Workday, Inc. Q3 FY2026 earnings call

• Workday achieved solid Q3 results with 15% subscription revenue growth and 28% non-GAAP operating margin.
• Customers see Workday as an advantage by unifying HR and finance on an intelligent platform, with AI driving adaptability and better decisions.
• Q3 customer highlights included growth across industries, segments, and geographies, with HCM adding new customers and core financials driving full suite adoption.
• AI is a key focus: over 75% of core customers use Workday Illuminate AI, driving over 1 billion AI actions; acquisitions like Paradox, Sana, and Pipedream enhance AI capabilities.
• International performance was strong with solid results in EMEA, APAC, and Japan, including new cloud initiatives and offices.
• Partners played a critical role, with over 20% of net new ACV sourced from partners.

Workday delivered solid Q3 results with 15% subscription revenue growth and a 28% non-GAAP operating margin. Subscription revenue in the third quarter was $2.244 billion. Twelve-month subscription revenue backlog (CRPO) was $8.21 billion at the end of Q3, increasing 17.6%. Total subscription revenue backlog at the end of the quarter was $25.96 billion, up 17%, and gross revenue retention rates remained healthy at 97%.

• Q4 subscription revenue expected to be $2.355 billion (15% growth), FY '26 subscription revenue $8.828 billion (14% growth).
• CRPO expected to increase 15-16% in Q4, including ~0.25 growth from Sana acquisition.
• Non-GAAP operating margin expected at least 28.5% in Q4 and ~29% for full year.
• Operating cash flow outlook increased to $2.9 billion, free cash flow to $2.7 billion.
• Targeting subscription revenue CAGR of 12%-15% through FY '28 with margin expansion.

• Dependencies on successful integration of acquisitions.
• Market uncertainties affecting customer spending.
• Potential impact of economic conditions on customers' ability to invest in technology.

Q: Mark Murphy asked about AI disruption and Workday Extend.

A: Carl Eschenbach responded about data quality, integrity, and security being key for enterprise adoption, with Workday's trust and data set making it preferred.

Q: Kirk Materne asked about customer headcount and ACV growth.

A: Carl Eschenbach and Zane Rowe discussed net headcount growth, cross/sell upsell, and new solutions driving ACV.

Q: Keith Weiss asked about AI solution uplift.

A: Garrett Katzmeyer discussed AI solutions adding 1.5% ARR growth, with examples like HiredScore.

Q: Michael Turrin asked about Paradox and margin trade-offs.

A: Carl Eschenbach and Zane Rowe talked about Paradox's early success and margin management.

Q: Brent Thill asked about Paradox go-to-market.

A: Carl Eschenbach discussed selling Paradox into existing and new customers.

Q: Karl Keirstead asked about CRPO normalization.

A: Zane Rowe discussed CRPO components and confidence in Q4 growth.

Q: Brad Sills asked about AI strategy.

A: Carl Eschenbach and Garrett Katzmeyer talked about AI as new UI, unique data and context, and partnerships.

Q: Brad Zelnick asked about Workday Go and AI for down market.

A: Carl Eschenbach and Garrett Katzmeyer discussed Workday Go's AI features for mid-market.

Q: Alex Zukin asked about next year's guide and M&A.

A: Carl Eschenbach and Zane Rowe discussed inorganic growth contribution and M&A pace.

Q: Raimo Lenschow asked about international growth.

A: Carl Eschenbach talked about strong international performance across regions.

Q: Kash Rangan asked about AI-native HCM.

A: Garrett Katzmeyer explained Workday's AI stack with data, semantics, and business processes.