Shares of human-capital management cloud platform provider Workday (NASDAQ:WDAY) received a huge analyst upgrade this week, just as the tech company is about to report earnings. UBS analyst Karl Keirstead raised his price target on the stock from $255 to $370. In addition, the analyst upgraded his rating on the stock from neutral to buy, noting that there's been an uptick in human resources-focused back-office systems, creating a catalyst for Workday. 

The move to upgrade shares before earnings takes some guts. Can Workday deliver on Keirstead's optimistic view?

Ahead of Workday's earnings report this week, here's a preview of some of the key items investors will want to watch.

Workday cloud platform

Image source: Workday.

Revenue

Workday's revenue growth accelerated in its most recently reported quarter, driven by robust subscription revenue. Total fiscal Q2 revenue was $1.26 billion, up 18.7% year over year. This was fueled by a 19.5% increase in subscription revenue to $1.11 billion. Just three months earlier, Workday's total revenue was growing at a rate of 15.4%, fueled by a 17% year-over-year increase in subscription revenue.

Regarding Workday's impressive momentum last quarter, Workday co-CEO Chano Fernandez said, "Our business continues to accelerate, fueled by growing demand from large enterprise customers for our industry leading HR, finance, and planning solutions to drive transformation at scale."

On average, analysts expect Workday to report fiscal third-quarter revenue of $1.31 billion.

Earnings

Workday also has some impressive bottom-line momentum, with non-GAAP (adjusted) earnings per share increasing from $0.84 to $1.23 in fiscal Q2. But expectations for fiscal Q2 are conservative. For fiscal Q3, analysts are expecting non-GAAP earnings per share of $0.86 -- in line with the $0.86 it reported in the year-ago period. 

"Investing for growth remains our number one priority," said Workday chief financial officer Robynne Sisco in the company's fiscal second-quarter earnings call. "In addition to the increased pace of hiring in the back half of FY '22, we also expect to ramp non-headcount spending with investments specifically targeted at accelerating demand generation, enhancing our market position and advancing our strategic product roadmap."

Guidance

Finally, investors will want to see if Workday's momentum is strong enough for the company to lift its full-year guidance for subscription revenue once again. As of Workday's fiscal second quarter, management was guiding for fiscal 2021 subscription revenue to be between $3.773 billion and $3.775 billion. Will management provide a higher expected range when it reports its fiscal third-quarter results?

Workday reports earnings after market close on Thursday, Nov. 18.

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