Executive Summary
In Q1 2025, Workday Inc (WDAY) reported solid financial performance across key metrics, notably a 19% year-over-year growth in subscription revenue, driven by strong demand in sectors like healthcare and public services. The company's 12-month subscription revenue backlog increased by 18%, indicating robust forward momentum. However, management expressed concerns regarding heightened scrutiny in deal processes, particularly in EMEA, and a slowdown in customer headcount growth impacting renewals. Despite these challenges, Workday's focus on innovation and strategic investments position the firm for long-term growth and margin expansion, underscoring a resilient business model despite macroeconomic pressures.
Key Performance Indicators
QoQ: -12.41% | YoY:392.93%
QoQ: -91.00% | YoY:78 576.47%
QoQ: -91.15% | YoY:79 900.00%
Key Insights
**Revenue Performance:** Q1 2025 revenue reached $1.982 billion, a year-over-year increase of 18%. Subscription revenue, a key growth indicator, was $1.815 billion, reflecting a 19% year-over-year growth, benefiting from strong client retention metrics, with gross retention exceeding 95%.
**Profitability:** Workday reported a non-GAAP operating income of $515 million, yielding a non-GAAP operating margin of 25.9%. This was achieved through careful expense management amid revenue outperformance....
Financial Highlights
Revenue Performance: Q1 2025 revenue reached $1.982 billion, a year-over-year increase of 18%. Subscription revenue, a key growth indicator, was $1.815 billion, reflecting a 19% year-over-year growth, benefiting from strong client retention metrics, with gross retention exceeding 95%.
Profitability: Workday reported a non-GAAP operating income of $515 million, yielding a non-GAAP operating margin of 25.9%. This was achieved through careful expense management amid revenue outperformance. The net income for the quarter was $107 million, translating to an EPS of $0.40.
Cash Flow: Operating cash flow was notably strong at $372 million, representing a 34% increase year-over-year as the company maintained discipline regarding capital expenditures of approximately $81 million.
Balance Sheet Health: Ending the quarter with $7.2 billion in cash and marketable securities positions Workday favorably, providing ample liquidity for strategic investments and acquisitions.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.98B |
17.67% |
3.81% |
| Gross Profit |
1.50B |
18.01% |
3.23% |
| Operating Income |
58.00M |
392.93% |
-12.41% |
| Net Income |
107.00M |
78 576.47% |
-91.00% |
| EPS |
0.40 |
79 900.00% |
-91.15% |
Key Financial Ratios
operatingProfitMargin
2.93%
operatingCashFlowPerShare
$1.41
freeCashFlowPerShare
$1.1
priceEarningsRatio
151.21
Management Commentary
Strategic Growth and Innovation:
- Carl Eschenbach, CEO, stated, "We closed several strategic deals, including a landmark federal win at the Defense Intelligence Agency," indicating successful penetration into the public sector.
- Management emphasized a commitment to innovation, noting, "We now have more than 50 AI use cases live in production... with tremendous feedback from recent events."
Market Dynamics and Scrutiny:
- Eschenbach also pointed out, "We experienced increased deal scrutiny... and are seeing customers committing to lower headcount levels on renewals compared to what we expected," highlighting challenges in the sales cycle.
"We've been delivering AI capabilities to our customers for nearly a decade... our customers trust Workday to help them navigate huge transformations." - Carl Eschenbach
â Carl Eschenbach
"While we expect challenges, we believe that our investments in the product and our partner ecosystem will allow us to overcome these hurdles in the future." - Zane Rowe
â Zane Rowe
Forward Guidance
Management has updated its full-year subscription revenue guidance to a range of $7.7 billion to $7.725 billion, anticipating approximately 17% growth. This revised outlook factors in continued customer conservatism amid economic uncertainties, along with expected CRPO growth between 15% and 16%. The non-GAAP operating margin for FY 2025 is forecasted to remain around 25%.