure policy.
