• Subscription Revenue (Q4): $2.04 billion, up 16%.
• Full Year Subscription Revenue (FY25): $7.718 billion, growth of 17%.
• Total Revenue (Q4): $2.21 billion, growth of 15%.
• Full Year Total Revenue (FY25): $8.45 billion, up 16%.
• Non-GAAP Operating Margin (Q4): 26.4%.
• Full Year Non-GAAP Operating Margin (FY25): 25.9%.
• Operating Cash Flow (Q4): $1.11 billion.
• Full Year Operating Cash Flow (FY25): $2.46 billion, growth of 15%.
• 12-Month Subscription Revenue Backlog (cRPO): $7.63 billion, growing 15%.
• Total Subscription Revenue Backlog: $25.06 billion, up 20%.
• Gross Revenue Retention Rate: 98%.
• Headcount: Approximately 20,400 workmates.
• FY26 Subscription Revenue Guidance: Approximately $8.8 billion, growth of 14%.
• FY26 Non-GAAP Operating Margin Guidance: Approximately 28%.
• FY26 Operating Cash Flow Guidance: $2.75 billion.

• Warning! GuruFocus has detected 4 Warning Sign with WDAY.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Workday Inc (NASDAQ:WDAY) reported a 16% growth in subscription revenue for Q4, showcasing strong demand for its services.
• The company achieved a 26% non-GAAP operating margin, indicating efficient cost management and operational execution.
• Workday Inc (NASDAQ:WDAY) expanded its customer base significantly, adding notable clients such as Bayer, Henkel, and the State of North Carolina.
• The launch of the Agent System of Record positions Workday Inc (NASDAQ:WDAY) as a leader in managing AI agents, enhancing its competitive edge.
• Workday Inc (NASDAQ:WDAY) saw strong international performance, particularly in the UK and Germany, despite macroeconomic headwinds.

Negative Points

• The restructuring led to a workforce reduction of approximately 8%, which could impact employee morale and productivity.
• There is a $75 million charge related to restructuring, affecting GAAP operating income for the quarter.
• The strengthening of the US dollar poses a $20 million headwind to the company's FY26 subscription revenue outlook.
• Despite strong Q4 results, the macroeconomic environment in EMEA remains challenging, potentially impacting future growth.
• The company faces risks associated with the integration and management of third-party AI agents, which could lead to operational complexities.

Q & A Highlights

Q: Can you walk us through the vision and investment required for the Agent System of Record? Are savings from restructuring being redirected into this? A: Carl Eschenbach, Co-CEO, explained that the restructuring was necessary to reinvest in the product and technology organization, particularly for the Agent System of Record. There is significant interest from customers and partners to manage agents securely, which necessitates this investment. David Somers, Chief Product Officer, added that there is strong interest in managing both Workday and third-party agents within this system.

Q: How does Workday plan to leverage AI in renewals and upselling opportunities? A: Carl Eschenbach highlighted that Workday has good visibility on renewals and actively sells AI SKUs back into the customer base, with over 30% of transactions involving AI products. The company is not waiting for renewals to upsell and is excited about new AI agent SKUs that will be rolled out in the next 6 to 12 months.

Q: What is the expected contribution from AI agents in the second half of the year? A: Zane Rowe, CFO, stated that while there is strong momentum in AI, the current guidance does not attribute a significant amount of revenue to AI agents, as they will be rolled out throughout the year. Carl Eschenbach added that new agents announced recently will be available in the second half of the year, but are not expected to significantly impact FY26 guidance.

Q: How is Workday performing internationally, particularly in Europe? A: Carl Eschenbach noted that while EMEA has been a headwind, the UK and Germany had strong performances in Q4. Workday continues to invest internationally, and when customers decide to move forward with large projects, they often choose Workday. Zane Rowe added that no significant macroeconomic changes are expected in Europe for FY26.

Q: How is Workday planning to reinvest savings from headcount reductions? A: Carl Eschenbach mentioned that Workday plans to have more headcount next year than before the restructuring, focusing investments in AI, international expansion, sales capacity, and partner ecosystems. Zane Rowe emphasized that the company is looking at scaling efficiently while investing in growth areas.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.