Workday’s third quarter saw management attribute growth to continued adoption of its AI-driven products, robust customer wins across key industries, and expansion into international markets. Despite exceeding Wall Street’s revenue and profit expectations, the market responded negatively, which management linked to investor concerns about the durability of subscription growth and the integration of recent acquisitions. CEO Carl Eschenbach highlighted that over three-quarters of net new deals included AI capabilities and that momentum in large enterprise and public sector wins was a primary driver of the quarter’s results.
Is now the time to buy WDAY? Find out in our full research report (it’s free for active Edge members).
Workday (WDAY) Q3 CY2025 Highlights:
- Revenue: $2.43 billion vs analyst estimates of $2.42 billion (12.6% year-on-year growth, 0.7% beat)
- Adjusted EPS: $2.32 vs analyst estimates of $2.17 (6.7% beat)
- Adjusted Operating Income: $692 million vs analyst estimates of $679.2 million (28.5% margin, 1.9% beat)
- Operating Margin: 10.6%, up from 7.6% in the same quarter last year
- Billings: $2.46 billion at quarter end, up 19.2% year on year
- Market Capitalization: $56.11 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Workday’s Q3 Earnings Call
- Mark Murphy (JPMorgan) asked about the slowdown in AI startup adoption and whether Workday is seeing increased demand for its own AI products. CEO Carl Eschenbach emphasized that enterprises are now prioritizing trusted platforms like Workday due to concerns over data quality and security.
- Kirk Materne (Evercore ISI) questioned how customer headcount reductions impact revenue. Eschenbach clarified that while headcount is up year-over-year, Workday offsets reductions through cross-selling and minimum contract clauses, with CFO Zane Rowe noting these factors are just one part of growth.
- Keith Weiss (Morgan Stanley) inquired about the incremental uplift from AI product adoption. President Garrett Katzmeyer explained that AI upsell can be significant, citing examples where new AI recruiting modules generate 2.5 times the revenue of legacy offerings.
- Michael Turrin (Wells Fargo) asked about early feedback on Paradox and Sana and their impact on the product/financial model. Management reported strong demand and seamless integration, stating that these acquisitions are already contributing meaningfully to the pipeline.
- Alex Zukin (Wolfe Research) probed whether management’s confidence in 2027 growth guidance has increased post-acquisitions. Eschenbach and Rowe reiterated their conviction, highlighting ongoing momentum from both organic innovation and acquired products.
Catalysts in Upcoming Quarters
In the coming quarters, key factors to watch include (1) the pace of AI product adoption and how quickly new agents and features gain traction across customer segments, (2) the integration and revenue contribution from recent acquisitions like Sana, Paradox, and the anticipated Pipedream deal, and (3) execution on international and public sector expansion, particularly the uptake of the EU sovereign cloud and progress with U.S. federal contracts. The balance between investment in growth and margin expansion will remain a key signpost of execution quality.
Workday currently trades at $213.67, down from $235 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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