Workday has projected steady growth for the upcoming fiscal year 2026 (FY26), backed by rising demand for its enterprise software solutions and continued investment in AI. The company expects subscription revenue, a key segment of its business, to reach $2.05bn in the first quarter (Q1) of fiscal 2026, representing a 13% increase, while full-year subscription revenue is forecasted to grow 14% to $8.8bn. The company also anticipates a non-GAAP operating margin of 28% for both the first quarter and the full year. These projections come after a strong fiscal 2025 (FY25), during which Workday saw double-digit revenue growth despite restructuring expenses and macroeconomic challenges.
The cloud software provider’s total revenue for the fourth quarter (Q4) ended 31 January 2025 reached $2.21bn, marking a 15% increase from the same period the previous year. Subscription revenue rose 16% year-over-year to $2.04bn, surpassing analyst estimates of $2.03bn. For FY25, Workday reported total revenue of $8.45bn, up 16% from the prior year. Subscription revenue for the full year grew 17% to $7.72bn. Operating cash flow for the FY25 rose to $2.46bn, reflecting a 15% increase, while free cash flow reached $2.19bn. The company ended the fiscal year with $8.02bn in cash, cash equivalents, and marketable securities.
Strong fourth-quarter and full-year performance
Following the earnings announcement, Workday’s stock climbed more than 9% in extended trading. Adjusted earnings per share (EPS) for the quarter came in at $1.92, higher than the expected $1.78. Non-GAAP operating income for Q4 was reported at $584m, or 26.4% of revenue, up from $462m the previous year. Full-year non-GAAP operating income reached $2.19bn, compared to $1.74bn in fiscal 2024. Workday also reported a 12-month subscription revenue backlog of $7.63bn, up 15% from the previous year, while its total subscription revenue backlog increased nearly 20% to $25.06bn.
Workday continues to expand its AI-driven enterprise software solutions. It recently introduced the Workday Agent System of Record, designed to manage AI agents across Workday’s platform and third-party services. During the earnings call, CEO Carl Eschenbach highlighted AI as a key differentiator for the company. “While others rush to charge for early GenAI features, we integrated them into our core offering,” said Eschenbach. “Now that our AI is delivering tangible ROI, we have new monetisation opportunities that will fuel our long-term growth.”
Workday also reported processing over one trillion transactions on its platform in fiscal 2025. The company claimed that it leverages its extensive dataset in HR and financial management to improve AI-driven automation and analytics.
As part of its strategic shift toward AI and operational efficiency, Workday announced in February that it would reduce its workforce by approximately 1,750 employees, or 8.5% of its staff. The layoffs are aimed at optimising resources for AI investments and long-term growth. Despite restructuring costs, Workday’s financial performance remained strong. The company reported an operating income of $75m for Q4, which was impacted by $75m in restructuring expenses. Full-year operating income was $415m, compared to $183m in fiscal 2024.
Read more: Workday forecasts lower Q4 subscription revenue amid weaker demand
