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Workday (WDAY)
NASDAQ:WDAY
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Workday
(NASDAQ:WDAY)
75Outperform
Positive Factors
AI Capabilities
Workday is rapidly expanding its AI capabilities and product portfolio, showing early traction in AI adoption.
Earnings
WDAY delivered strong FQ4 results exceeding both subscription revenue and backlog estimates.
Negative Factors
Competition
Competition is fierce, software in transition, and the macro environment fragile.
Geographical Performance
Despite the strength in the UK and Germany, management noted EMEA continues to be a headwind to growth and is not baking in any major improvement in the segment.
Workday (WDAY) vs. S&P 500 (SPY)
Market Cap
$60.74B
Dividend YieldN/A
Average Volume (3M)2.47M
Price to Earnings (P/E)111.1
Beta (1Y)1.09
Revenue Growth16.94%
EPS Growth-62.24%
CountryUS
Employees20,482
SectorTechnology
Sector Strength40
IndustrySoftware - Application
Share Statistics
EPS (TTM)1.96
Shares Outstanding215,000,000
10 Day Avg. Volume2,290,442
30 Day Avg. Volume2,473,102
Financial Highlights & Ratios
PEG Ratio0.02
Price to Book (P/B)N/A
Price to Sales (P/S)7.86
Price to Cash Flow (P/CF)14.90
P/FCF Ratio14.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$312.07Price Target Upside43.72% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering33
Workday Business Overview & Revenue Model
Company DescriptionWorkday, Inc. is a leading provider of enterprise cloud applications for finance and human resources. Founded in 2005, the company offers a suite of applications designed to help organizations manage their financial and human capital resources more effectively. Workday's core products include solutions for human capital management, financial management, planning, and analytics across various industries, enabling businesses to make informed decisions through data-driven insights.
How the Company Makes MoneyWorkday primarily generates revenue through a subscription-based model, where customers pay recurring fees to access its cloud-based software solutions. The company's key revenue streams include subscriptions from its Human Capital Management (HCM) and Financial Management applications. Additional revenue is derived from professional services, such as consulting and training, which help clients implement and optimize Workday solutions. Strategic partnerships with leading technology firms and a strong focus on innovation and customer satisfaction also contribute to its financial success.
Workday Financial Statement Overview
Summary
Workday demonstrates strong revenue growth and efficient cash flow management, evidenced by a 16.2% increase in total revenue and a high operating cash flow to net income ratio. However, the decline in net profit margin and return on equity indicates potential areas for improvement.Income Statement
Workday demonstrated strong revenue growth with a 16.2% increase in Total Revenue over the TTM period. Gross Profit Margin is high at 80.2%, indicating effective cost management. However, the Net Profit Margin dropped to 6.2% from a higher 19.0% the previous year, suggesting increased expenses or reduced profitability. EBIT and EBITDA margins are relatively low at 4.8% and 5.0%, respectively, indicating room for improvement in operating efficiency.85
Very Positive
Balance Sheet
The company's balance sheet is solid, with a low Debt-to-Equity Ratio of 0.04, showing minimal reliance on debt financing. Return on Equity is healthy at 5.8%, but has decreased from the previous year, reflecting reduced net income. The Equity Ratio is robust at 50.3%, indicating a strong equity base relative to total assets.78
Positive
Cash Flow
Cash flow is a strong point for Workday, with a significant Free Cash Flow Growth Rate of 14.7%. The Operating Cash Flow to Net Income Ratio is high at 4.68, highlighting efficient cash generation from operations. Free Cash Flow to Net Income Ratio is also strong at 4.17, indicating robust cash flow relative to net earnings.90
Very Positive
| Breakdown | ||||
| Mar 2025 | Mar 2024 | Mar 2023 | Mar 2022 | Mar 2021 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 8.45B | 7.26B | 6.22B | 5.14B | 4.32B | Gross Profit |
| 7.18B | 5.49B | 4.50B | 3.71B | 3.12B | EBIT |
| 415.00M | 183.00M | -222.20M | -116.45M | -248.60M | EBITDA |
| 1.08B | 465.00M | 206.00M | 227.27M | 87.33M | Net Income Common Stockholders |
| 526.00M | 1.38B | -366.75M | 29.00M | -282.43M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 8.02B | 7.81B | 6.12B | 3.64B | 3.54B | Total Assets |
| 17.98B | 16.45B | 13.49B | 10.50B | 8.72B | Total Debt |
| 378.00M | 3.30B | 3.25B | 2.10B | 2.24B | Net Debt |
| -1.17B | 1.28B | 1.36B | 568.48M | 853.88M | Total Liabilities |
| 8.94B | 8.37B | 7.90B | 5.96B | 5.44B | Stockholders Equity |
| 9.03B | 8.08B | 5.59B | 4.54B | 3.28B |
| Cash Flow | Free Cash Flow | |||
| 2.19B | 1.91B | 1.30B | 1.38B | 1.01B | Operating Cash Flow |
| 2.46B | 2.15B | 1.66B | 1.65B | 1.27B | Investing Cash Flow |
| -1.78B | -1.75B | -2.51B | -1.61B | -1.24B | Financing Cash Flow |
| -1.15B | -268.00M | 1.20B | 110.25M | 625.05M |
Workday Technical Analysis
Negative
217.14
Price Trends
254.30
Negative
258.16
Negative
247.17
Negative
Market Momentum
-4.66
Positive
35.52
Neutral
16.26
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WDAY, the sentiment is Negative. The current price of 217.14 is below the 20-day moving average (MA) of 242.47, below the 50-day MA of 254.30, and below the 200-day MA of 247.17, indicating a bearish trend. The MACD of -4.66 indicates Positive momentum. The RSI at 35.52 is Neutral, neither overbought nor oversold. The STOCH value of 16.26 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for WDAY.
Workday Risk Analysis
Workday disclosed 39 risk factors in its most recent earnings report. Workday reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Workday Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $12.22B | 23.93 | 34.88% | 0.76% | 11.19% | 51.03% | |
75 Outperform | $60.74B | 111.05 | 6.15% | ― | 16.94% | -62.24% | |
75 Outperform | $10.21B | 44.90 | 20.49% | ― | 15.96% | 31.76% | |
68 Neutral | $40.76B | 16.92 | 31.13% | ― | 132.55% | 2681.72% | |
67 Neutral | $17.36B | ― | -1.62% | ― | 18.52% | 76.16% | |
65 Neutral | $4.03B | 421.99 | 2.11% | ― | 16.42% | ― | |
57 Neutral | $18.57B | 9.42 | -13.42% | 2.72% | 5.01% | -23.43% |
* Technology Sector Average
Performance Comparison
WDAY
Workday
217.14
-51.47
-19.16%
PAYC
Paycom
198.11
-2.17
-1.08%
PCTY
Paylocity
174.88
6.67
3.97%
BILL
Bill.com Holdings
39.54
-24.54
-38.30%
GRAB
Grab
3.73
0.43
13.03%
COIN
Coinbase Global
160.55
-96.44
-37.53%
Workday Earnings Call Summary
Earnings Call Date: Feb 25, 2025 | % Change Since: -14.92% | Next Earnings Date: May 22, 2025
Earnings Call Sentiment Positive
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.Highlights
Strong Q4 Performance
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%.
Record Number of Core Financial Wins
In Q4, Workday reported a record number of core financials wins, with significant expansions in financial services and healthcare, contributing to strong momentum.
AI Monetization and Growth
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 Expansion
Despite macro headwinds, international revenue grew 16% in Q4, with strong performance in the UK and Germany, and new wins in APAC.
Successful Partner Ecosystem Growth
More than 15% of net new ACV in Q4 was sourced through partners, up from more than 10% last quarter.
Future Outlook and Guidance
Workday expects FY '26 subscription revenue of approximately $8.8 billion, growth of 14%, with an expected non-GAAP operating margin of approximately 28%.
Lowlights
Restructuring and Associated Costs
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.
Macro Challenges in EMEA
Continued macro headwinds were noted in EMEA, affecting growth despite strong individual country performances.
Company 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.Workday Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Workday Appoints Gerrit Kazmaier as New President
Positive
Feb 25, 2025
On February 20, 2025, Workday announced the appointment of Gerrit Kazmaier as President, Product and Technology, effective March 10, 2025. Kazmaier, who brings extensive experience from Google Cloud and SAP, will lead Workday’s innovation strategy and product and technology organization. This leadership change follows the retirement of Sayan Chakraborty, who will continue as an advisor until December 2025. Kazmaier’s appointment is expected to drive Workday’s AI and cloud transformation initiatives, reinforcing its position as a leader in enterprise software innovation.
Business Operations and Strategy
Workday Announces Major Restructuring and Growth Strategy
Negative
Feb 5, 2025
On February 5, 2025, Workday announced a restructuring plan aimed at prioritizing investments and fostering durable growth, which involves eliminating approximately 1,750 positions, accounting for 8.5% of its workforce. This move is part of a broader strategy to adapt to market demands by investing in strategic areas like AI and platform development, while incurring $230 million to $270 million in related charges. The company plans to complete these actions by the second quarter of fiscal 2026, with implications for both its workforce and operational footprint.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.