Workday(US:WDAY)2025-11-26 21:03Revenue Performance - Total revenues for the three months ended October 31, 2025, were $2.4 billion, a 13% increase from $2.2 billion in the prior year period [136]. - Subscription services revenues for the three months ended October 31, 2025, were $2.2 billion, reflecting a 15% increase from $2.0 billion in the prior year period [136]. - Subscription services revenues accounted for approximately 92% of total revenues for the three and nine months ended October 31, 2025 [125]. - Professional services revenues for the three months ended October 31, 2025, were $188 million, a decrease of 7% from $201 million in the prior year period [136]. Operating Income - GAAP operating income for the three months ended October 31, 2025, was $259 million, a 57% increase from $165 million in the prior year period [123]. - Non-GAAP operating income for the three months ended October 31, 2025, was $692 million, a 22% increase from $569 million in the prior year period [123]. - GAAP operating income for the three months ended October 31, 2025, was $259 million, or 10.7% of revenues, compared to $165 million, or 7.6% of revenues in the prior year [161]. - Non-GAAP operating income for the nine months ended October 31, 2025, was $2.1 billion, or 29.2% of revenues, compared to $1.6 billion, or 25.7% of revenues in the prior year [164]. Costs and Expenses - Total costs and expenses for the three months ended October 31, 2025, were $2.2 billion, an increase of $178 million, or 9%, compared to the prior year period [141]. - For the nine months ended October 31, 2025, total costs and expenses were $6.5 billion, an increase of $578 million, or 10%, compared to the prior year [142]. - Costs of subscription services for the three months ended October 31, 2025, were $395 million, an increase of $65 million, or 20%, compared to the prior year [143]. - Costs of subscription services for the nine months ended October 31, 2025, were $1.1 billion, an increase of $191 million, or 21%, compared to the prior year [144]. Cash and Investments - Cash, cash equivalents, and marketable securities as of October 31, 2025, totaled $6.8 billion, a 4% decrease from $7.2 billion in the prior year [123]. - As of October 31, 2025, the company had cash, cash equivalents, and marketable securities totaling $6.8 billion, primarily for working capital and general corporate purposes [174]. - Cash provided by operating activities increased to $1.7 billion for the nine months ended October 31, 2025, compared to $1.3 billion in the same period of 2024, driven by higher cash collections of $767 million [178]. - Free cash flows for the nine months ended October 31, 2025, were $1.6 billion, up from $1.2 billion in the prior year, reflecting improved cash collections and decreased capital expenditures [184]. Restructuring and Workforce - The company reduced approximately 7.5% of its workforce as part of the Fiscal 2026 Restructuring Plan announced in February 2025 [120]. - Restructuring expenses for the nine months ended October 31, 2025, were $172 million, primarily related to the Fiscal 2026 Restructuring Plan [158]. - Share-based compensation expense increased by $105 million for the nine months ended October 31, 2025, compared to the prior year, primarily due to the Fiscal 2026 Restructuring Plan [160]. Tax and Regulatory Considerations - The provision for income taxes for the nine months ended October 31, 2025, was $197 million, compared to $86 million in the prior year [169]. - The company is assessing the impact of the 2025 Tax Act, which is expected to reduce domestic cash tax outflows for the remainder of fiscal 2026 [171]. - The company is monitoring the OECD's Pillar Two rules, which may affect its effective tax rate and current tax obligations [172]. Acquisition and Financing Activities - The company completed the acquisition of Sana Labs AB for approximately $1.0 billion in cash in November 2025 [191]. - Cash used in financing activities was $1.8 billion for the nine months ended October 31, 2025, primarily due to share repurchases of $1.4 billion [181]. - The company has a remaining authorization of $4.4 billion for share repurchases as of October 31, 2025 [187]. - The company expects capital expenditures to be approximately $200 million in fiscal 2026, mainly for office facilities [180]. Market and Interest Rate Risks - A hypothetical increase or decrease of 100 basis points in interest rates would have resulted in an approximately $68 million market value reduction or increase in the investment portfolio as of October 31, 2025 [209]. - The company is exposed to foreign currency exchange risk due to global transactions, with significant exposures to the euro, British pound, Canadian dollar, and Australian dollar [205]. - The company enters into foreign currency derivative hedging transactions to mitigate foreign currency exchange risks [206]. - The Senior Notes have fixed annual interest rates, eliminating economic interest rate exposure on these debt obligations [210]. - Borrowings under the 2022 Credit Agreement are subject to variable interest rates, exposing the company to market risk from changes in underlying index rates [211]. - The investment portfolio is managed to preserve capital and meet liquidity needs, with no investments made for trading or speculative purposes [207]. - Fixed rate securities may have their market value adversely affected by rising interest rates, while floating rate securities may produce less income if rates fall [208]. - The company’s future investment income may fluctuate due to changes in interest rates, potentially leading to losses in principal if securities decline in market value [208]. - The fair values of the Senior Notes will increase as interest rates fall and decrease as interest rates rise, indicating exposure to interest rate risk [210].