Workday Inc. WDAY, a leading provider of enterprise-level software solutions for financial management and human resource domains, reported better-than-expected fiscal fourth-quarter results. Non-GAAP earnings of $1.92 per share surpassed the Zacks Consensus Estimate by 17 cents.

Revenues surged 15% year over year to $2.21 billion. The figure surpassed the Zacks Consensus Estimate by $31 million. Healthy traction in multiple verticals boosted the top line.

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WDAY’s Segment Performance

In the fourth quarter, Workday generated $2.04 billion in subscription revenues, up 15.9% year over year. The figure marginally surpassed our estimate of $2.02 billion. Solid traction in the government and higher education vertical propelled net sales growth.
 
During the quarter, the company signed its largest Workday Student deal with the Minnesota State Colleges and Universities. Following strong adoption in the U.S. market, the company introduced the Workday solution in the markets of Australia, Canada and New Zealand. City of Minneapolis, St. Louis Count, and City University of New York have also selected Workday’s full solution suite in the fiscal fourth quarter. The financial services market remains a major growth driver for the company. 

During the fiscal fourth quarter, the company inked a significant expansion deal with AON. In the healthcare vertical, North Mississippi Medical Center, Hackensack Meridian Health and UnityPoint Health have selected WDAY’s solution suite.

Workday has been placing a strong emphasis on AI-native product development. Its current AI-solutions suite, which includes Talent Mobility agent, Extend Pro and Recruiter Agent, has been gaining strong popularity.

Workday has been also witnessing positive trends in the international market. Despite macroeconomic challenges, Workday witnessed substantial growth in its two largest markets, the United Kingdom and Germany. During the quarter, companies like Henkel and Bayer opted to deploy WDAY’s human capital management solutions. In the Asia Pacific region, Binance, JINGDONG and Nine Entertainment have selected Workday’s solution suite.

Professional services revenues totaled $171 million. The figure surpassed our estimate of $154.5 million.

WDAY’s Financial Position

In the January quarter, sales and marketing costs rose to $629 million from $558 million in the year-earlier quarter. General and administrative expenses were $219 million, up from $189 million in the year-ago quarter. Product development costs increased to $673 million from $635 million in the year-ago quarter.

In the fiscal fourth quarter, Workday generated $1.11 billion in cash from operations compared with $996 million in the year-ago quarter. In fiscal 2025, the company generated $2.5 billion in cash compared with $2.14 billion in the prior-year period. As of Jan. 31, 2024, the company had $1.54 billion in cash and cash equivalents, with $2.98 billion of long-term debt compared with respective figures of $2.01 billion and $2.98 billion in fiscal 2024. Total current liabilities were $5.54 billion compared with $5.05 billion in fiscal 2024. 
 
In fiscal 2025, this Zacks Rank #3 (Hold) company bought back 2.9 million shares worth $700 million. At the quarter’s end, the company had $802 million left under its buyback program.

Workday’s Guidance

For fiscal 2026, the company expects subscription revenues to be $8.8 billion, indicating growth of 14% year over year. Professional services revenues are expected to be $700 million. The non-GAAP operating margin is anticipated to be 28%. Capital expenditure is approximated to be around $250 million. Operating cash flow is expected to be $2.75 billion.

For the first quarter of fiscal 2026, Workday expects Subscription services revenues to be $2.05 billion. Revenues from Professional services are estimated to be $165 million. The non-GAAP operating margin is approximated to be 28%.

The company is steadily investing in key growth areas and integrating AI across its product suite to expand WDAY’s portfolio offerings. Management is also putting a strong emphasis on enhancing efficiency across its business operations. These factors, combined with growing demand for Workday platforms across industries, will likely to drive long-term growth.

Stocks to Consider

InterDigital IDCC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, it delivered an earnings surprise of 158.41%. It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions used in digital cellular, wireless 3G, 4G and IEEE 802-related products and networks.

Celestica Inc. CLS sports a Zacks Rank #1 at present. The company provides competitive manufacturing technology and service solutions for printed circuit assembly and system assembly, as well as post-manufacturing support to many of the world's leading original equipment manufacturers.

United States Cellular Corporation USM sports a Zacks Rank of 1 at present. In the last reported quarter, it delivered an earnings surprise of 150%.

U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. It is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology.

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