01—Abstract
Summary
Summary of the 8-K filed November 25, 2025. Cited figures are marked; the original filing is the authoritative source.
Workday's fiscal 2026 third quarter (ended October 31, 2025) showed continued top-line acceleration and strong profitability.
Total revenues rose 12.6% year-over-year to $2.432 billiona, and subscription revenues grew 14.6% to $2.244 billion. GAAP operating income was $259 million (10.7% margin), up from $165 million, while non-GAAP operating income reached $692 million (28.5% margin) versus $569 million a year earlier. Operating cash flow was $588 million and free cash flow was $550 million, both up sharply from the prior year.
Twelve-month subscription revenue backlog grew 17.6% to $8.21 billionb, and total subscription backlog rose 17.0% to $25.96 billion, figures that include the recently closed Paradox acquisition. Management raised full-year fiscal 2026 subscription revenue guidance to $8.828 billion (14.4% growth per the release's outlook section; the CFO quote cites 14%) and reaffirmed non-GAAP operating margin of approximately 29%. Q4 guidance calls for subscription revenue of $2.355 billion (15.5% growth) and non-GAAP operating margin of at least 28.5%.
Capital returns were meaningful, with about 3.4 million Class A shares repurchased for $803 millionc in the quarter, and cash, equivalents and marketable securities totaled $6.84 billion at quarter-end. Investors should weigh the strong non-GAAP profitability and cash generation against GAAP results, which remain much lower because of share-based compensation (about $376 million in the quarter) and restructuring charges (about $172 million year-to-date under the Fiscal 2026 Restructuring Plan).
Acquisitions (Paradox, Sana) and the expanding goodwill balance, which rose to $4.26 billiond from $3.48 billion, also increased the company's acquisition footprint. Quarterly diluted GAAP EPS was $0.94 versus non-GAAP EPS of $2.32.
02—Key points
Key Highlights
- Total revenues of $2.432 billion, up 12.6% YoY; subscription revenues of $2.244 billion, up 14.6% YoY
- GAAP operating margin of 10.7% ($259M) vs. 7.6% a year ago; non-GAAP operating margin of 28.5% ($692M) vs. 26.3%
- Operating cash flow of $588M and free cash flow of $550M, up from $406M and $359M respectively
- 12-month subscription revenue backlog of $8.21B (+17.6%); total subscription backlog of $25.96B (+17.0%), including Paradox
- FY2026 subscription revenue guidance raised to $8.828B; non-GAAP operating margin guidance of ~29% maintained
- Repurchased ~3.4M shares for $803M in the quarter; cash and marketable securities of $6.84B at October 31, 2025
- Year-to-date restructuring charges of $172M under the Fiscal 2026 Restructuring Plan (~7.5% workforce reduction); acquisition activity lifted goodwill to $4.26B
03—Questions
Frequently Asked Questions
Did Workday beat expectations and raise guidance?
The filing does not include consensus estimates, so a beat cannot be confirmed from this document. Management did update full-year fiscal 2026 subscription revenue guidance to $8.828 billion and reaffirmed a non-GAAP operating margin of about 29%. Q4 guidance calls for subscription revenue of $2.355 billion and a non-GAAP operating margin of at least 28.5%. Investors should compare these against prior guidance and analyst consensus.
Why is there such a large gap between GAAP and non-GAAP profitability?
Non-GAAP figures exclude share-based compensation ($376M in the quarter, about 15.5% of revenue), employer payroll taxes on stock transactions, amortization of acquisition intangibles, acquisition-related costs, and restructuring costs. Share-based compensation is the largest item and is a real recurring cost to shareholders, so investors should assess profitability on both bases.
How are the recent acquisitions affecting the business?
Workday closed Paradox (candidate experience AI) and Sana (enterprise knowledge AI) this quarter. Business combinations used $974M of cash in the quarter, goodwill rose to $4.26B from $3.48B, and acquisition-related intangibles increased to $549M. Backlog figures include Paradox, so future organic growth comparisons will require adjustment.
Is Workday's balance sheet and capital allocation strong?
Cash, equivalents and marketable securities total $6.84B, against $2.99B of noncurrent debt. Treasury stock rose to $2.71B from $1.31B, reflecting $1.39B of buybacks year-to-date, and unearned revenue declined seasonally to $3.87B. Free cash flow of $1.56B year-to-date covers buybacks, but investors should watch whether repurchases keep pace with share-count dilution from equity compensation.
04—Continue