Workday reported QQ1 2026 revenue of USD 2.232 billion, up 12.61% year over year and 0.95% quarter over quarter, reflecting continued demand for its cloud-based HR, planning, and financial management solutions. Gross profit reached USD 1.695 billion with a robust gross margin of 75.94%, while operating income stood at USD 204 million for an operating margin of 9.14%. Net income was USD 68 million (net margin 3.05%), and diluted earnings per share were USD 0.25–0.26. Cash flow from operations was USD 457 million, with free cash flow of USD 421 million; capital expenditure was modest at USD 36 million, leaving the company with USD 988 million in cash and USD 7.97 billion in cash and short-term investments at period end. The balance sheet remains solid, featuring total assets of USD 17.21 billion, total liabilities of USD 8.29 billion, and stockholders’ equity of USD 8.92 billion. Net debt stood at USD 2.42 billion, and despite Positive operating cash flow, the company elected to repurchase USD 290 million of its own shares during the period, signaling confidence in intrinsic value and a constructive capital allocation stance.
Key drivers for the quarter included continued growth in core HR, planning, and analytics offerings, ongoing investments in R&D to expand product capabilities (R&D expenditure of USD 663 million represents a material investment intensity, approximately 29.7% of revenue), and disciplined cost management within operating expenses. While revenue momentum was positive, net income declined year over year by approximately 36%, reflecting higher operating costs and the ongoing cadence of growth investments. Looking ahead, the company’s near-term cash generation remains a meaningful margin of safety even as it navigates a competitive SaaS environment and macro uncertainty. Investors should monitor ARR/DBNRR, customer concentration risk, and the progression toward higher-margin, multi-module adoption to assess the trajectory of profitability improvements.
Key Performance Indicators
Revenue
2.23B
QoQ: 0.95% | YoY:12.61%
Gross Profit
1.70B
75.94% margin
QoQ: 1.38% | YoY:13.38%
Operating Income
204.00M
QoQ: 172.00% | YoY:251.72%
Net Income
68.00M
QoQ: -27.66% | YoY:-36.45%
EPS
0.26
QoQ: -25.71% | YoY:-35.00%
Revenue Trend
Margin Analysis
Key Insights
Revenue: USD 2.232 billion for QQ1 2026, YoY growth 12.61% and QoQ growth 0.95%.
Cash Flow and Balance Sheet
- Cash Flow from Operations (CFO): USD 457 million; Free Cash Flow (FCF): USD 421 million; Capex: USD 36 million.
- Cash and Cash Equivalents: USD 972 million; Total Cash and Short-Term Investments: USD 7.97 billion; Net Cash Provided by/used in investing activities: Investing cash flow net: -USD 523 million; Financing activities net: -USD 501 million.
- Net Debt: USD 2.421 billion; Long-Term Debt: USD 3.295 billion; Total Debt: USD 3.393 billion.
- Balance Sheet: Total Assets USD 17.212 billion; Total Liabilities USD 8.293 billion; Total Stockholders’ Equity USD 8.919 billion.
- Liquidity and Capital Allocation: Current ratio around 2.0x (based on current assets vs current liabilities implied by provided figures); No cash dividends declared; USD 290 million of share repurchases during the period.
Operational and Margin Context
- R&D intensity: USD 663 million (approx. 29.7% of revenue), underscoring ongoing investment in platform, analytics, AI capabilities, and new modules to sustain long-term growth.
- Revenue Mix and Margin Trajectory: Strength in core cloud offerings supports a solid gross margin; profitability remains modest relative to top software peers, reflecting continued scale investments and mix toward high-value modules.
- Leverage and Coverage: Interest expense USD 29 million; interest coverage not explicitly provided; net debt to annualized EBITDA is a point of focus for capital allocation assessment.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.23B
12.61%
0.95%
Gross Profit
1.70B
13.38%
1.38%
Operating Income
204.00M
251.72%
172.00%
Net Income
68.00M
-36.45%
-27.66%
EPS
0.26
-35.00%
-25.71%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Earnings call transcript data was not provided in the material. As a result, this section cannot cite management quotes or specific caller questions. In a typical call, investors would expect management to discuss: (1) product roadmap and AI-enhanced capabilities across Workday’s HCM, planning, and financial management suites; (2) customer expansion, net retention, and cross-sell metrics; (3) geographic expansion and currency exposure considerations; (4) progress on cost discipline, profitability acceleration, and headline targets such as ARR growth and operating margin improvements. When transcript data becomes available, quotes grouped by themes (strategy, operations, market conditions) and their implications should be added here.
Transcript not provided in the data.
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Transcript not provided in the data.
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Forward Guidance
No explicit numeric full-year guidance was provided in the data set for QQ1 2026. Based on the disclosed quarterly results, the company's emphasis appears to be on sustaining mid-teens revenue growth via expansion of core HCM, planning, and financial management solutions, while continuing to invest in product development and go-to-market capabilities. The absence of formal guidance introduces some uncertainty around a precise earnings trajectory; however, the robust cash flow generation supports ongoing investments and potential capital returns. Investors should monitor: (a) ARR growth and dollar-based net retention (DBNRR) as indicators of recurring revenue health; (b) progression toward higher-margin, multi-module deployments; (c) operating expense discipline relative to revenue growth; (d) currency effects given the London listing and USD-denominated operating results; and (e) any updates to share repurchase cadence or dividend policy. In a qualitative sense, the outlook remains positive if Workday can accelerate adoption of additional modules within existing customers and convert net-new customers without sacrificing operating leverage.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0M18.L Focus
75.94%
N/A
N/A
N/A
0Y0Y.L
33.00%
16.70%
7.81%
25.00%
0JC3.L
55.10%
37.80%
2.85%
31.06%
0KEF.L
0.00%
22.70%
2.61%
11.74%
0HW4.L
46.40%
24.50%
7.49%
10.61%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Base-case thesis: Workday continues to demonstrate solid top-line growth and meaningful cash generation, underpinned by a strong product portfolio and ongoing R&D investment. The QQ1 2026 results show revenue expansion and a resilient gross margin, but net income remains small amidst growth investments, highlighting a need for continued operating leverage and higher adoption of higher-margin modules. If the company can accelerate cross-sell across HCM, planning, and spend management while maintaining disciplined cost control, operating margins should gradually improve and free cash flow should remain robust. Upside potential hinges on stronger DBNRR, higher ARR growth, and a favorable macro environment for enterprise IT spend. Downside risk centers on competitive pressure, slower-than-expected adoption of multi-module contracts, and currency or geopolitical factors affecting international growth. Investors should monitor net retention, module adoption rates, and the pace of profitability improvement alongside cash generation trends to assess the durability of Workday’s growth premium.
Key Investment Factors
Growth Potential
Workday’s growth runway rests on expanding core HCM, financial management, and planning capabilities within existing customers and across new geographies. Cross-sell opportunities across modules (HCM, financials, planning, cloud spend management) and the expansion of AI-powered analytics can raise dollar-based retention and average contract value. The company also benefits from a large and expanding software-as-a-service (SaaS) installed base with high gross margins and strong cash generation, enabling continued investment in product development (R&D USD 663M in QQ1 2026) and selective opportunistic share repurchases.
Profitability Risk
Key risks include intensifying competition from Oracle, SAP, and other ERP/HCM providers, which can pressure pricing and customer acquisition costs. Macro softness in enterprise IT spend could dampen growth. Customer concentration risk and large contract sales cycles may introduce volatility in quarterly results. Currency exposure due to the UK listing (0M18.L) could add translation impact. The path to sustained profitability relies on higher-margin multi-module adoption and continued optimization of operating expenses relative to revenue growth.
Financial Position
The balance sheet is strong, with USD 7.97B in cash and short-term investments against USD 3.39B of total debt, yielding a net debt position of USD 2.42B and a leverage profile that is reasonable given the cash generation profile. Current assets (~USD 9.70B) and current ratio roughly near 2x indicate solid short-term liquidity. The company generated USD 457M of operating cash flow and USD 421M of free cash flow in QQ1 2026, supporting ongoing R&D investment (29.7% of revenue) and USD 290M in share repurchases, signaling confidence in the business and disciplined capital allocation.
SWOT Analysis
Strengths
Robust gross margin (75.94%) and strong cash generation (FCF USD 421M in QQ1 2026).
Large, diversified enterprise customer base and multi-module product suite (HCM, planning, financials, analytics).
Solid balance sheet with USD 7.97B in cash and investments and manageable leverage (net debt ~USD 2.42B).
Healthy free cash flow supports ongoing R&D and selective capital returns (USD 290M in buybacks).
Weaknesses
Net income remains modest relative to revenue (net margin ~3.05%), reflecting ongoing growth investments.
Profitability improvements depend on higher multi-module adoption and efficiency in SG&A relative to revenue growth.
Competition from Oracle, SAP, and other cloud vendors could pressure pricing and market share.
Opportunities
AI-enabled analytics and automated workflows to deepen product value and stickiness.
Expansion into international markets and industries with long upgrading cycles.
Increased cloud spend management adoption and planning usage to broaden the addressable market.
Threats
Intense competition and potential pricing pressure in enterprise cloud software.
Macro weakness in enterprise IT spending could impact deal velocity.
Currency and regulatory changes related to the UK listing and global operations.