Workday Inc. reported fiscal 2026 fourth‑quarter revenue of $2.532 billion, up 14.5% year‑over‑year, and subscription revenue of $2.360 billion, up 15.7% year‑over‑year. The company’s diluted earnings per share were $2.47, beating the consensus estimate of $2.32 by $0.15. The beat was driven by a combination of higher mix of high‑margin AI‑enabled contracts and disciplined cost management that kept operating expenses in line with revenue growth. Compared with Q3 FY2026, revenue rose from $2.43 billion and EPS from $2.32, underscoring a steady acceleration in the core subscription business.
Non‑GAAP operating income reached $774 million, giving the company a 30.6% operating margin—an increase from 26.4% in the same quarter a year earlier. The margin expansion reflects both pricing power in the AI segment and operational efficiencies that offset the slower hiring ramp the company has pursued to support its growth initiatives. Management noted that “solid revenue growth, ongoing efficiencies we are driving across the business and a slightly slower ramp in hiring” contributed to the improved margin.
AI products now generate more than $400 million in annual recurring revenue, a milestone that signals the company’s monetization strategy is gaining traction. The AI ARR represents a significant portion of the subscription growth and demonstrates that Workday’s investment in AI is translating into tangible revenue streams, reinforcing the company’s shift toward higher‑margin, data‑centric services.
For fiscal 2027, Workday guided subscription revenue of $9.925 billion to $9.950 billion, a 12%‑13% year‑over‑year increase, and a non‑GAAP operating margin of approximately 30.0%. The guidance reflects management’s view that macroeconomic uncertainty will temper technology spending, especially in the federal government and healthcare sectors, and that the company will need to invest further in AI to maintain its competitive edge. The guidance also signals a cautious outlook, with a slight deceleration from the 15.7% growth seen in Q4 FY2026.
Investors reacted negatively to the guidance, with the stock falling in after‑hours trading. The market’s focus was on the 12‑13% subscription revenue growth target and the 30% operating margin, both of which were viewed as lower than analyst expectations and indicative of potential headwinds in the near term.
Management emphasized the company’s confidence in its AI strategy. “We built Workday to bring innovation back to the worlds of HR and finance, and AI gives us the chance to do it all again. We operate at the heart of the global enterprise, where trust and accuracy matter most. That gives Workday a unique opportunity to bring AI directly into the HR and finance workflows our customers rely on every day and to deliver real, measurable value.” CFO Zane Rowe added, “Our results this quarter reflect the deep trust customers place in Workday to manage their most critical assets. This is creating durable expansion opportunity, particularly as adoption of our AI solutions accelerate.” Chief Commercial Officer Rob Enslin noted that “some large enterprise deals are taking longer to close, particularly in the federal government and healthcare sectors, which impacted fourth‑quarter results.”
The content on EveryTicker is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk.