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01/10 16:15
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a positive outlook with strong subscription revenue growth, high gross revenue retention, and significant share repurchase plans. Despite some macroeconomic risks and vague responses in the Q&A, the company's financial performance and optimistic guidance, including a new buyback authorization, suggest a positive stock price movement. The absence of guidance refusal and the presence of strong financial metrics further support this sentiment. Additionally, the potential impact of AI initiatives and partnerships could enhance market confidence.
Subscription Revenue $2,059,000,000, up 13% year-over-year (15% adjusted for leap year). Growth driven by strong customer adoption across key verticals and geographies.
Professional Services Revenue $181,000,000, contributing to total revenue of $2,240,000,000, which is also up 13% year-over-year.
U.S. Revenue $1,680,000,000, up 13% year-over-year.
International Revenue $559,000,000, up 13% year-over-year.
12-Month Subscription Revenue Backlog (CRPO) $7,630,000,000, increasing 15.6% year-over-year, including growth from subscription contracts related to implementation and testing environments.
Total Subscription Revenue Backlog $24,620,000,000, up 19% year-over-year.
Gross Revenue Retention Rate 98%, indicating strong customer retention.
Non-GAAP Operating Income $677,000,000, representing a non-GAAP operating margin of 30.2%. Outperformance attributed to moderated headcount growth and revenue outperformance.
GAAP Operating Income $39,000,000, impacted by a $166,000,000 charge related to restructuring.
Operating Cash Flow $457,000,000, growth of 23% year-over-year.
Share Repurchase $293,000,000 of shares repurchased during the quarter, with $589,000,000 remaining authorization.
Cash and Marketable Securities $8,000,000,000 at the end of the quarter.
Current Headcount Approximately 19,300, reflecting the previously announced restructuring.
AI Products: New ACV across AI products more than doubled year over year in Q1, with roughly 25% of customer expansions including one or more AI products.
Workday Go: Launched Workday Go for medium enterprises, enabling implementations in as little as 30 to 60 days with preconfigured deployments.
XtendPro: Increasing demand for XtendPro, enabling customers to build AI applications on top of the Workday platform.
Market Expansion: Established new HCM relationships with United Airlines, Pilot Travel Centers, and Mutual of Omaha Insurance Company.
International Growth: Solid growth across EMEA, APAC, and Japan, with notable wins in various sectors.
Federal Sector: Continued focus on the federal sector with increased attendance at the federal forum and strong conversations with government leaders.
Subscription Revenue Growth: Subscription revenue grew 13% to $2.059 billion in Q1.
Operating Margin: Non-GAAP operating margin of 30.2% in Q1, with a focus on operational efficiencies.
Cash Flow: Operating cash flow was $457 million, up 23%.
AI Innovation: Investments in AI and technology are driving long-term growth and differentiation in the market.
Capital Allocation: Board approved a new $1 billion open-ended buyback authorization, focusing on organic growth and strategic acquisitions.
Economic Environment: The economic environment remains uncertain, which could impact customer spending and investment decisions.
SLED Market Risks: There are potential headwinds in the SLED (State, Local, Education) market due to funding issues from the federal government.
International Business Risks: The international business may face challenges depending on macroeconomic conditions, which could affect growth.
Regulatory Issues: The company is closely monitoring regulatory changes that could impact its operations, particularly in the federal sector.
Supply Chain Challenges: Supply chain issues could affect the implementation and delivery of services, particularly in international markets.
Competitive Pressures: Increased competition in the AI and enterprise software market may impact market share and pricing strategies.
Hiring and Workforce Management: The company is cautious about hiring due to the uncertain macro environment, which may affect operational capacity.
Investment in AI: While there is a strong focus on AI innovation, the success of these investments is contingent on market adoption and customer willingness to invest.
Subscription Revenue Growth: Workday achieved a 13% subscription revenue growth in Q1 FY 2026, driven by strong customer adoption across various sectors.
AI Product Adoption: New ACV across AI products more than doubled year over year in Q1, with approximately 25% of customer expansions including AI solutions.
Workday Go Initiative: Launched Workday Go to target medium enterprises, enabling faster implementations in 30-60 days with preconfigured deployments.
Federal Sector Growth: Workday is focusing on the federal sector, with increased attendance at their federal forum and discussions on transforming the federal workforce.
Global Expansion: Solid growth in EMEA, APAC, and Japan, with notable wins and expansions in these regions.
FY 2026 Subscription Revenue Guidance: Reiterating subscription revenue guidance of $8,800,000,000 for FY 2026.
Q2 FY 2026 Subscription Revenue Outlook: Expecting Q2 subscription revenue to be approximately $2,160,000,000, reflecting a 13% growth.
CRPO Growth Expectation: Expecting CRPO to increase between 15-16% in Q2 FY 2026.
FY 2026 Non-GAAP Operating Margin: Expecting a non-GAAP operating margin of approximately 28.5% for FY 2026.
Operating Cash Flow Outlook: Maintaining FY 2026 operating cash flow outlook of $2,750,000,000.
Capital Expenditures Guidance: Expecting FY 2026 capital expenditures of approximately $250,000,000.
Share Repurchase: In Q1, Workday repurchased $293,000,000 of its shares and had $509,000,000 in remaining authorization as of April 30. Additionally, the Board approved a new $1,000,000,000 open-ended buyback authorization.
The earnings call summary and Q&A reveal strong financial performance, strategic acquisitions, and growing AI solutions. The company increased its FY '26 subscription revenue and operating margin guidance, indicating confidence in future growth. Acquisitions like Paradox and Sana are positively impacting growth, and AI solutions are contributing significantly to ARR. Despite some lack of specific guidance, overall sentiment is positive, with strong international growth and a robust M&A strategy. The positive outlook on subscription revenue and AI growth suggests a likely stock price increase in the short term.
Workday's earnings call reflects positive sentiment with strong subscription revenue growth, AI product expansion, and strategic acquisitions like Paradox. Despite concerns about AI disruption, Workday's robust customer base and high retention rates mitigate these fears. The Q&A highlights positive AI adoption, strong international performance, and strategic government sector focus. While some financial details were vague, the overall tone and strategic initiatives suggest a positive market reaction, likely resulting in a 2% to 8% stock price increase.
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