Workday Q3 Earnings Beat Estimates on Solid Revenue Growth

Core Insights - Workday, Inc. (WDAY) reported strong third-quarter fiscal 2026 results, with both revenue and net income exceeding Zacks Consensus Estimates, driven by customer wins across various industries and a focus on innovation and AI integration [1][9] Financial Performance - Net income on a GAAP basis was $252 million or 94 cents per share, up from $193 million or 72 cents in the year-ago quarter, with non-GAAP net income per share at $2.32 compared to $1.89 previously, beating estimates by 19 cents [2] - Net sales for the quarter reached $2.43 billion, an increase from $2.16 billion year-over-year, surpassing the Zacks Consensus Estimate by $17 million [3] Revenue Breakdown - Subscription services revenues were $2.24 billion, up from $1.95 billion in the prior year, while total subscription revenue backlog was $25.96 billion, reflecting a 17% year-over-year increase [5] - Professional services revenues were $188 million, slightly down from $201 million in the previous year, but still beating estimates of $180.1 million [5] Customer Growth and Industry Demand - The company experienced strong traction in sectors such as tech, media, financial services, healthcare, and education, with notable new customer wins and expansion agreements [4][9] Operating Metrics - Operating income for the quarter was $259 million, compared to $165 million in the year-ago quarter, with non-GAAP operating income at $692 million, reflecting improved margins [6] Cash Flow and Liquidity - Workday generated $588 million in cash from operating activities, up from $406 million in the prior-year quarter, and had cash and cash equivalents of $6.84 billion as of October 31, 2025 [7] Future Outlook - For the fourth quarter of fiscal 2026, Workday expects subscription services revenues to be $2.35 billion, indicating a growth of 14%, with a non-GAAP operating margin projected at 28.5% [8] - For the full fiscal year 2026, subscription revenues are anticipated to reach $8.82 billion, also reflecting a 14% year-over-year growth [10]