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    WDAY
    Earnings call· Oct 2025(Q3 FY26)

    Workday, Inc. WDAY

    Nov 25, 2025 Source

    Executive summary

    Workday Q3 FY26 — Strong Subscription Revenue Growth and AI Momentum

    Workday delivered solid Q3 FY26 results, driven by robust subscription revenue growth and strong adoption of its AI solutions. The company is strategically investing in AI, both organically and through acquisitions, to enhance its platform and expand market reach. Management remains confident in its long-term financial framework, balancing growth initiatives with continued margin expansion.

    Highlights

    5

    • Subscription revenue grew 15% to $2.244 billion, demonstrating strong execution.

    • Non-GAAP operating margin reached 28.5%, reflecting continued efficiency gains.

    • 12-month subscription revenue backlog (cRPO) increased 17.6% to $8.21 billion, with Paradox adding over 1 point of growth.

    • AI products contributed more than 1.5 points of ARR growth, with over 1 billion AI actions on the platform year-to-date.

    • Repurchased $803 million of shares in Q3, with $4.4 billion remaining under current authorization and a plan for $3.6 billion more through FY27.

    Concerns

    1

    • Some isolated impacts were observed within institutions relying heavily on federal grants, primarily in higher education.

    Guidance & targets

    17
    CategoryTargetConfidence
    Q4 FY26 Subscription Revenue
    $2.355 billion
    high materiality
    High
    Q4 FY26 Subscription Revenue Growth
    15%
    high materiality
    High
    FY26 Subscription Revenue
    $8.828 billion
    high materiality
    High
    FY26 Subscription Revenue Growth
    14%
    high materiality
    High
    Q4 FY26 cRPO Growth
    15% to 16%
    high materiality
    High
    Q4 FY26 Professional Services Revenue
    $168 million
    medium materiality
    High
    FY26 Professional Services Revenue
    $715 million
    medium materiality
    High
    Q4 FY26 Non-GAAP Operating Margin
    at least 28.5%
    high materiality
    High
    FY26 Non-GAAP Operating Margin
    approximately 29%
    high materiality
    High
    FY26 Non-GAAP Tax Rate
    19%
    medium materiality
    High
    FY26 Operating Cash Flow
    $2.90 billion
    high materiality
    High
    FY26 Capital Expenditures
    approximately $200 million
    medium materiality
    High
    FY26 Free Cash Flow
    $2.70 billion
    high materiality
    High
    FY26 Free Cash Flow Growth
    23%
    high materiality
    High
    Subscription Revenue CAGR
    12% to 15%
    high materiality
    High
    FY27 Subscription Revenue Growth
    approximately 13%
    high materiality
    High
    Q1 FY27 Subscription Revenue Growth
    approximately 14%
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    US
    Total US revenue for the third quarter.
    		$1.825 billion12%——
    International
    Total International revenue for the third quarter, with solid performance across EMEA, APAC, and Japan.
    		$607 million13%——
    Healthcare
    Became Workday's sixth industry to exceed $1 billion in ARR in Q3, with strategic wins like Ardent Health, Ascendian, and Northeast Georgia Medical Center.
    ARR: >$1 billion
    		————

    Operational metrics

    20
    Non-GAAP Operating Income
    $692 million
    Q3 FY26
    Non-GAAP Operating Margin
    28.5%
    Q3 FY26
    Share Repurchases
    $803 million
    Q3 FY26

    Part of an accelerated buyback pace.

    Share Repurchases Year-to-Date
    $1.4 billion
    YTD Q3 FY26
    Remaining Share Repurchase Authorization
    $4.4 billion
    as of Oct 31

    Under current authorization.

    Total Planned Share Repurchases
    $5 billion
    through FY27

    Includes an additional $3.6 billion to be repurchased.

    Cash and investments balance
    $6.8 billion
    as of Oct 31

    Cash and marketable securities.

    Headcount
    20,588
    as of Oct 31
    AI products ARR growth contribution
    1.5 points
    Q3 FY26

    Contribution to total ARR growth.

    AI actions
    over 1 billion
    YTD FY26

    On the Workday platform this year alone.

    Net new deals including HR and Finance
    50%
    Q3 FY26
    Net new deals including AI products
    over 75%
    Q3 FY26
    Customer expansions including AI products
    35%
    Q3 FY26
    Workday GO implementation time reduction
    up to 25%
    future
    Partners sourced net new ACV
    more than 20%
    Q3 FY26
    HiredScore uplift on recruiting SKU
    $2.50for every $1 of recruiting
    current

    HiredScore adds $2.50 on top of every $1 of standard recruiting SKU sold.

    DIA contract Q4 revenue
    $15 million
    Q4 FY26

    Expected revenue from the first phase of the DIA contract.

    Paradox cRPO growth contribution
    over 1 point
    Q3 FY26

    Contribution to 12-month subscription revenue backlog (cRPO) growth.

    Sana cRPO growth contribution
    0.25 point
    Q4 FY26

    Expected contribution to 12-month subscription revenue backlog (cRPO) growth.

    Sana and Paradox Q4 subscription revenue growth contribution
    1.5 points
    Q4 FY26

    Combined contribution to Q4 subscription revenue growth.

    Industry KPIs

    7
    MetricValueDetails
    Capacity CAPEX$200 millionUSD
    Revenue growth$2.244 billionUSD
    Arr net new arr1.5 pointspoints
    Rpo current rpo$8.21 billionUSD
    Gross retention renewal rate97%%
    Operating FCF margin rule of 4028.5%%
    Ai product adoption monetizationover 75%%

    Orderbook & backlog

    3
    12-month subscription revenue backlog (cRPO)$8.21 billionend of Q3 FY26

    17.6% increase

    Includes over 1 point of growth from Paradox acquisition, which was not included in prior backlog guidance.

    Total subscription revenue backlog$25.96 billionend of Q3 FY26

    17% increase

    Gross revenue retention rate97%Q3 FY26

    remained healthy

    Product announcements

    6
    ProductTypeDetails
    Workday GOexpansion
    Illuminate agentslaunch
    Workday Buildlaunch
    Workday Data Cloudupdate
    Workday EU Sovereign Cloudlaunch
    AI Center of Excellenceexpansion

    Deals & partnerships

    6
    ParadoxAI-native platform for recruiting

    Acquisition closed in Q3, already off to a strong start. Provides an industry-leading AI recruiting platform and a new 'land-only' product for Workday's sales force, including sales into competitors' environments.

    SanaAI-native platform for user experience and learning

    Acquisition closed in Q3. Will help reimagine Workday's user experience for the age of AI and brings hyper-personalized skill development and AI-generated content creation to Workday Learning.

    PipedreamLow-code integration platform for AI agents

    Intent to acquire announced. Pipedream has more than 3,000 prebuilt connectors to widely used business applications, enhancing Workday's ability to enable AI agents to get work done across the enterprise.

    MicrosoftExpanded partnership to manage people and agents

    Expanded partnership to help joint customers securely manage their people and agents across both Workday and Microsoft platforms.

    Chime, Spring Health, StradaWorkday Wellness partners

    New Workday Wellness partners brought on to expand value delivered to joint customers.

    Databricks, Salesforce, Snowflake, Google CloudWorkday Data Cloud partnerships

    Partnerships to unlock more insight and value from Workday data. Google Cloud is a new addition to existing partners Databricks, Salesforce, and Snowflake.

    Risks & headwinds

    2
    Impacts within institutions relying on federal grantsQ3 FY26

    isolated impacts

    Mitigation: Win rates are very strong when ready to move forward; long-term opportunity ahead.

    Government shutdown impact on federal agenciesQ3 FY26

    weeks long government shutdown

    Mitigation: Engagement across federal agencies remained high; offset by strong execution across the portfolio.

    What to watch in Q4 FY26

    5

    DIA contract expansion

    next quarter
    CurrentFirst phase nearing completion, contributing $15M in Q4 FY26 revenue.
    TargetNegotiation of follow-on contract to take the platform to the next level with further security requirements.

    Why it matters

    This expansion represents a significant long-term opportunity across the broader defense and intelligence communities, validating Workday's public sector strategy.

    We're already talking to them about an expansion of taking that platform to the next level, which opens up a whole bunch of different opportunities across a broader Department of Defense or Department of War.

    Q&A highlights

    8

    Are you seeing novelty wearing off for third-party AI coding products due to operationalization difficulties, and is this accelerating adoption of Workday Extend?

    Carl Eschenbach stated that the narrative of AI startup disruption to mature SaaS companies was overblown and is playing out as expected. Customers are returning to trusted vendors like Workday due to concerns about data quality, integrity, and security with point solutions. Workday's clean data, security, and business outcomes are resonating, leading to continued customer reliance on their platform.

    “When I spend time with CXOs around the world that both customers and prospects they talk about 3 things that's hindering or slowing down enterprise adoption of AI: It is data quality; it's data integrity; and its security. And by the way, none of these are an issue for Workday.”

    asked by Mark Murphy · answered by Carl Eschenbach

    2 min read5 chapters

    Detailed Narrative

    01

    AI Strategy and Adoption

    Workday's AI strategy is centered on unifying HR and finance on one intelligent platform, leveraging its clean and curated data sets for HR and finance. Over 75% of core customers use Workday Illuminate AI, driving more than 1 billion AI actions this year. AI products contributed over 1.5 points of ARR growth in Q3, with 75% of net new deals and 35% of customer expansions including at least one AI product. The company emphasizes building purpose-built agents for HR and finance that deliver measurable ROI, differentiating from general-purpose AI solutions.

    02

    Strategic Acquisitions and Partnerships

    Workday closed the acquisition of Paradox in Q3, which quickly contributed to cRPO growth and offers a new land product for sales. The recent acquisition of Sana aims to reimagine the user experience with AI-native capabilities, particularly in learning and UI/UX. The intent to acquire Pipedream will enhance integration capabilities for AI agents with over 3,000 prebuilt connectors. Workday also expanded its partnership with Microsoft to manage people and agents across both platforms and formed new Workday Wellness partnerships.

    03

    Workday GO and Medium Enterprise Momentum

    Workday GO continues to drive strong new customer growth and ACV momentum in the medium enterprise segment. A major expansion of Workday GO was announced, including Global Payroll, an expanded partner network, and an AI-powered deployment agent designed to cut implementation time by up to 25%. This initiative aims to simplify the adoption of Workday's solutions for mid-market customers globally, making it a key growth vector.

    04

    Public Sector and International Expansion

    Public sector momentum was strong, with the Department of Energy successfully going live and the DIA project nearing completion of its first phase, opening long-term opportunities across the intelligence community. International performance was solid across EMEA, APAC, and Japan, driven by product internationalization, strong partner networks, and talent acquisition. The company announced a new EU Sovereign Cloud and an AI Center of Excellence in Dublin, along with expansion into the Middle East and India.

    05

    Customer Headcount and Cross-Sell Opportunities

    While some customers are experiencing layoffs, Workday's customer base saw a net increase in headcount year-over-year. The company mitigates potential impacts through cross-selling new solutions (e.g., Evisort, HiredScore, Sana, Paradox) back into its installed base, focusing on revenue per seat rather than just seat count. Annual true-up📎s and minimums in contracts also provide protection against headcount reductions.

    AI-generated summary of the company’s earnings call. Not investment advice.