"Our customers are looking to continuously consolidate on top of the Workday platform. They do it with Workday because of the strong ROI in total cost of ownership we bring them." - Carl Eschenbach
Workday Inc reported a strong performance in Q1 2026, achieving a 13% year-over-year growth in subscription revenue, resulting in total revenue of $2.24 billion. This growth is indicative of strong customer adoption across key sectors, underpinned by a robust focus on AI-driven solutions. While the current economic landscape presents uncertainties, CEO Carl Eschenbach emphasized the resilience of Workday's value proposition, particularly in helping organizations drive efficiencies, agility, and innovation. Management reiterated its commitment to long-term growth, bolstered by recent customer wins and a diversified product offering.
Key Performance Indicators
Revenue
2.24B
QoQ: 1.31% | YoY:13.02%
Gross Profit
1.70B
76.03% margin
QoQ: 1.85% | YoY:13.91%
Operating Income
39.00M
QoQ: -48.00% | YoY:-32.76%
Net Income
68.00M
QoQ: -27.66% | YoY:-36.45%
EPS
0.26
QoQ: -25.71% | YoY:-35.00%
Revenue Trend
Margin Analysis
Key Insights
**Total Revenue**: $2.24 billion, up 13% YoY
**Subscription Revenue**: $2.059 billion, up 13% YoY (15% adjusting for leap year)
**Net Income**: $68 million, down 36.45% YoY
**EBITDA**: $289 million, contributing a margin ratio of 12.9%
**Gross Profit Margin**: 76.03%
Financial Highlights
### Key Financial Metrics
- Total Revenue: $2.24 billion, up 13% YoY
- Subscription Revenue: $2.059 billion, up 13% YoY (15% adjusting for leap year)
- Net Income: $68 million, down 36.45% YoY
- EBITDA: $289 million, contributing a margin ratio of 12.9%
- Gross Profit Margin: 76.03%
- Non-GAAP Operating Margin: 30.2%
### Revenue Breakdown
- U.S. Revenue: $1.68 billion, up 13% YoY
- International Revenue: $559 million, up 13% YoY
- Subscription Revenue Backlog: $7.63 billion, up 15.6% YoY
- Gross Revenue Retention Rate: 98%
Commentary: Management highlighted strong demand for AI products, with over 25% of customer expansions incorporating AI solutions, indicating a robust push towards AI integration. CEO Carl Eschenbach noted, 'Our customers are investing in us because they know a path to leveraging AI is through the Workday platform.'
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.24B
13.02%
1.31%
Gross Profit
1.70B
13.91%
1.85%
Operating Income
39.00M
-32.76%
-48.00%
Net Income
68.00M
-36.45%
-27.66%
EPS
0.26
-35.00%
-25.71%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Management Insights
- AI and Innovation: CEO Carl Eschenbach remarked, 'We help manage and optimize their most critical assets... with AI at the core.' The firm's AI offerings demonstrated a 100% growth year-over-year, reflecting significant customer enthusiasm.
- Customer Adoption: The company secured new HCM contracts with notable firms like United Airlines and CVS Health, reinforcing Workday's market position.
- Growth Strategy: Zane Rowe, CFO, noted, 'We continue to expect a slightly faster growth, particularly in Q4, driven in part by revenue from product deliverables associated with previously closed deals.'
Our customers are looking to continuously consolidate on top of the Workday platform. They do it with Workday because of the strong ROI in total cost of ownership we bring them.
â Carl Eschenbach
No company is better positioned than Workday to lead this shift. Our unparalleled data... and platform built with AI at its core, we're ready to shape the future of work.
â Carl Eschenbach
Forward Guidance
### Future Outlook
Management maintains its subscription revenue guidance of $8.8 billion for FY 2026, despite economic uncertainty. Key strategic investments are pouring into areas such as AI and international markets. Looking ahead, the company projects Q2 FY 2026 subscription revenue at approximately $2.16 billion, sustaining 13% growth. Market conditions are being monitored carefully, particularly in the SLED and healthcare sectors, signaling vigilance amidst potential headwinds. CFO Rowe mentioned, 'While there's heightened macro uncertainty... we haven't seen this meaningfully impact our business and our growth prospects.'
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
WDAY Focus
76.03%
N/A
N/A
N/A
INTU
74.90%
8.25%
1.09%
216.86%
ZM
70.70%
24.20%
2.61%
21.80%
NOW
78.90%
14.60%
4.54%
89.49%
SNOW
65.70%
-41.90%
-6.95%
-40.83%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
With Workday continuing to innovate its AI offerings and expand its market reach, the investment thesis appears solid. The ability to pivot towards medium enterprises and leverage existing technology partnerships will likely encourage sustained revenue growth. Market conditions remain uncertain, particularly for SLED and healthcare, which may impact growth targets should economic pressures persist. However, the company's dedication to driving ROI for customers positions it favorably against competitors. Investors should monitor the execution of new product rollouts and customer adoption rates of AI capabilities as indicators of future growth.
Key Investment Factors
Growth Potential
Workday's commitment to AI-centric solutions and its launch of WorkdayGo, aimed at the emerging and medium enterprise market, positions it strongly for continued growth.
Profitability Risk
Potential macroeconomic headwinds impacting agency budgets and federal funding could pose challenges in the SLED sectors and macro-dependent revenue streams.
Financial Position
The company boasts a strong balance sheet with $8 billion in cash and marketable securities, evidencing liquidity and resilience amidst uncertain economic conditions.
SWOT Analysis
Strengths
Strong financial performance with steady revenue growth
High gross profit margin at 76%
Robust cash reserves totaling $8 billion
Strong customer retention rate of 98%
Weaknesses
Net income reduced by 36%, indicating profit challenges amidst high investment in growth areas
Dependence on continual new customer acquisition to offset potential declines in larger client budgets
Opportunities
Expansion into medium-sized enterprises with WorkdayGo offerings
Further adoption of AI products presents significant growth potential
Enhancements in customer support through strategic partnerships
Threats
Economic fluctuations potentially leading to budget cuts in client sectors
Increased competition from other software vendors accelerating AI capabilities