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Workday kicked-off FY26 with an above top end of guidance growth performance. For the three months ended 30th April, the software provider reported a 12.6% yoy increase in turnover to $2.24bn with subscription revenues rising by 13.4% from the same period last year to $2.06bn. Q1 operating income was down 40% yoy to $64m as the result of restructuring expenses of £166m. Non-GAAP operating income, however, increased by 31% yoy to $677m.
The company ended the first quarter with a total subscription revenue backlog almost a fifth higher yoy at $24.62bn. The period saw notable industry growth in the technology & media and manufacturing verticals with both sectors crossing $1 billion in annual recurring revenue. Workday also continued its international expansion during Q1 by going live on the AWS U.K. public cloud and announcing a new location for its EMEA headquarters in Dublin.
Acknowledging the uncertainties surrounding the current trading environment, Workday is anticipating a weakening client spending on its human capital management software. This did not prevent the company from reiterating the fiscal 2026 subscription revenue guidance of $8.8bn issued in February (see here) Workday also upped its projection for FY26 non-GAAP operating margin from c.28% to approximately 28.5%.
Neither the strength of Q1 numbers nor the positive statement regarding the trajectory for the remainder of the FY were sufficient to reassure Workday investors. There remain concerns that competition in the human capital and financial management software market is increasing, which could lead to downward pricing pressure. In after-hours trading following the publication of the company’s latest quarterlies, Workday’s shares dipped by almost 19% against yesterday’s closing price.
Posted by: Duncan Aitchison at 08:28
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