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Workday, Inc. (WDAY)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY26 delivered solid topline and profit quality: total revenue $2.240B (+12.6% y/y), subscription revenue $2.059B (+13.4% y/y), and non-GAAP operating margin 30.2% (vs 25.9% y/y), while GAAP results were impacted by $166M restructuring charges .
  • Results beat Wall Street on revenue and non-GAAP EPS: revenue $2.240B vs $2.217B consensus*, and non-GAAP diluted EPS $2.23 vs $2.01 consensus*; EBITDA missed consensus given differing reporting focus (actual $289M vs $708M consensus*) .
    Values retrieved from S&P Global.
  • Guidance: reiterated FY26 subscription revenue $8.800B (+14%), raised FY26 non-GAAP operating margin to ~28.5% (from 28.0% prior); Q2 subscription revenue guided to $2.160B (+13.5%) and non-GAAP margin ~28% .
  • Strategic catalysts: accelerating AI monetization and product adoption (AI ACV >2x y/y; ~25% of expansions included AI SKUs), federal and international momentum, and a new $1.0B open-ended buyback authorization .

What Went Well and What Went Wrong

What Went Well

  • Strong profit quality: “non-GAAP operating margin of 30%” on 13% subscription growth, driven by disciplined headcount and revenue outperformance .
  • AI traction and monetization: “New ACV across our AI products more than doubled year-over-year in Q1… roughly 25% of our customer expansions… included one or more of these products” (e.g., Recruiting Agent, Talent Mobility, Evisort, Extend Pro) .
  • Backlog and retention: 12‑month subscription CRPO $7.63B (+15.6%), total subscription backlog $24.62B (+19.1%), gross revenue retention ~98%—supporting durable growth visibility .

What Went Wrong

  • GAAP optics: GAAP operating margin fell to 1.8% and diluted EPS to $0.25 due to $166M restructuring charges; share-based comp rose to $459M .
  • Billings softness vs CRPO strength: management flagged lighter billings growth given longer deployments and flexible payment terms in targeted industries (education/others), despite strong CRPO growth .
  • EBITDA below S&P consensus*: reported EBITDA of $289M vs $708M consensus*, reflecting Workday’s emphasis on non-GAAP operating income/margin over EBITDA as a primary KPI .
    Values retrieved from S&P Global.

Financial Results

Core P&L vs Prior Year, Prior Quarter, and Estimates

MetricQ1 2025Q4 2025Q1 2026 (Actual)Q1 2026 Consensus*
Total Revenues ($USD Billions)$1.990 $2.211 $2.240 $2.217*
Diluted EPS GAAP ($)$0.40 $0.35 $0.25 N/A
Diluted EPS Non-GAAP ($)$1.74 $1.92 $2.23 $2.01*
Operating Margin Non-GAAP (%)25.9% 26.4% 30.2% N/A
EBITDA ($USD Millions)N/AN/A$289 $708*

Values retrieved from S&P Global.

Segment Revenue Breakdown

Segment ($USD Millions)Q1 2025Q4 2025Q1 2026
Subscription Services$1,815 $2,040 $2,059
Professional Services$175 $171 $181
Total Revenues$1,990 $2,211 $2,240

KPIs and Cash Metrics

KPIQ1 2025Q4 2025Q1 2026
12‑mo Subscription CRPO ($USD Billions)$6.60–$6.98 (company noted 15% y/y; CRPO at Q3 was $6.98) $7.63 $7.63
Total Subscription Backlog ($USD Billions)$22.19 (Q3) $25.06 $24.62
Gross Revenue Retention (%)98% (Q4 commentary) 98% 98%
Operating Cash Flow ($USD Millions)$372 $1,113 $457
Free Cash Flow ($USD Millions)$291 $1,026 $421
Share Repurchases ($USD Millions)N/A$99 (Q4) $293
Cash & Marketable Securities ($USD Billions)N/A$8.02 $7.97

Notes: CRPO at Q1 and Q4 reflects company-reported figures and growth rates; interim Q3 values shown for trend context .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Subscription Revenue ($USD Billions)Q2 FY26N/A$2.160 (+13.5%) New
Non-GAAP Operating Margin (%)Q2 FY26~28% ~28% Maintained
Subscription Revenue ($USD Billions)FY26$8.800 (+14%) $8.800 (+14%) Maintained
Non-GAAP Operating Margin (%)FY26~28.0% ~28.5% Raised
Operating Cash Flow ($USD Billions)FY26$2.75 $2.75 Maintained
Capital Expenditures ($USD Millions)FY26~$250 ~$250 Maintained
CRPO Growth (%)Q2 FY26N/A15–16% incl. ~1pt tenants New detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 FY25)Q1 FY26Trend
AI monetization and adoption30% of expansions with AI SKUs; Recruiter Agent and Extend Pro ACV accelerating AI ACV >2x y/y; ~25% of expansions with AI; 7 new agents and Agent System of Record momentum Strengthening
Federal sectorDIA/DOE strategic wins; foundational investments Continued momentum; deepening agency engagement; platform security focus Building
International (EMEA/APJ)Headwinds in EMEA; strong Q4 in U.K./Germany; APAC progress Solid Q1 across EMEA/APJ; AWS U.K. cloud go-live; new Dublin HQ Improving, monitored
Partner ecosystem>15% of Q4 net new ACV sourced by partners; Bill on Workday growing >20% of net new ACV in Q1 from partner-sourced pipeline; expand MSP/Payroll Connect Expanding
Medium enterprise (Workday Go)Downmarket focus highlighted “Workday Go” launched; 30–60 day implementations; fixed pricing Accelerating
Macro/scrutinyDeal scrutiny persisted; leap year effects Watching SLED and international; FX tailwind vs prior headwind; macro choppiness acknowledged Stable/Watch
Billings vs CRPOCRPO healthy; billings variability by terms Q1 billings softer; explained by payment terms/industry mix; CRPO guide firm Managed

Management Commentary

  • “Workday delivered a solid first quarter… 13% subscription revenue growth and a non-GAAP operating margin of 30%… fueled by strong customer adoption across key verticals, geographies and segments.” — CEO Carl Eschenbach .
  • “We remain focused on executing in this uncertain environment and are reiterating our fiscal 2026 subscription revenue guidance of $8.8 billion while increasing our fiscal 2026 non-GAAP operating margin guidance to approximately 28.5%.” — CFO Zane Rowe .
  • “New ACV across our AI products more than doubled year-over-year in Q1… roughly 25% of our customer expansions… included one or more of these products.” — CEO Carl Eschenbach .
  • “Q1 non-GAAP operating income was $677 million, representing a non-GAAP operating margin of 30.2%… outperformance versus guidance was a result of moderated headcount growth along with revenue outperformance.” — CFO Zane Rowe .

Q&A Highlights

  • Macro and guidance confidence: Management reiterated FY26 guide, noting durable ROI/TCO narrative and expected H2 revenue acceleration tied to product deliverables; FX turned from ~$20M headwind to ~$10M tailwind for the remainder of the year .
  • Billings vs CRPO: Softer billings growth explained by payment terms and industry mix (e.g., education), while CRPO growth and OCF guide remained intact .
  • AI monetization trajectory: Already “moving the needle”—100% y/y growth in AI ACV; broader agent rollout over next 6–12 months expected to deepen monetization across segments .
  • Federal opportunity: Investments in secure platform and engagement across civilian/DoD/intelligence; restructuring primarily complete with no additional charges beyond Q1 .
  • Cost discipline and hiring: Intent to prudently grow back in key areas (AI, Product & Technology, go-to-market), balancing growth investments with efficiency .

Estimates Context

  • Revenue and EPS beats: Q1 FY26 revenue $2.240B vs $2.217B consensus*; non-GAAP diluted EPS $2.23 vs $2.01 consensus*. EBITDA reported $289M vs $708M consensus*, reflecting Workday’s focus on non-GAAP operating income/margin versus EBITDA .
    Values retrieved from S&P Global.
  • Implications: Street models likely raise non-GAAP margin trajectory given Q1 30.2% and FY26 guide uplift to 28.5%, while revenue path remains consistent with reiterated $8.8B; watch for billings/CRPO cadence nuances and tenant contract inclusion in CRPO (adds ~1pt growth in Q2) .

Key Takeaways for Investors

  • Quality beat: Strong non-GAAP margin (30.2%) on revenue outperformance, signaling early benefits from cost discipline and AI-driven mix—supportive for upward margin revisions .
  • Guidance credibility: Reiterated $8.8B FY26 subscription revenue and raised FY26 non-GAAP margin to 28.5%, underpinning medium-term target of 30%+ margins .
  • AI monetization inflecting: AI ACV >2x y/y; ~25% of expansions attached AI SKUs; growing agent portfolio and Agent System of Record are catalysts for bookings and pricing power .
  • Backlog durability: 12‑mo CRPO up 15.6% and total backlog up 19.1% y/y with ~98% gross retention—visibility into FY26 and beyond .
  • Watch list: Billings variability (terms/vertical mix), SLED/international macro sensitivity, and FX; management flagged tenants inclusion adds ~1pt to CRPO growth in Q2 .
  • Capital returns: $293M repurchased in Q1 and new $1.0B open-ended authorization provide downside support amid execution on AI/product deliverables .
  • Near-term trading lens: Momentum around AI updates and margin guidance raise are likely positive narrative drivers; monitor Q2 CRPO and H2 deliverables to validate acceleration path .

Additional Relevant Press Releases

  • Unveiled next generation Illuminate Agents (contract intelligence, document-driven accounting, frontline, self-service, etc.)—broadening AI monetization and ROI case .
  • Q1 FY26 press release confirming headline results, backlog, buyback, and guidance .

Values retrieved from S&P Global.