Workday Inc (WDAY) Q1 2026 Earnings Call Transcript
Workday, Inc. provides enterprise cloud applications in the United States and internationally. The company offers a suite of financial management applications to maintain accounting information; manage financial processes, such as payables and receivables; identify real-time financial, operational, and management insights; perform financial consolidation; reduce time-to-close; promote internal control and auditability; and achieve consistency across finance operations. It also provides spend management solutions that help organizations to streamline supplier selection and contract management, build and execute sourcing events, such as requests for proposals, and manage indirect spend; expense management solutions to submit and approve expenses; and a suite of human capital management applications that enables HR teams to hire, onboard, pay, develop, reskill, and provide employee experiences. In addition, the company offers planning applications; and applications for analytics and reporting comprising augmented analytics to surface insights to the line of business in simple-to-understand stories. Further, it provides supply chain and inventory solutions to healthcare organizations; solutions to manage the end-to-end student and faculty lifecycle; Workday Extend for customers and their developers to build custom applications; and Workday Illuminate, which helps customers accelerate manual tasks, assist employees, and transform business processes. The company serves the professional and business services, financial services, healthcare, education, government, technology, media, retail, and hospitality industries. It sells its solutions through its direct sales organization. The company was formerly known as North Tahoe Power Tools, Inc. and changed its name to Workday, Inc. in July 2005. Workday, Inc. was incorporated in 2005 and is headquartered in Pleasanton, California.
Workday delivered solid FY26 results driven by AI-enabled growth, GAAP margin compression due to AI investment, and guiding FY27 to ~12–13% subscription revenue growth with a shift to AI-centric, consumption-based models.
⭐ Key Highlights
✔Positive Signals
- 1. 1.7B AI actions in FY26 across Workday platform (organic AI growth signal).
- 2. Over $400M ARR from AI solutions with $100M in new ACV in Q4 (strong monetization of AI).
- 3. Sana Core and Sana Enterprise GA, enabling broader AI-driven engagement (Feb 15).
- 4. Q4 subscription revenue up 16% and full-year subscription up 14% (robust core business).
- 5. 22% growth in engineering output over 6 months and high AI-enabled productivity gains (customer-facing ROI).
✖Negative Signals
- 1. DIA contract in Q4 provided near-1 point rotation to subscription growth but is not expected in Q1 guidance.
- 2. Some net-new large deals (Fed, SLED, health care) are taking longer to close, affecting Q4/Q1 momentum.
- 3. GAAP operating margin expected to be 18–19 points lower than non-GAAP margins in FY27 due to AI investment and growth initiatives.
- 4. Channel and sales leadership transitions (e.g., departure of Head of Sales) could introduce near-term execution risk.
📊Financial Results
- Q4 subscription revenue: $2.360B, up 16% YoY.
- Full-year subscription revenue: $8.833B, up 14%.
- Q4 total revenue: $2.532B, up 15%.
- Full-year total revenue: $9.552B, up 13%.
- Non-GAAP operating income: Q4 $774M (30.6% margin); full-year $2.82B (29.6% margin).
🔮Future Guidance
- FY27 subscription revenue guidance: $9.925B–$9.950B, up 12–13%.
- Q1 FY27 subscription revenue guidance: approximately $2.335B (up ~13%).
- cRPO growth guidance for Q1: 14.5–15.5%.
- FY27 subscription growth expected to be ~5% sequentially in Q2.
- FY27 non-GAAP operating margin ~30%; GAAP margin ~18–19 points lower; FY27 OCF about $3.450B; capex ~$270M; FCF ~$3.18B (↑~15%).
💡Interesting Insights
- Lights-out finance concept: continuous AI automation of core finance processes with real-time compliance autopilot and contract/document intelligence.
- Flex Credits pricing model enabling consumption-based AI adoption for both internal and third-party agents, expanding monetization beyond core apps.
- Strategy to earn value from third-party agents via a shared intelligence layer—data, APIs, and agent APIs monetized through Flex Credits.
Detailed Analysis
AI-generated summary of Workday Inc earnings call transcript.
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