EPS of $0.72 increased by 69.8% from previous year
Gross margin of 84.8%
Net income of 193.00M
""Our customers are seeing upwards of 30% productivity gain in the recruiters, which is significant when you think about recruiting being one of your biggest costs associated with HR." - Carl Eschenbach, CEO" - Carl Eschenbach
In Q3 2025, Workday Inc (NASDAQ: WDAY) reported continuing solid growth with total revenue of $2.16 billion, reflecting a year-over-year increase of 16%. The company's subscription revenue drove this growth with a notable rise of 16% to $1.959 billion. Non-GAAP operating income was recorded at $569 million, representing an operating margin of 26.3%. CEO Carl Eschenbach emphasized the significance of ongoing AI innovations and strong customer relationships, particularly in the government and higher education sectors, which constituted a majority of the company's substantial wins for the quarter.
Despite facing external economic pressures and evolving market conditions, Workday's focus on expanding its AI capabilities and ecosystems contributed to a robust financial performance. However, management highlighted challenges regarding delayed revenue recognition tied to strategic contracts that may affect Q4 outcomes. The long-term strategy aims to sustain mid-teen growth rates while expanding operating margins through operational efficiencies and enhanced product offerings.
Key Performance Indicators
Revenue
2.16B
QoQ: 3.60% | YoY:15.78%
Gross Profit
1.83B
84.77% margin
QoQ: 16.33% | YoY:28.90%
Operating Income
165.00M
QoQ: 48.65% | YoY:87.81%
Net Income
193.00M
QoQ: 46.21% | YoY:69.73%
EPS
0.73
QoQ: 46.00% | YoY:69.77%
Revenue Trend
Margin Analysis
Key Insights
**Total Revenue**: $2.16 billion, +16% YoY.
- **Subscription Revenue**: $1.959 billion, +16% YoY.
- **Gross Profit**: $1.831 billion, with a gross profit margin of 84.77%.
- **Operating Income**: $569 million, translating to an operating margin of 26.3%.
- **Net Income**: $193 million, +69.73% YoY; EPS increased to $0.73.
- **Operating Cash Flow**: $406 million.
1. Q3 2025 Financial Performance:
- Total Revenue: $2.16 billion, +16% YoY.
- Subscription Revenue: $1.959 billion, +16% YoY.
- Gross Profit: $1.831 billion, with a gross profit margin of 84.77%.
- Operating Income: $569 million, translating to an operating margin of 26.3%.
- Net Income: $193 million, +69.73% YoY; EPS increased to $0.73.
- Operating Cash Flow: $406 million.
2. Key Financial Ratios:
- Current Ratio: 1.998
- Debt-to-Equity Ratio: 0.390
- Net Profit Margin: 8.94%
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.16B
15.78%
3.60%
Gross Profit
1.83B
28.90%
16.33%
Operating Income
165.00M
87.81%
48.65%
Net Income
193.00M
69.73%
46.21%
EPS
0.73
69.77%
46.00%
Key Financial Ratios
currentRatio
2
grossProfitMargin
84.8%
operatingProfitMargin
7.64%
netProfitMargin
8.94%
returnOnAssets
1.18%
returnOnEquity
2.24%
debtEquityRatio
0.39
operatingCashFlowPerShare
$1.53
freeCashFlowPerShare
$1.35
priceToBookRatio
7.2
priceEarningsRatio
80.4
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Strategic Focus: Management discussed how over 30% of customer expansions integrated AI solutions, signaling a shift towards value-based product offerings.
Customer Wins: CEO Eschenbach noted major wins in government and healthcare, such as the Defense Intelligence Agency and CommonSpirit Health, which reflect deep market penetration and demand for full suites.
AI Adoption: 30% of Q3's customer upgrades involved AI, positioning Workday as a leading partner in this transformative sector. Eschenbach stated, "Customers know that an investment in Workday is an investment in AI," highlighting the strategic importance of AI in current sales.
"Our customers are seeing upwards of 30% productivity gain in the recruiters, which is significant when you think about recruiting being one of your biggest costs associated with HR." - Carl Eschenbach, CEO
â Carl Eschenbach
"We have a clear target between now and FY27 of driving mid-teens subscription revenue growth, while expanding non-GAAP operating margins to 30%." - Carl Eschenbach, CEO
â Carl Eschenbach
Forward Guidance
Management expects Q4 FY25 subscription revenue to be $2.025 billion, representing growth of 15% YoY. For FY26, Workday anticipates subscription revenue of approximately $8.8 billion, a growth target of about 14%. Factors driving future performance include AI product rollouts, particularly the new agents introduced by their Illuminate initiative, and enhanced operational efficiencies across global markets. The non-GAAP operating margin for FY25 is revised to 25.5%, with expectations to reach approximately 27.5% in FY26.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
WDAY Focus
84.77%
7.64%
2.24%
80.40%
INTU
85.30%
48.00%
14.00%
15.58%
ZM
75.90%
15.50%
2.39%
27.75%
NOW
79.10%
14.90%
4.65%
106.71%
SNOW
67.20%
-38.90%
-11.10%
-29.49%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The investment outlook for Workday remains positive, supported by continued subscription revenue growth, strong cash flow generation, and a solid balance sheet. The company's strategy to deepen AI integration and optimize operational efficiencies may unlock additional value and drive sustained revenue growth. However, investors should monitor potential risks tied to delayed revenue recognition and market competition. Given these dynamics, Workday presents a compelling opportunity for investors seeking exposure to leading technology in the SaaS space.
Key Investment Factors
Growth Potential
Workday's growth potential is anchored on increasing adoption of AI solutions within its customer base, strong performance in strategic markets like government and healthcare, and ongoing innovation with its cloud applications. The commitment to achieving mid-teen subscription growth through FY27 showcases long-term optimism.
Profitability Risk
Risks include potential delays in revenue recognition tied to strategic deals, economic fluctuations affecting customer spending, and intense competition within the technology sector that could pressure margins. Additionally, the global economy and regulatory changes in key markets could pose challenges to operations.
Financial Position
Workday maintains a strong financial position with $7.2 billion in cash and cash equivalents, a healthy current ratio of nearly 2.0, and manageable debt levels at a debt-to-equity ratio of 0.39. The balance sheet supports ongoing investments in growth while providing flexibility to navigate economic uncertainties.
SWOT Analysis
Strengths
Strong brand reputation and customer loyalty in cloud-based HR and finance solutions.
Significantly high gross margins reflecting operational efficiency.
Innovative leadership in AI technology integration, enhancing value for clients.
Weaknesses
Dependency on subscription revenue, exposing the company to fluctuations in customer demand.
Challenges in scaling operations globally amidst supply chain disruptions.
Opportunities
Expanding AI product offerings to capture new market segments and enhance existing services.
Potential for international market expansion, especially in untapped regions.
Threats
Intensifying competition from established and emerging software companies in the cloud market.
Economic slowdowns could impact customer budgets and spending on technology.