Workday FY Conference Summary Company Overview - **Company**: Workday (NasdaqGS: WDAY) - **Industry**: Enterprise Software, specifically focusing on Human Resources (HR) and Finance solutions Key Points and Arguments Market Potential - Workday operates in a Total Addressable Market (TAM) of approximately **$200 billion** with only **4-5%** market penetration, indicating significant growth opportunities [4][6] - The company aims to expand its portfolio, particularly in frontline work, which encompasses around **3 billion workers globally** [6][12] Growth Strategies 1. **Portfolio Expansion**: - Workday is broadening its service offerings in finance, including new modules for revenue management and cost management [7][8] 2. **Geographic Expansion**: - Focus on increasing presence in Europe with localized offerings and new data centers, as well as entering the Indian market [10][12] 3. **Targeting Mid-Market**: - Workday is simplifying its services to better cater to mid-market companies (1,000 to 3,000 employees) with new packages like Workday Go and Workday Accelerated [12][11] Technology and Innovation - Workday is committed to leveraging AI to transform user experience and automate backend processes, with **1.2 billion AI actions** already executed in the core platform [20][24] - The company has structured its AI strategy around three pillars: enhancing user experience, automating backend processes, and creating an open platform for integration [18][22] Data and AI - Workday emphasizes the importance of data, context, and process for AI value generation, creating a high barrier to entry for competitors [28][30] - The company has a unique advantage due to its comprehensive data set across HR and finance functions, which is essential for effective AI implementation [28][24] Monetization Strategy - Introduction of **Flex Credits** as a new monetization model for AI features, allowing customers to pay based on usage rather than a fixed seat-based model [39][40] - This model aims to balance customer value with Workday's revenue generation, allowing for flexibility in AI feature consumption [41][46] Acquisitions - Workday has made strategic acquisitions to enhance its AI capabilities, including the acquisition of **Sana** for AI-driven user experience and **Pipedream** for connectivity [50][53] - The focus is on integrating these acquisitions to create a comprehensive ecosystem that enhances the Workday platform [54][55] Financial Discipline - Workday maintains a balance between innovation and margin efficiency, leveraging operational leverage to invest in both organic and inorganic growth [58][60] - The company is confident in its ability to continue expanding investments in AI while also improving margins [60][61] Additional Insights - The discussion highlighted the misconception that AI can operate effectively without a strong data and process foundation, emphasizing the need for accuracy in enterprise applications [32][36] - Workday's approach to AI is not just about better dashboards but about fundamentally transforming business processes [36][37] This summary encapsulates the key insights from Workday's FY conference, focusing on its market potential, growth strategies, technological innovations, and financial discipline.

Financial Data and Key Metrics Changes - Workday reported Q3 subscription revenue of $2.244 billion, reflecting a 15% increase year-over-year. Total revenue reached $2.432 billion, up 13% [19] - Non-GAAP operating margin for Q3 was 28.5%, with non-GAAP operating income of $692 million [20] - The 12-month subscription revenue backlog (CRPO) was $8.21 billion, increasing by 17.6% [19] - Total subscription revenue backlog at the end of the quarter was $25.96 billion, up 17% [20] - Operating cash flow for Q3 was $588 million, representing a growth of 45% [20] Business Line Data and Key Metrics Changes - In Human Capital Management (HCM), Workday added new customers including Sunnybrook Health Sciences Center and Fuji Electric, with strong full-suite adoption [8] - AI products contributed over 1.5 points of Annual Recurring Revenue (ARR) growth this quarter, with more than 75% of core customers using Workday Illuminate AI [9] - Workday Go is driving strong new customer growth, particularly in the medium enterprise segment, with a major expansion announced [8] Market Data and Key Metrics Changes - U.S. revenue in Q3 totaled $1.825 billion, up 12%, while international revenue was $607 million, up 13% [19] - Healthcare became the sixth industry to exceed $1 billion in ARR, with significant wins in the sector [10] - The company saw strong performance across EMEA, APAC, and Japan, with notable wins in these regions [16] Company Strategy and Development Direction - Workday aims to unify HR and Finance on one intelligent platform, leveraging AI to help organizations adapt quickly and make better decisions [7] - The company is focused on increasing AI talent and entering new markets, including the Middle East and India [20] - Workday is committed to driving efficiencies while scaling the business globally, with a focus on targeted investments for long-term growth [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum of the business heading into Q4 and FY27, citing strong customer engagement and ROI from Workday solutions [30] - The company is optimistic about AI-driven growth investments and expects to achieve a subscription revenue CAGR of 12%-15% through FY28 [24] - Management acknowledged some impacts from fiscal funding in certain sectors but emphasized strong execution across the portfolio [23] Other Important Information - Workday closed the acquisition of Paradox, which contributed to CRPO growth and was not included in backlog guidance [20] - The company plans to repurchase an additional $3.6 billion in shares through the end of FY27, leading to a total of $5 billion in repurchases [21] Q&A Session Summary Question: Feedback on venture-backed vibe-coding startups - Management noted that while there is interest in point solutions, customers are returning to trusted vendors like Workday due to data quality and security concerns [31] Question: Mechanisms to maintain ACV growth amid layoffs - Management highlighted that they are focused on selling back into their customer base with new solutions, which helps offset any potential impacts from headcount reductions [36] Question: Early success with AI solutions - Management reported that AI solutions are adding significant growth to ARR, with 75% of new sales including an AI solution [43] Question: Feedback on Paradox and Sana acquisitions - Early feedback from customers has been very positive, with strong demand for both acquisitions and their integration into Workday's offerings [51] Question: Go-to-market strategy for Paradox - Workday plans to sell Paradox not only to existing customers but also to competitors' environments, expanding its market reach [59] Question: Confidence in DIA go-live milestones - Management expressed high confidence in meeting DIA contract requirements, which are expected to contribute significantly to Q4 revenue [68]

Financial Data and Key Metrics Changes - Workday reported a 15% growth in subscription revenue, totaling $2.244 billion for Q3 2026, with total revenue reaching $2.432 billion, reflecting a 13% increase [17] - Non-GAAP operating margin stood at 28.5%, with non-GAAP operating income of $692 million [18] - The 12-month subscription revenue backlog (CRPO) increased by 17.6% to $8.21 billion, while total subscription revenue backlog rose 17% to $25.96 billion [18] Business Line Data and Key Metrics Changes - The Human Capital Management (HCM) segment saw new customer additions, including Sunnybrook Health Sciences Center and Fuji Electric, contributing to strong full-suite adoption [6] - More than 75% of core customers are utilizing Workday Illuminate AI, with over 1 billion AI actions executed on the platform this year [7] - AI products contributed over 1.5 points to Annual Recurring Revenue (ARR) growth in Q3 [8] Market Data and Key Metrics Changes - Healthcare became the sixth industry to exceed $1 billion in ARR, with significant wins including Arden Health and Northeast Georgia Medical Center [9] - International revenue totaled $607 million, up 13%, with strong performances across EMEA, APAC, and Japan [17][15] - The U.S. revenue for Q3 was $1.825 billion, reflecting a 12% increase [17] Company Strategy and Development Direction - Workday aims to enhance its AI capabilities through strategic acquisitions, including the recent acquisition of Sana, which will improve user experience and AI integration [12] - The company is focused on expanding into new markets, including the Middle East and India, while also investing in medium enterprises [18] - Workday's vision is to unify HR and finance processes on a single platform, leveraging AI to drive better decision-making and operational efficiency [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business momentum and the ability to achieve financial targets, with a subscription revenue growth forecast of approximately 14% for FY26 [20] - The company anticipates continued growth in AI-driven solutions, with expectations for a subscription revenue CAGR of 12%-15% through FY28 [22] - Management acknowledged some impacts from fiscal funding in the public sector but emphasized strong execution across the portfolio [20] Other Important Information - Workday's operating cash flow for Q3 was $588 million, a 45% increase, and the company ended the quarter with $6.8 billion in cash and marketable securities [18] - The company plans to repurchase an additional $3.6 billion in shares, totaling $5 billion in buybacks [19] Q&A Session Summary Question: Feedback on venture-backed vibe-coding startups - Management noted that while there are challenges with operationalizing these solutions, customers are returning to trusted vendors like Workday for reliable data and security [27][28] Question: Mechanisms to maintain ACV with customers facing layoffs - Management highlighted that customer headcount is still growing year-over-year, and they are focused on selling additional solutions to existing customers to offset any potential impacts from layoffs [30] Question: Early success with AI solutions - Management reported that AI solutions are contributing significantly to ARR growth, with 75% of new sales including AI products [32][33] Question: Feedback on Paradox and Sana acquisitions - Early feedback from customers has been very positive, indicating strong demand for both AI solutions and the integration of these acquisitions into the Workday ecosystem [36][38] Question: International growth performance - Management expressed satisfaction with international performance across EMEA, APAC, and Japan, attributing success to product localization and strong partner networks [60][61]

Investor Presentation Q3 FY26 This presentation may contain forward-looking statements for which there are risks, uncertainties, and assumptions. Forward-looking statements may include any statements regarding strategies or plans for future operations; any statements concerning new features, enhancements or upgrades to our existing applications or plans for future applications; any projections of revenues, gross margins, earnings, or other financial items; and any statements of expectation or belief. Forwar ...

Core Insights - Workday reported total revenues of $2.432 billion for the fiscal 2026 third quarter, representing a year-over-year increase of 12.6% [7] - Subscription revenues reached $2.244 billion, up 14.6% year-over-year [7] - The company anticipates fiscal 2026 subscription revenue of $8.828 billion, reflecting a growth of 14% [3] Financial Performance - Operating income for the third quarter was $259 million, or 10.7% of revenues, compared to $165 million, or 7.6% of revenues, in the same period last year [7] - Non-GAAP operating income was $692 million, or 28.5% of revenues, compared to $569 million, or 26.3% of revenues, in the same period last year [7] - Diluted net income per share was $0.94, up from $0.72 in the third quarter of fiscal 2025 [7] - Non-GAAP diluted net income per share was $2.32, compared to $1.89 in the same period last year [7] Subscription Backlog - The 12-month subscription revenue backlog was $8.21 billion, an increase of 17.6% year-over-year [7] - Total subscription revenue backlog reached $25.96 billion, increasing 17.0% year-over-year [7] Cash Flow and Share Repurchase - Operating cash flows were $588 million, compared to $406 million in the same period last year [7] - Free cash flows amounted to $550 million, up from $359 million in the same period last year [7] - Workday repurchased approximately 3.4 million shares of Class A common stock for $803 million as part of its share repurchase programs [7] Business Developments - Workday announced a new AI Centre of Excellence in Dublin, Ireland, with a three-year investment of €175 million and the creation of 200 specialized AI roles [5] - The company welcomed new customers and expanded existing relationships, including notable wins in the healthcare sector [8] - Workday unveiled several new innovations at its annual customer conference, including new AI agents and a new data layer [8] Market Position - Workday was named a Leader in the 2025 Gartner Magic Quadrant for Cloud HCM Suites for 1,000+ Employee Enterprises, Cloud ERP for Service-Centric Enterprises, and Cloud ERP Finance [8]

Core Insights - Workday has launched a global developer network aimed at enhancing AI talent through access to tools, training, and certification [1][2] - Google Cloud has joined Workday Data Cloud, providing customers with secure, zero-copy access to HR and finance data for AI-driven insights [1][6] Developer Network and Training - The global developer network will allow a wider community to develop, certify, and apply Workday skills, facilitating hands-on experience in building AI-powered solutions [2][3] - Partnerships with universities and staffing firms will provide dedicated training paths and certifications, preparing learners for roles in the Workday Economy [3][4] Certification and Talent Connection - Developers completing the program will receive a Workday Pro Developer Certification and be listed in the Workday Talent Directory, connecting them with potential employers [4][5] Google BigQuery Partnership - The integration of Google BigQuery with Workday Data Cloud enhances customer flexibility in analyzing and activating Workday data [5][7] - Customers will benefit from direct access to Workday HR and finance data within Google Cloud, enabling predictive modeling without complex integrations [6][8] Planned Acquisition of Pipedream - Workday's planned acquisition of Pipedream aims to expand its open ecosystem, providing an integration platform for AI agents with over 3,000 pre-built connectors [9][10] - This acquisition, along with others, will enhance the ability to connect Workday data with external systems, fostering innovation across the platform [10][11] Availability Timeline - The global developer network is set to launch in early 2026, with the Workday Data Cloud available to early adopters in the first half of 2026 [12]

Core Insights - Workday has achieved significant growth in the higher education sector, with over 650 institutions across 19 countries adopting its AI-powered solutions to enhance student and employee success [1][2][4]. Group 1: Customer Adoption and Market Trends - The increase in new customers is driven by challenges in higher education, including declining enrollment, rising costs, and increased regulations, prompting institutions to adopt AI for improved outcomes and operational efficiency [2][3]. - Newly signed U.S. customers include notable institutions such as Loyola University Chicago and Swarthmore College, building on recent successes with other universities [3][4]. - Workday's global expansion includes new customers like Bow Valley College in Canada and the University of York in England, with successful implementations at various universities worldwide [4][10]. Group 2: Product Features and Innovations - Workday's research indicates that 90% of higher education leaders aim to enhance the student experience, with 92% seeking to streamline faculty and staff processes through a unified system [5][6]. - New AI agents, such as the Academic Requirements Agent, are designed to automate tasks like transcript processing, allowing staff to focus on strategic initiatives [7][9]. - Workday Student has gained traction, with over 140 customers representing more than 190 institutions, and has supported over 3 million student records since its launch in 2018 [10][11]. Group 3: Recognition and Future Outlook - Workday has been recognized as a leader in the 2025 Gartner Magic Quadrant for Higher Education Student Information System Software as a Service, reflecting its strong position in the market [12][13]. - The company continues to invest in the higher education sector, positioning itself as a critical partner for institutions navigating significant changes and external pressures [13].

Summary of Key Points from the Conference Call Company Overview - The company discussed its unique position in the software industry, particularly in the context of the transition from on-premises software to cloud-based solutions and SaaS models [1][2] - The company has seen significant growth in its user base, increasing from 46 million contracted users to 75 million over the past five years [4] AI and Software Growth - The company highlighted the expanding opportunities in AI, stating that 75% of existing customers are using AI features, and 75% of new customers are purchasing AI as their first product [6] - AI-related annual contract value (ACV) has grown from over $250 million to more than $450 million, representing a 50% year-over-year increase [7] - The company emphasized that AI is integral to its product offerings and is driving growth, contributing approximately 1.5 percentage points to overall annual recurring revenue (ARR) growth [8] Talent Acquisition and Leadership - The company has made significant hires in leadership positions to drive growth, including a new GM for the medium enterprise segment and a former Google executive to lead the platform business [12][13] - The collaboration between new and existing talent is noted as a key strength for future growth [12] Financial Performance and Projections - The company expects to achieve over $8.8 billion in revenue for the current year, up from just under $6 billion in 2023 [37] - Non-GAAP operating margins are projected to increase from just over 20% in FY2023 to 29% by the end of the current year [41] - The company has set a target for subscription revenue CAGR through FY2028 to range from 12% to 15% [54] Capital Allocation and Share Buybacks - The company announced a $5 billion share buyback program through FY2027, emphasizing its commitment to returning capital to shareholders [59][62] - The focus remains on organic investment, particularly in AI, while also considering M&A opportunities that align with its strategic goals [66][67] Market Expansion and New Offerings - The company is focusing on expanding its presence in the medium enterprise market and has launched Workday Go to cater to this segment [33][90] - A new consumption-based pricing model called flex credits was introduced, allowing customers to pay based on usage, which is expected to enhance customer value and capture revenue [88] Data Integrity and AI Differentiation - The company is investing in improving data integrity and context, which is crucial for effective AI implementation in enterprise settings [93][96] - The unique architecture of Workday allows for the integration of AI into business processes, enhancing operational efficiency and effectiveness [84][96] Conclusion - The company is optimistic about its future, citing strong customer loyalty, innovative capabilities, and a robust growth strategy [15][16] - The leadership team is committed to driving durable growth while expanding operating margins, positioning the company for long-term success in the evolving software landscape [15][41]

Core Insights - Workday has launched Workday Build, a new developer platform that enables customers and partners to create, share, and scale AI-powered solutions directly on the Workday platform [1][3] - The platform includes the Workday Flowise Agent Builder, a low-code tool for building and managing custom AI agents, enhancing the ability to leverage Workday's data for business-specific applications [2][6] Product Features - Workday Flowise Agent Builder allows for the design, deployment, and management of AI agents, ranging from simple conversational experiences to complex workflows, built on Workday's secure data [6] - A unified set of AI developer products and tools is introduced, including a generative AI-powered Developer Copilot and Agent Gateway for seamless integration with Workday's systems [6] - Workday Data Cloud provides zero-copy access to HR and finance data, facilitating deeper insights and more intelligent solutions by connecting to various enterprise data platforms [6] Availability - Workday Flowise Agent Builder will be available to customers with Workday Extend Professional in the first half of 2026, while Workday Data Cloud will be available to early adopters in the same timeframe and generally later that year [4]