Workday Inc. WDAY reported solid fourth-quarter fiscal 2025 results, with adjusted earnings and revenues surpassing the respective Zacks Consensus Estimate.
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The company reported revenue growth year over year, driven by solid customer wins across various industries, including education, financials and healthcare. Strategic expansions and strong contract renewals within the existing customer base also drove the top line. Management’s strong focus on innovations, AI integration and international expansion are positive factors.
Net Income
Net income on a GAAP basis was $94 million or 35 cents per share compared with $1.19 billion or $4.42 per share in the year-ago quarter. The significant decline was primarily due to a high income tax benefit in the year-earlier quarter.
Non-GAAP net income per share was $1.92 compared with $1.57 per share in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 17 cents.
In fiscal 2025, the company reported a GAAP net income of $526 million or $1.95 per share compared with a net income of $1.38 billion or $5.21 per share in fiscal 2024. In fiscal 2025, non-GAAP net income per share rose to $7.3 from $5.9 per share in the prior year.
Workday, Inc. Price, Consensus and EPS Surprise
Workday, Inc. price-consensus-eps-surprise-chart | Workday, Inc. Quote
Revenues
Net sales during the quarter were $2.21 billion, up from $1.92 billion in the year-ago quarter, backed by rising demand for the company’s HCM (Human Capital Management) and financial management solution. The top line surpassed the Zacks Consensus Estimate by $31 million.
In fiscal 2025, the company reported $8.45 billion in revenues compared with $7.26 billion in fiscal 2024.
The strong revenue growth accentuates the diversity and robustness of Workday’s product portfolio. In addition to several new customer wins, the company also witnessed several strategic expansions and contract renewals within its existing customer base.
In the fourth quarter, German companies like Bayer and Henkel opted to deploy Workday’s core HCM solutions. In healthcare, the company witnessed strong growth in ACV bookings. In education, various institutions such as Johns Hopkins University and Health System deployed the company’s Financial Management solutions to modernize the former’s human resource and finance processes.
Subscription services revenues contributed $2.04 billion, up from $1.76 billion in the year-ago quarter. The 16% growth was primarily driven by new ACV bookings. Net sales matched our estimate of $2 billion. At the end of the quarter, the 12-month subscription revenue backlog was $7.63 billion, up 15.2%, backed by higher contract renewals. The total subscription revenue backlog was $25.06 billion, up 19.7% year over year.
Revenues from professional services were $171 million compared with $162 million in the prior-year quarter. The top line beat our estimate of $154.5 million.
Other Details
Operating income during the quarter was $75 million compared with $79 million in the year-ago quarter. Non-GAAP operating income was $584 million, up from $462 million a year ago, with respective margins of 26.4% and 24%. The year-over-year improvement was backed by a combination of revenue outperformance, ongoing cost discipline and improved efficiencies across the company.
Cash Flow & Liquidity
During the fourth quarter of fiscal 2025, the company generated $1.11 billion of cash from operating activities compared with $996 million in the prior-year quarter. In fiscal 2025, the company generated $2.46 billion of cash from operations compared with $2.15 billion in fiscal 2024.
As of Jan. 31, 2025, it had cash and cash equivalents and marketable securities of $8.02 billion with long-term debt of $2.98 billion compared with respective figures of $7.8 billion and $2.98 billion.
Outlook
For the first quarter of fiscal 2026, Workday expects Subscription services revenues to be $2.05 billion, representing growth of 13%. Revenues from Professional services are estimated to be $165 million. Management expects non-GAAP operating margin to be 28%.
The company expects subscription revenue to increase roughly 5.5% sequentially in the second quarter. Management forecasts a slightly faster pace of year-over-year subscription revenue growth in the second half of fiscal 2026 relative to the first half, primarily driven by continued momentum across investment initiatives.
For fiscal 2026, the company expects subscription revenues to be $8.8 billion, suggesting growth of 14% year over year. Professional services revenues are expected to be about $700 million. The non-GAAP operating margin is projected to be 28%. Capital expenditure is approximated to be around $250 million, down slightly from fiscal 2025. Non-GAAP tax rate is expected to be 19%. Operating cash flow is forecasted to be $2.75 billion.
WDAY’s Zacks Rank
Workday currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases
Dell Technologies DELL is scheduled to release fourth-quarter fiscal 2025 earnings on Feb. 27. The Zacks Consensus Estimate for earnings is pegged at $2.53 per share, indicating growth of 15% from the year-ago figure.
Autodesk ADSK is scheduled to release fourth-quarter fiscal 2025 earnings on Feb. 27. The Zacks Consensus Estimate for earnings is pegged at $2.13 per share, indicating growth of 1.91% from the year-ago figure.
Globalstar GSAT is scheduled to release fourth-quarter 202 earnings on Feb. 27. The Zacks Consensus Estimate for earnings is pegged at a loss of 6 cents per share, indicating growth of 60% from the year-ago figure.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
