$Workday(WDAY)$ is scheduled to release its fiscal year 2026 first-quarter for period ending 30 April 2025 earnings on Thursday, 22 May 2025, after the market closes.
Consensus EPS Forecast: Analysts' consensus EPS forecast for Q1 2026 is $2.01.
Year-over-Year EPS Increase Expectation: Analysts project a year-over-year EPS increase of 35.3%, compared to the $1.74 reported in the same quarter last year (fiscal Q1 2025).
Revenue Estimate: The revenue estimate for Q1 2026 is around $2.2 billion.
Subscription Revenue Guidance (Provided in previous earnings call): Approximately $2.050 billion, representing a growth of 13% year-over-year.
Non-GAAP Operating Margin Guidance (Provided in previous earnings call): Approximately 28.0%.
Workday (WDAY) Last Positive Earnings Call Saw Share Price Increased By 6.99%
Workday had a positive earnings call on 25 Feb 2025 which saw its share price gained 6.99% since.
Workday's Q4 and FY '25 results demonstrate strong growth, particularly in subscription revenue, core financial wins, AI monetization, and international expansion. Despite the need for restructuring and macro headwinds in EMEA, the overall performance and strategic advancements in AI and partnerships present a positive outlook.
Workday (WDAY) Guidance
During Workday's fourth-quarter fiscal 2025 earnings call, the company provided comprehensive guidance indicating a positive outlook for fiscal 2026. Subscription revenue for fiscal 2025 was reported at $7.718 billion, a 17% increase, with expectations for fiscal 2026 set at approximately $8.8 billion, representing a 14% growth. For the first quarter of fiscal 2026, subscription revenue is projected at $2.050 billion, with a growth rate of 13%. The company also highlighted a strong non-GAAP operating margin of 26.4% for the fourth quarter, with a fiscal 2026 target of approximately 28%.
Cash flow from operations was $2.46 billion for the year, with a fiscal 2026 projection of $2.75 billion. Workday continues to emphasize strategic investments in AI, international markets, and its partner ecosystem, aiming for mid-teens subscription revenue growth and a 30% non-GAAP operating margin in the medium term.
Key Areas to Watch in the Workday (WDAY) Earnings Report and Call
Revenue Growth Trends: Investors will be closely monitoring the actual revenue growth in Workday's Human Capital Management (HCM) and Financial Management software segments. The sustainability and potential acceleration of revenue growth, especially in core markets, will be a key focus. Workday's revenue growth has moderated in recent quarters (from 23% YoY in Q1 2024 to 17% in Q4 2025), so stabilizing or improving this metric is crucial.
Workday delivered 16% subscription revenue growth and a 26% non-GAAP operating margin in Q4. Total revenue in Q4 was $2.21 billion, up 15%. Full-year FY '25 subscription revenue was $7.718 billion, growth of 17%.
"One Workday" Strategy Progress: Updates on the adoption rates and cross-selling success of Workday's unified platform strategy will be important. Effective execution of this strategy could deepen client relationships and drive higher retention and upsell opportunities.
In Q4, Workday reported a record number of core financials wins, with significant expansions in financial services and healthcare, contributing to strong momentum.
Margin Expansion Pressures: Rising customer acquisition and retention costs have put pressure on Workday's margins. Analysts will be looking for signs of improved operational efficiency, such as gross margin expansion and controlled sales and marketing expenses as a percentage of revenue. The guidance for a 28.0% non-GAAP operating margin for Q1 2026 will be compared against the actual results.
Workday announced a restructuring that will reduce the workforce by approximately 8%, with an expected restructuring expense of approximately $180 million in Q1 FY '26.
Competitive Positioning: Insights into Workday's ability to differentiate itself against competitors like SAP and Oracle, who are aggressively expanding their cloud offerings, will be valuable. Management's commentary on customer wins, renewals, and cross-selling will be pivotal. Workday's user experience and integration capabilities are key differentiators.
More than 15% of net new ACV in Q4 was sourced through partners, up from more than 10% last quarter.
AI Strategy and Monetization: Workday has been emphasizing its AI-focused product strategy. Investors will be keen to hear updates on the traction and monetization of their AI offerings, such as the "Agent System of Record" and role-based agents. Previous reports indicated AI SKUs were involved in over 30% of customer expansions.
AI SKUs were involved in more than 30% of customer expansions. Extend Pro and Recruiting Agent doubled ACV from Q3 to Q4. The launch of the Agent System of Record and new role-based agents marks a significant AI advancement.
International Growth: Despite macroeconomic headwinds, Workday's international revenue grew 16% in Q4 2025. The report will likely provide updates on the performance in key international markets like the UK and Germany, as well as progress in the APAC region.
Despite macro headwinds, international revenue grew 16% in Q4, with strong performance in the UK and Germany, and new wins in APAC. Continued macro headwinds were noted in EMEA, affecting growth despite strong individual country performances.
Customer Base Expansion: Monitoring the growth of Workday's customer base, including the number of Financial Management customers (which exceeded 2,000 in previous reports) and the total number of users under contract (over 70 million previously), will provide insights into the company's market penetration.
Backlog: The 12-month and total subscription revenue backlog figures will indicate the strength of future revenue. In the fiscal year 2025 report, the 12-month subscription revenue backlog was $7.63 billion (up 15.2% YoY), and the total subscription revenue backlog was $25.06 billion (up 19.7% YoY).
Overall Economic Outlook: Management's commentary on the broader economic environment and its impact on enterprise IT spending will be closely watched.
Workday expects FY '26 subscription revenue of approximately $8.8 billion, growth of 14%, with an expected non-GAAP operating margin of approximately 28%.
Workday (WDAY) Price Target
Based on 34 analysts from Tiger Brokers offering 12 month price targets for Workday in the last 3 months. The average price target is $300.56 with a high forecast of $348.00 and a low forecast of $230.00. The average price target represents a 10.08% change from the last price of $273.05.
Wall Street analysts generally maintain a "buy" or "outperform" rating on Workday's stock. Some analysts have initiated coverage with optimistic views on Workday's low ERP market share and potential for significant growth through AI initiatives, with price targets as high as $315.
Technical Analysis - Exponential Moving Average (EMA)
If we looked at how Workday have been trading, there have pretty good investors sentiment over the last two weeks though we saw a slight decline on last Friday, investors would be looking at the numbers and Workday guidance on their prospects in the enterprise software market.
So these are the two scenarios that could move the stock price despite we seeing positive momentum from the RSI.
Positive surprises in revenue growth, margin expansion, or AI adoption could boost investor confidence and potentially lead to a higher valuation for Workday's stock, which has underperformed some peers in the past year.
Weaker-than-expected results or a cautious outlook for the future could raise concerns about Workday's long-term growth trajectory and put downward pressure on the stock price.
We are not seeing any signs of investors planning to take profit or sell off their existing shares, so I believe investors would want to see Workday performance in executing its growth strategies, are they managing their cost effectively.
I will be watching closely on Monday (19 May) to plan for a small position for this stock.
Summary
Workday fiscal Q1 2026 earnings report will be a crucial indicator of Workday's ability to execute its growth strategies, manage costs effectively, and maintain its competitive edge in the enterprise software market. Investors will be scrutinizing the numbers and management's commentary for insights into the company's performance and future prospects.
I am looking more onto what Workday earnings could show for the AI monetization progress for productivity software, this would be important as the next focus for hedge funds and investors would be when would the software sector which had started on AI integration start to see its monetization.
Appreciate if you could share your thoughts in the comment section whether you think Workday would be able to post a better-than-expected results due to returns on its AI monetization and boosting investors confidence.
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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