Revenue Performance - Total revenues for the three months ended April 30, 2025, were $2.24 billion, a 13% increase from $1.99 billion in the prior year period [120]. - Subscription services revenues were $2.06 billion for the three months ended April 30, 2025, representing a 13% increase from $1.82 billion in the prior year [133]. - The total subscription revenue backlog as of April 30, 2025, was $24.62 billion, up 19% from $20.68 billion a year earlier [136]. Customer Retention and Satisfaction - The gross revenue retention rate was approximately 98% as of April 30, 2025, indicating strong customer satisfaction and retention [134]. Operating Performance - Operating cash flows for the three months ended April 30, 2025, were $457 million, a 23% increase from $372 million in the prior year [120]. - Non-GAAP operating income increased by 32% to $677 million for the three months ended April 30, 2025, compared to $515 million in the prior year [120]. - GAAP operating income decreased to $39 million, or 1.8% of revenues, for the three months ended April 30, 2025, down from $64 million or 3.2% in the prior year [152]. - Non-GAAP operating income increased to $677 million, or 30.2% of revenues, for the three months ended April 30, 2025, compared to $515 million or 25.9% in the previous year [153]. Costs and Expenses - Total costs and expenses for the three months ended April 30, 2025, were $2.20 billion, a 14% increase from $1.93 billion in the prior year, including $166 million in restructuring expenses [138]. - Costs of subscription services increased by 21% to $350 million for the three months ended April 30, 2025, compared to $290 million in the prior year [139]. - Sales and marketing expenses increased to $623 million for the three months ended April 30, 2025, up $50 million or 9% from the prior year [145]. - General and administrative expenses rose to $212 million for the three months ended April 30, 2025, an increase of $11 million or 6% compared to the previous year [147]. - Restructuring expenses amounted to $166 million for the three months ended April 30, 2025, primarily related to employee transition and severance payments [149]. - Share-based compensation expense increased by $74 million to $459 million for the three months ended April 30, 2025, representing 20.5% of total revenues [150]. Cash Flow and Liquidity - Cash provided by operating activities was $457 million for the three months ended April 30, 2025, an increase from $372 million in the prior year [165]. - Free cash flows improved to $421 million for the three months ended April 30, 2025, compared to $291 million for the same period in 2024 [172]. - As of April 30, 2025, the company had cash, cash equivalents, and marketable securities totaling $8.0 billion [161]. - The company expects capital expenditures to be approximately $250 million in fiscal 2026, primarily for office facilities [168]. Market and Investment Risks - A hypothetical increase or decrease of 100 basis points in interest rates would have resulted in an approximately $111 million market value reduction or increase in the investment portfolio as of April 30, 2025 [194]. - The company has significant foreign currency exchange risk, with major exposures to the euro, British pound, Canadian dollar, and Australian dollar as of April 30, 2025 [190]. - The company’s investment portfolio is subject to market risk due to changes in interest rates, which may affect future investment income [193]. - The company does not enter into investments for trading or speculative purposes, focusing instead on preserving capital and meeting liquidity needs [192]. - The Senior Notes have fixed annual interest rates, thus the company does not have economic interest rate exposure on these debt obligations [195]. - The company’s borrowings under the 2022 Credit Agreement are exposed to market risk from changes in underlying index rates, affecting borrowing costs [196]. Strategic Initiatives - The company announced a restructuring plan in February 2025, resulting in a reduction of approximately 7.5% of its workforce [117]. - The company expects to continue investing in strategic growth areas, including innovative AI solutions and international expansion, to drive long-term subscription revenue growth [115]. Accounting Policies - There were no significant changes to the company's critical accounting policies and estimates during the three months ended April 30, 2025 [187]. - The company excludes share-based compensation expenses from non-GAAP financial measures, which are influenced by stock price and other factors beyond its control [182]. - Acquisition-related costs, including direct transaction costs and integration-related expenses, are excluded from non-GAAP financial measures due to their inconsistent nature [182].

Market Performance - The S&P 500 index declined approximately 2.3% this week, while the Dow Jones Industrial Average fell about 2.5% [1] - The Nasdaq index dropped around 2.4%, and the Nasdaq 100 index also saw a decline of about 2.4% [1] - The semiconductor index experienced a significant drop of 4.4%, and the banking index fell approximately 4.2% [1] - The index tracking the seven major U.S. tech stocks decreased by about 2.8%, and the "Trump Tariff Losers Index" fell by 5% [1] - Small-cap stocks declined by 3.3%, while the biotechnology index saw a slight increase of 0.4% [1] Daily Performance - On Friday, the S&P 500 index initially closed down by 0.6%, with the technology sector dropping 1.2% [1] - Other sectors such as telecommunications, consumer discretionary, and financials saw declines of up to 0.9%, while the utilities sector rose by 1.2% [1] - The Nasdaq 100 index initially closed down by 0.9%, with notable declines in stocks like Workday (down 12.4%), Copart (down 11.6%), and Ross Stores (down 9.9%) [1] - Conversely, stocks such as CrowdStrike (up 2.9%), Grail (up 3.6%), and Intuit (up 8.2%) experienced gains [1]

Core Viewpoint - Workday Inc experienced a significant decline in stock price following the release of its fiscal first-quarter results, which highlighted mixed performance against market expectations [1]. Financial Performance - Workday reported subscription revenue of $2.059 billion, with a year-on-year growth of 13.4%, surpassing Piper Sandler's estimate of 13.0% [3][5]. - The company achieved an operating margin of 30%, an increase from 26% in the previous quarter, attributed to moderated headcount growth [4]. - Non-GAAP earnings per share were reported at $2.23, exceeding the consensus estimate of $2.01 [8][13]. Subscription Backlog and Guidance - The 12-month subscription backlog (cRPO) grew by 15.6%, above the Street's expectation of 15.1%, although this included contributions from short-term tenant contracts [2]. - Management's guidance for cRPO growth in the fiscal second quarter is set at 15%-16%, which includes the aforementioned contributions [2]. - Analysts noted that the guidance for subscription revenue growth in the second quarter is 13.5%, slightly below the consensus of 13.7% [5][15]. Analyst Ratings and Price Targets - KeyBanc Capital Markets maintained an Overweight rating but reduced the price target from $335 to $325 [2]. - Piper Sandler raised its price target from $230 to $255 while maintaining a Neutral rating [3]. - Goldman Sachs reaffirmed a Buy rating and increased the price target from $275 to $300 [5]. - RBC Capital Markets maintained an Outperform rating with a price target of $340 [12]. - Needham and Citizens also maintained Buy ratings with price targets of $300 and $315, respectively [17][15]. Market Reaction - The market reaction to Workday's results was described as "overblown," with analysts suggesting that revenue growth is back-weighted and driven by already signed deals [6]. - Workday's stock fell by 12.04% to $239.32 following the earnings announcement [19].

Group 1 - Workday, Inc. (NASDAQ: WDAY) reported a strong first quarter for fiscal 2026, with revenue, margins, and guidance meeting or exceeding expectations [1] - Following the earnings report, Workday's stock initially gained 1.3% but then experienced a surprising drop [1] Group 2 - The company is focused on operational performance, indicating a solid start to the fiscal year [1] - Analysts noted that the results checked nearly every operational box, suggesting a robust business model [1]

Group 1: Autodesk Inc (ADSK) - Autodesk reported a first-quarter earnings and revenue beat, along with a raised full-year guidance [2] - Following the earnings report, 11 brokerage firms increased their price targets, with Morgan Stanley raising its target from $330 to $370 [2] - Despite a slight decline of 0.3% to $294.03, Autodesk's stock is up 37% year-over-year [2] - Options volume for Autodesk is significantly high, running at 12 times the average daily pace, with notable activity in the 300-strike and 315-strike calls [3] Group 2: Workday Inc (WDAY) - Workday also reported a first-quarter earnings and revenue beat, but faced pressure due to a disappointing subscription revenue outlook [4] - The stock was down 10.8% to $242.48, with J.P. Morgan Securities maintaining an "overweight" rating, while six analysts cut their price targets [4] - Workday is experiencing its worst single-session drop since May 2024, with a decline of 6.4% in 2025 [4] - Options trading for Workday is exceptionally high, with 10,000 calls and 13,000 puts traded, which is 20 times the average daily volume [5]

Market Overview - Market indexes showed resilience against high bond yields, with the 30-year bond yield at +5.05%, the highest in 18 years, but moderated from previous spikes [1] - Major indexes finished flat, with the Dow, S&P 500, and Russell 2000 remaining unchanged, while the Nasdaq closed up +53 points (+0.28%) [2] - Despite being in the red over the past five trading days, the indexes have seen double-digit gains over the past month [2] Quarterly Earnings Summary - **Workday (WDAY)**: Reported Q1 earnings of $2.23 per share on $2.4 billion in sales, beating previous figures of $1.99 per share and $2.22 billion. However, shares fell -5% due to steady guidance and reduced capex spending [3] - **Deckers Outdoor (DECK)**: Earnings of $1.00 per share exceeded the Zacks consensus of 57 cents, with revenues of $1.02 billion surpassing expectations of $988.6 million. Shares dropped -11% due to lower-than-expected guidance for the current quarter and full-year guidance held back due to tariff issues [3] - **Intuit (INTU)**: Surpassed earnings expectations with $11.65 per share against a consensus of $10.89, and revenues of $7.75 billion exceeding the $7.54 billion forecast. Shares rose +5% following a significant increase in next-quarter guidance driven by Credit Karma growth [4] - **Ross Stores (ROST)**: Beat earnings estimates by 4 cents with $1.47 per share on $4.98 billion in revenues, slightly above consensus. Same-store sales were flat but improved from a projected decline. Shares fell -9% due to lower next-quarter earnings guidance attributed to tariff pressures [5] - **AutoDesk (ADSK)**: Reported Q1 earnings of $2.29 per share, beating the anticipated $2.14, with revenues of $1.63 billion slightly above the forecast of $1.61 billion. Shares gained +5% due to positive next-quarter guidance [6]

Core Insights - Workday reported revenue of $2.24 billion for the quarter ended April 2025, reflecting a year-over-year increase of 12.6% and a surprise of +1.10% over the Zacks Consensus Estimate of $2.22 billion [1] - Earnings per share (EPS) for the quarter was $2.23, compared to $1.74 in the same quarter last year, resulting in an EPS surprise of +12.06% against the consensus estimate of $1.99 [1] Financial Performance Metrics - Subscription revenue backlog stood at $24.62 billion, slightly below the estimated $25.32 billion by analysts [4] - Subscription services revenue reached $2.06 billion, exceeding the average estimate of $2.05 billion, marking a year-over-year increase of +13.4% [4] - Professional services revenue was reported at $181 million, surpassing the average estimate of $165.09 million, with a year-over-year change of +3.4% [4] Stock Performance - Workday's shares have returned +19.4% over the past month, outperforming the Zacks S&P 500 composite's +13.4% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance relative to the broader market in the near term [3]

Core Viewpoint - Workday reported quarterly earnings of $2.23 per share, exceeding the Zacks Consensus Estimate of $1.99 per share, and showing an increase from $1.74 per share a year ago, representing an earnings surprise of 12.06% [1][2] Financial Performance - Workday's revenues for the quarter ended April 2025 were $2.24 billion, surpassing the Zacks Consensus Estimate by 1.10%, and up from $1.99 billion year-over-year [2] - The company has consistently surpassed consensus EPS estimates over the last four quarters [2] Stock Performance - Workday shares have increased approximately 4.1% since the beginning of the year, while the S&P 500 has declined by 0.6% [3] Future Outlook - The company's earnings outlook is crucial for assessing future stock performance, with current consensus EPS estimates at $2.02 for the coming quarter and $8.40 for the current fiscal year [7] - The estimate revisions trend for Workday is currently unfavorable, resulting in a Zacks Rank 5 (Strong Sell), indicating expected underperformance in the near future [6] Industry Context - The Internet - Software industry, to which Workday belongs, is currently ranked in the top 26% of over 250 Zacks industries, suggesting a favorable environment for stocks in this sector [8] - Guidewire Software, another company in the same industry, is expected to report quarterly earnings of $0.46 per share, reflecting a year-over-year increase of 76.9% [9]

Financial Performance - Workday's trailing twelve month subscription revenues reached $7.961 billion, demonstrating a year-over-year growth of 15.5%[9] - The trailing twelve month non-GAAP operating income was $2.349 billion, resulting in a 27.0% margin[9] - Operating cash flow for the trailing twelve months amounted to $2.547 billion, achieving a 29.3% margin[9] - In Q1 FY26, total revenues were $2.240 billion, a 12.6% increase year-over-year, with subscription revenues at $2.059 billion, up by 13.4%[22] - Q1 FY26 operating cash flows reached $457 million, a 23.0% increase year-over-year, and free cash flows were $421 million, up by 44.6%[22] Customer and Operational Metrics - Workday serves over 11,000 global customers across 175+ countries, including 60%+ of the Fortune 500[10] - The company has approximately 19,300 employees worldwide, operating in 30+ countries[10] - Total subscription revenue backlog reached $24.62 billion, a 19.1% increase year-over-year, with the 12-month subscription revenue backlog at $7.63 billion, up by 15.6%[22] Future Guidance - Workday projects full year FY26 subscription revenues to be $8.800 billion and a non-GAAP operating margin of 28.5%[13] - The company anticipates Q2 FY26 total revenues of $2.340 billion, a 12% increase year-over-year, and subscription revenues of $2.160 billion, up by 13%[28]

Financial Data and Key Metrics Changes - Workday reported a 13% growth in subscription revenue, totaling $2,059 million for Q1 FY 2026, with total revenue reaching $2,240 million, also up 13% [28][30] - Non-GAAP operating margin for the quarter was 30.2%, while GAAP operating income was impacted by a $166 million restructuring charge, resulting in a GAAP operating income of $39 million [30][31] - The twelve-month subscription revenue backlog (CRPO) increased by 15.6% to $7,630 million, and total subscription revenue backlog rose by 19% to $24,620 million [29][30] Business Line Data and Key Metrics Changes - More than 30% of net new wins in Q1 were full suite, with over 50% in focused industries like healthcare and SLED [11][43] - New ACV from AI products more than doubled year-over-year, with approximately 25% of customer expansions including AI solutions [12][88] - Professional services revenue was $181 million, contributing to the overall revenue growth [28] Market Data and Key Metrics Changes - U.S. revenue in Q1 totaled $1,680 million, up 13%, while international revenue also grew by 13% to $559 million [28][29] - The company saw notable wins in EMEA and APAC, with significant expansions in various sectors including healthcare and manufacturing [24][25] Company Strategy and Development Direction - Workday is focusing on AI integration and innovation, with a strong emphasis on delivering ROI for customers [20][26] - The launch of Workday Go aims to accelerate deployment for medium enterprises, allowing implementations in as little as 30 to 60 days [14][51] - The company is investing heavily in AI and expanding its partner ecosystem to drive growth and innovation [21][72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining guidance despite macroeconomic uncertainties, citing strong customer demand and the value proposition of the Workday platform [40][42] - The company is closely monitoring specific markets like SLED and international business for potential impacts from the macro environment [25][108] - Management highlighted the importance of AI in driving customer engagement and future growth, with expectations for continued strong adoption [88][98] Other Important Information - Workday ended the quarter with $8 billion in cash and marketable securities and announced a new $1 billion open-ended buyback authorization [31] - The company is maintaining its FY 2026 operating cash flow outlook of $2,750 million and capital expenditures of approximately $250 million [35] Q&A Session Summary Question: Can you discuss the current macro environment and how it affects guidance? - Management noted that the Workday value proposition remains strong, with customers consolidating on the platform for better ROI and TCO, despite some headwinds in specific industries [40][41] Question: What is the potential impact of Workday Go on medium enterprises? - Workday Go is designed to accelerate deployment and improve pricing and packaging for medium enterprises, allowing for faster implementations [51][52] Question: How is the adoption of Xtend and XtendPro progressing? - Adoption of Xtend and XtendPro is increasing, with significant growth in partner applications and customer customizations [58][60] Question: What are the growth rates for HCM versus Financials? - Both HCM and Financials are performing well, with a strong sales motion for full suite offerings contributing to overall growth [62][64] Question: How is the company approaching capital allocation in the current environment? - The focus remains on organic growth and strategic investments, with a commitment to returning capital to shareholders through buybacks [84][85] Question: What is the outlook for AI product monetization? - Strong adoption of AI solutions is already being seen, with expectations for continued growth and monetization opportunities in the near future [98][99]