Executive Summary
In Q4 2025, Workday Inc. (WDAY) demonstrated robust financial performance, achieving $2.21 billion in total revenue, marking a 15% year-over-year growth. Subscription revenue reached $2.04 billion, reflecting a 16% increase, underscoring continued demand for its cloud-based enterprise applications. During the earnings call, CEO Carl Eschenbach highlighted the company’s successful execution across key sectors, including financial services and healthcare, while emphasizing the increasing integration of AI within its offerings. The launch of the Agent System of Record aims to streamline management of AI agents in organizational frameworks and further bolster customer services, reflecting Workday's commitment to innovation and efficiency. As the company navigates a transformative year, its robust customer base and strategic initiatives position it well for sustained growth and resilience.
Key Performance Indicators
QoQ: -54.55% | YoY:13.26%
QoQ: -51.30% | YoY:-92.09%
QoQ: -52.05% | YoY:-92.26%
Key Insights
1. **Revenue Performance**: Total revenue for Q4 reached $2.21 billion, up 15% YoY, driven primarily by a 16% growth in subscription revenue to $2.04 billion.
2. **Profitability Metrics**: Gross profit was approximately $1.67 billion with a gross margin of 75.6%. However, operating income saw a decrease to $75 million, a 54.6% sequential decline, influenced by restructuring costs and increased operational expenses.
3. **Net Income**: Net income was reported at $94 million, representing a net ma...
Financial Highlights
1. Revenue Performance: Total revenue for Q4 reached $2.21 billion, up 15% YoY, driven primarily by a 16% growth in subscription revenue to $2.04 billion.
2. Profitability Metrics: Gross profit was approximately $1.67 billion with a gross margin of 75.6%. However, operating income saw a decrease to $75 million, a 54.6% sequential decline, influenced by restructuring costs and increased operational expenses.
3. Net Income: Net income was reported at $94 million, representing a net margin of 4.3%. Significant YoY decline in net income was noted due to one-off expenses related to restructuring and lower operating income.
4. Cash Flow: The operating cash flow improved to $1.11 billion for the quarter, contributing to a total of $2.46 billion for FY 2025, indicating strong cash generation capabilities. Free cash flow stood at $1.03 billion, reinforcing financial strength for future investments.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
2.21B |
15.81% |
2.36% |
| Gross Profit |
1.67B |
15.45% |
-8.68% |
| Operating Income |
75.00M |
13.26% |
-54.55% |
| Net Income |
94.00M |
-92.09% |
-51.30% |
| EPS |
0.35 |
-92.26% |
-52.05% |
Key Financial Ratios
operatingProfitMargin
3.39%
operatingCashFlowPerShare
$4.18
freeCashFlowPerShare
$3.86
priceEarningsRatio
185.28
Management Commentary
1. On Subscription Growth: CEO Carl Eschenbach noted, "Workday delivered another solid quarter in Q4 with 16% subscription revenue growth... Our value proposition has never been stronger."
2. On Customer Adoption of AI: "We're seeing productivity gains of over 50% from our Developer Copilot. This helps our customers build apps much faster, showcasing the tangible ROI from AI integrations."
3. On Market Expansion: Eschenbach highlighted, "Our industry focus is a huge contributor to this growth... Workday now serves more than 11,000 customers across industries and geographies."
4. On Financial Services and Healthcare: The Q4 performance showed notable wins in crucial sectors such as finance and healthcare, contributing to 30% of the net new business being full suite solutions.
"Our AI has evolved and is delivering tangible ROI, we have new monetization opportunities that will fuel our long-term growth." - Carl Eschenbach
— Carl Eschenbach
"More than 15% of our net new ACV was sourced through partners, up from more than 10% last quarter and we're just getting started." - Carl Eschenbach
— Carl Eschenbach
Forward Guidance
Looking ahead, Workday projects FY 2026 subscription revenue to reach approximately $8.8 billion, representing a 14% growth trajectory. While management acknowledged macroeconomic pressures, particularly from currency fluctuations, they remain optimistic about achieving an annual subscription revenue backlog of $25.06 billion. Despite the restructuring costs anticipated in the first half of FY 2026, Workday expects to maintain an operating cash flow of approximately $2.75 billion during the fiscal year. Key to this outlook will be ongoing growth in AI revenues and a focus on operational efficiencies across the organization.