Workday, Inc. Q4 FY2025 earnings call

• Customer momentum: Welcomed new customers like Bayer, Henkel, etc. and expanded with Cisco, Mondelez. Over 11,000 customers globally. Strong in SLED, financial services, healthcare. 30% of customer expansions involved AI SKUs. Launched Agent System of Record.
• International: Strong in U.K., Germany, APAC; opened Osaka office. Leadership changes: Sayan Chakraborty retired, Gerrit Kazmaier joined as President of Product and Technology. Restructuring done for investment in product and technology.

In Q4, subscription revenue was $2.040 billion, up 16%. Full year FY '25 subscription revenue was $7.718 billion, up 17%. Professional services revenue in Q4 was $171 million, and $728 million for the full year. Total revenue in Q4 was $2.21 billion, up 15%, and $8.45 billion for the full year, up 16%. U.S. revenue in Q4 totaled $1.66 billion, up 15%, and international revenue was $556 million, growing 16%. 12-month subscription revenue backlog (cRPO) was $7.63 billion at the end of Q4, growing 15%. Non-GAAP operating income for Q4 was $584 million, a margin of 26.4%, and full-year non-GAAP operating income was $2.19 billion, margin 25.9%.

• FY '26 subscription revenue expected ~$8.8 billion, growth 14%. Q1 FY '26 subscription revenue ~$2.050 billion, growth 13%. cRPO expected to increase 14.5%-15.5% in Q1. Q2 subscription revenue expected to increase ~5.5% sequentially.
• FY '26 professional services revenue ~$700 million. Q1 professional services revenue $165 million.
• FY '26 non-GAAP operating margins ~28%. Q1 non-GAAP operating margin 28%, but GAAP impacted by restructuring.
• FY '26 operating cash flow ~$2.75 billion. Capital expenditures ~$250 million.

• Uncertainties in the federal government's IT modernization direction.
• Risks associated with AI agent sprawl in the enterprise if not managed properly.
• Macro headwinds in EMEA and other regions.

Q: Mark Murphy from JPMorgan asked about the vision and scale of investment in the Agent System of Record and lighthouse customers.

A: Carl Eschenbach and David Somers responded about the investment in AI and agent system, and interest from customers and partners.

Q: Kash Rangan from Goldman Sachs inquired about the health of the renewal base and AI upsell opportunities.

A: Carl Eschenbach and Zane Rowe discussed strong visibility in the existing customer base, AI SKU uptake, and good create and close momentum.

Q: Kirk Materne from Evercore ISI asked about agent revenue contribution to back-half and visibility into back-half.

A: Zane Rowe and Carl Eschenbach talked about AI SKU contributions, FX headwinds, and new agent rollouts.

Q: Brad Sills from Bank of America asked about international strength and go-to-market in Europe.

A: Carl Eschenbach and Zane Rowe mentioned strong performance in U.K. and Germany, and continued investment in international markets.

Q: Raimo Lenschow from Barclays asked about go-to-market change with Rob Enslin.

A: Carl Eschenbach stated smooth transition with Rob Enslin and tweaks to go-to-market motion.

Q: Michael Turrin from Wells Fargo asked about margin potential and reinvestment trade-offs.

A: Zane Rowe discussed balance between product investments and margin growth, focusing on AI and scaling the business.

Q: Brent Thill from Jefferies asked about federal government uncertainty.

A: Carl Eschenbach talked about federal government ERP modernization opportunity and past wins.

Q: Alex Zukin from Wolfe Research asked about TAM expansion via agents and margin calculus with RIF.

A: Carl Eschenbach and Zane Rowe explained agent monetization opportunity and margin framework considering investments.

Q: John DiFucci from Guggenheim asked about business momentum and Global Payroll Connect.

A: Carl Eschenbach and David Somers discussed partner investments, Global Payroll Connect, and platform momentum.

Q: Karl Keirstead from UBS asked about spending mix change from RIF.

A: Carl Eschenbach and Zane Rowe talked about investing in AI, international, go-to-market, and partner ecosystem.

Q: Chris Quintero from Morgan Stanley asked about the Salesforce partnership.

A: David Somers discussed ongoing partnership with Salesforce and early-stage progress.