Workday, Inc. Q1 FY2026 earnings call

• Customer highlights: Established new HCM relationships with United Airlines, Pilot Travel Centers, etc.; strong expansions with FedEx, CVS Health, etc. Investments in financials showed growth in net new ACV and customers. AI innovation: New ACV across AI products more than doubled; ~25% of customer expansions included AI products. Launched WorkdayGo for emerging and medium enterprises with fast deployments. Five industries exceeded $1 billion in ARR. Partners were critical, with over 20% of net new ACV from partner source pipeline. Growth in EMEA, APAC, and Japan with notable wins and expansions.

Subscription revenue in the first quarter was $2.059 billion, up 13% or 15% when adjusted for the leap year compare. Professional services revenue was $181 million, resulting in total revenue of $2.24 billion, growth of 13%. From a geographic perspective, US revenue in Q1 totaled $1.68 billion, up 13%, and international revenue totaled $559 million, also up 13%. Twelve-month subscription revenue backlog or CRPO was $7.63 billion at the end of Q1, increasing 15.6%. Total subscription revenue backlog at the end of the quarter was $24.62 billion, up 19%. Gross revenue retention rates remained a strong 98%. Non-GAAP operating income for the quarter was $677 million, representing a non-GAAP operating margin of 30.2%.

• Reiterated subscription revenue guidance of $8.8 billion. Anticipates Q2 FY 2026 subscription revenue to be approximately $2.16 billion, growth of 13%. Expect CRPO to increase between 15% and 16% in Q2. FY 2026 professional services revenue expected ~$700 million; Q2 professional services revenue expected $180 million. FY 2026 non-GAAP operating margin expected ~28.5%; Q2 non-GAAP operating margin expected 28%. Maintaining FY 2026 operating cash flow outlook of $2.75 billion and CAPEX of ~$250 million.

• Macro environment uncertainties, particularly impact on certain markets like SLED and international business. Potential headwinds in industries such as higher ed if linked to government funding changes, and possible blowback in international markets from macro-level US actions.

Q: Kirk Materne asks about the environment in EMEA and SLED markets and confidence in guiding given macro.

A: Carl Eschenbach and Zane Rowe respond about Workday's value proposition, AI adoption, partner growth, and how the company's initiatives give confidence in the guide.

Q: Brad Sills asks about WorkdayGo and medium enterprise.

A: Carl Eschenbach talks about WorkdayGo's deployment, pricing, packaging, and target market for emerging and medium enterprises.

Q: Mark Murphy asks about adoption of Xtend and Xtend Pro and growth rates in HCM vs Fins Plus.

A: Carl Eschenbach and Zane Rowe discuss Xtend and Xtend Pro's growth, Fins sales motion, and full suite wins.

Q: Brent Thill asks about cost control and hiring plan in uncertain environment.

A: Zane Rowe and Carl Eschenbach discuss scaling the business, investing in key areas like AI, and prudent hiring.

Q: Michael Turrin asks about CRP metric, billings growth, and capital allocation.

A: Zane Rowe addresses CRP growth, billings variation, and capital allocation focusing on organic growth and share buybacks.

Q: Brad Zelnick asks about AI adoption level and CRPO contribution from services.

A: Carl Eschenbach talks about AI adoption and Zane Rowe clarifies CRPO contribution from services and implementation.

Q: Carl Keirstead asks about AI monetization timeline and margin growth trade-off.

A: Carl Eschenbach discusses AI monetization already moving the needle and Zane Rowe talks about margin expectations and growth.

Q: Rishi Jaluria asks about macro impact and go-to-market messaging.

A: Carl Eschenbach addresses macro impact and continued strong value proposition messaging.

Q: Alex Zukin asks about AI growth areas and capital allocation for tuck-ins.

A: Garrett Katzmeyer and Zane Rowe discuss AI growth across segments and capital allocation for tuck-ins.

Q: Derek Wood asks about US federal business opportunities.

A: Carl Eschenbach talks about US federal business investments and opportunities.

Q: Scott Berg asks about impact of AI agents on sales cycles.

A: Carl Eschenbach discusses how AI agents accelerate sales cycles for existing customers and don't elongate net new opportunities.