WDAY 10-Q
Workday, Inc. (WDAY)
10-Q
2026-08-27
For: 2026-07-31
View Original
Added on
August 28, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
For the quarterly period ended July 31, 2026
OR
| Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
For transition period from to
Commission File Number: 001-35680
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S Employer Identification No.) | |||||||
(Address of principal executive offices, including zip code)
(925 ) 951-9000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| (Nasdaq Global Select Market) | ||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 25, 2026, there were approximately 196 million shares of the registrant’s Class A common stock and 45 million shares of the registrant’s Class B common stock outstanding.
Workday, Inc.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Workday, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)
| July 31, 2026 | January 31, 2026 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities | |||||||||||
| Trade and other receivables, net | |||||||||||
| Deferred costs | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Deferred costs, noncurrent | |||||||||||
| Acquisition-related intangible assets, net | |||||||||||
| Deferred tax assets | |||||||||||
| Goodwill | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Accrued compensation | |||||||||||
| Unearned revenue | |||||||||||
| Operating lease liabilities | |||||||||||
| Debt, current | |||||||||||
| Total current liabilities | |||||||||||
| Debt, noncurrent | |||||||||||
| Unearned revenue, noncurrent | |||||||||||
| Operating lease liabilities, noncurrent | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | |||||||||||
| Additional paid-in capital | |||||||||||
| Treasury stock | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained earnings (accumulated deficit) | ( | ||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See Notes to Condensed Consolidated Financial Statements
3
Workday, Inc.
Condensed Consolidated Statements of Operations
(in millions, except number of shares which are reflected in thousands and per share data)
(unaudited)
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Subscription services | $ | $ | $ | $ | |||||||||||||||||||
| Professional services | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
Costs and expenses (1): | |||||||||||||||||||||||
| Costs of subscription services | |||||||||||||||||||||||
| Costs of professional services | |||||||||||||||||||||||
| Product development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Restructuring | |||||||||||||||||||||||
| Total costs and expenses | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Other income, net | |||||||||||||||||||||||
| Income before provision for (benefit from) income taxes | |||||||||||||||||||||||
| Provision for (benefit from) income taxes | ( | ( | |||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Net income per share, basic | $ | $ | $ | $ | |||||||||||||||||||
| Net income per share, diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted-average shares used to compute net income per share, basic | |||||||||||||||||||||||
| Weighted-average shares used to compute net income per share, diluted | |||||||||||||||||||||||
| (1) Costs and expenses include share-based compensation expense as follows: | |||||||||||||||||||||||
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Costs of subscription services | $ | $ | $ | $ | |||||||||||||||||||
| Costs of professional services | |||||||||||||||||||||||
| Product development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Restructuring | |||||||||||||||||||||||
| Total share-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
4
Workday, Inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Net change in foreign currency translation adjustment | ( | ( | |||||||||||||||||||||
Net change in unrealized gains (losses) on available-for-sale debt securities, net of tax provision (benefit) of $( | ( | ( | ( | ||||||||||||||||||||
Net change in unrealized gains (losses) on cash flow hedges, net of tax provision (benefit) of $ | ( | ( | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
5
Workday, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in millions, except number of shares which are reflected in thousands)
(unaudited)
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Common stock: | |||||||||||||||||||||||
| Balance, beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Issuance of common stock under employee equity plans | |||||||||||||||||||||||
| Shares withheld related to net share settlement of equity awards | |||||||||||||||||||||||
| Balance, end of period | |||||||||||||||||||||||
| Additional paid-in capital: | |||||||||||||||||||||||
| Balance, beginning of period | |||||||||||||||||||||||
| Issuance of common stock under employee equity plans | |||||||||||||||||||||||
| Shares withheld related to net share settlement of equity awards | ( | ( | ( | ( | |||||||||||||||||||
| Share-based compensation | |||||||||||||||||||||||
| Balance, end of period | |||||||||||||||||||||||
| Treasury stock: | |||||||||||||||||||||||
| Balance, beginning of period | ( | ( | ( | ( | |||||||||||||||||||
| Common stock repurchases under share repurchase programs | ( | ( | ( | ( | |||||||||||||||||||
| Balance, end of period | ( | ( | ( | ( | |||||||||||||||||||
| Accumulated other comprehensive income (loss): | |||||||||||||||||||||||
| Balance, beginning of period | ( | ( | ( | ||||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Balance, end of period | ( | ( | ( | ( | |||||||||||||||||||
| Retained earnings (accumulated deficit): | |||||||||||||||||||||||
| Balance, beginning of period | ( | ( | ( | ( | |||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Balance, end of period | ( | ( | |||||||||||||||||||||
| Total stockholders’ equity | $ | $ | $ | $ | |||||||||||||||||||
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Common stock shares: | |||||||||||||||||||||||
| Balance, beginning of period | |||||||||||||||||||||||
| Issuance of common stock under employee equity plans | |||||||||||||||||||||||
| Shares withheld related to net share settlement of equity awards | ( | ( | ( | ( | |||||||||||||||||||
| Common stock repurchased | ( | ( | ( | ( | |||||||||||||||||||
| Balance, end of period | |||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
6
Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
| Six Months Ended July 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation expense | |||||||||||
| Amortization of deferred costs | |||||||||||
| Non-cash lease expense | |||||||||||
| Net losses on investments | |||||||||||
| Accretion of discounts on marketable debt securities, net | ( | ( | |||||||||
| Deferred income taxes | ( | ||||||||||
| Asset impairments | |||||||||||
| Other | ( | ||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Trade and other receivables, net | |||||||||||
| Deferred costs | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Accrued expenses and other liabilities | ( | ( | |||||||||
| Unearned revenue | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of marketable securities | ( | ( | |||||||||
| Maturities of marketable securities | |||||||||||
| Sales of marketable securities | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Purchases of non-marketable equity and other investments | ( | ( | |||||||||
| Sales of non-marketable equity and other investments | |||||||||||
| Other | |||||||||||
| Net cash provided by (used in) investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Repurchases of common stock | ( | ( | |||||||||
| Proceeds from issuance of common stock from employee equity plans | |||||||||||
| Taxes paid related to net share settlement of equity awards | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes | |||||||||||
| Net decrease in cash, cash equivalents, and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents, and restricted cash at the beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash at the end of period | $ | $ | |||||||||
See Notes to Condensed Consolidated Financial Statements
7
| Six Months Ended July 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Supplemental cash flow data: | |||||||||||
| Cash paid for interest, net of amounts capitalized | $ | $ | |||||||||
| Cash paid for income taxes, net of refunds | |||||||||||
| Non-cash investing and financing activities: | |||||||||||
| Purchases of property and equipment, accrued but not paid | |||||||||||
| Repurchases of common stock, including excise tax, accrued but not paid | |||||||||||
Taxes related to net share settlement of equity awards, accrued but not paid | |||||||||||
| As of July 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Reconciliation of cash, cash equivalents, and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash included in Prepaid expenses and other current assets | |||||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | |||||||||
See Notes to Condensed Consolidated Financial Statements
8
Workday, Inc.
Notes to Condensed Consolidated Financial Statements
As used in this report, the terms “Workday,” “registrant,” “we,” “us,” and “our” mean Workday, Inc. and its subsidiaries unless the context indicates otherwise.
Amounts in this report may not recalculate due to rounding. Year-over-year comparisons, operating margin, and net income per share are calculated using unrounded data.
Note 1. Overview and Basis of Presentation
Description of the Business
Workday is a leading enterprise AI platform that operates at the core of human resources, finance, and information technology, providing solutions for human capital management, financial management, spend management, and planning. Workday couples AI with the context, guardrails, and trusted processes that run the enterprise, delivering both AI that assists with work and agents that are capable of driving measurable outcomes for our customers.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the results of Workday, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of our management, the information contained herein reflects all adjustments necessary for a fair presentation of Workday’s financial position, results of operations, stockholders’ equity, and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the three and six months ended July 31, 2026, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2027. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, filed with the SEC on March 6, 2026.
Certain prior period amounts reported in our unaudited condensed consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, judgments, and assumptions include, but are not limited to, the identification of distinct performance obligations for revenue recognition, the determination of the period of benefit for deferred commissions, the realizability of deferred tax assets, the measurement of uncertain tax positions, the fair value and useful lives of assets acquired and liabilities assumed through business combinations, the measurement of share-based compensation expense, and the valuation of non-marketable equity investments. Actual results could differ from those estimates, judgments, and assumptions, and such differences could be material to our condensed consolidated financial statements.
Segment Information
We operate as a single operating and reportable segment: cloud applications. Although we offer a variety of enterprise cloud solutions to a diverse global customer base, we operate in one operating segment because our business activities are managed on a consolidated basis, our service offerings all operate on the Workday platform and are deployed in a similar manner, and our Chief Operating Decision Maker (“CODM”), who is our Chief Executive Officer, allocates resources and assesses performance based upon discrete financial information at the consolidated level.
9
Our CODM assesses performance and decides how to allocate resources based on Net income, as reported on the Condensed Consolidated Statements of Operations. Net income is used to evaluate the overall profitability of the business and to guide decisions on how to invest in and grow the business. Our CODM also reviews Total assets, as reported on the Condensed Consolidated Balance Sheets, and Capital expenditures, as reported on the Condensed Consolidated Statements of Cash Flows. Significant segment expenses include the costs and expenses presented on the Condensed Consolidated Statements of Operations. Other segment items include Other income, net and Provision for (benefit from) income taxes.
Note 2. Significant Accounting Policies and Accounting Standards
Significant Accounting Policies
Concentrations of Risk and Significant Customers
Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, debt securities, derivative instruments, and trade and other receivables. Our deposits exceed federally insured limits.
No customer individually accounted for more than 10% of trade and other receivables, net as of July 31, 2026, or January 31, 2026. No customer individually accounted for more than 10% of total revenues during the three and six months ended July 31, 2026, or 2025.
Other than the United States (“U.S.”), no country individually accounted for more than 10% of total revenues during the three and six months ended July 31, 2026, or 2025.
In order to reduce the risk of disruption of our cloud applications, we host our applications in data centers operated by third parties located in the U.S., Europe, Canada, and the Asia-Pacific region. These data centers include third-party hosted infrastructure, including Amazon Web Services and Google Cloud, and co-location data centers. Procedures are in place to restore services in the event of disruption at one of these data center facilities. Even with these procedures for disaster recovery in place, our cloud applications could be significantly interrupted during the implementation of the procedures to restore services.
Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires the disclosure of additional information about specific expense categories in the notes to the financial statements. This ASU is effective for annual periods beginning in our fiscal 2028, and interim periods beginning in the first quarter of our fiscal 2029, with early adoption permitted. The updated standard allows for adoption on a prospective or retrospective basis. We are currently evaluating the effect the updated standard will have on our financial statement disclosures.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the internal-use software costs capitalization model by eliminating stage-based rules and replacing them with a principles-based framework to be more aligned with modern software development practices. This ASU is effective for interim and annual reporting periods beginning in the first quarter of our fiscal 2029, with early adoption permitted as of the beginning of an annual reporting period. Entities may adopt the guidance using prospective application, retrospective application, or a modified transition approach. We are currently evaluating the effect the updated standard will have on our consolidated financial statements and related disclosures.
10
Note 3. Investments
Debt Securities
As of July 31, 2026, debt securities consisted of the following (in millions):
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Aggregate Fair Value | ||||||||||||||||||||
| U.S. treasury securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| U.S. agency obligations | |||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| Supranational securities | |||||||||||||||||||||||
| Total debt securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Included in Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Included in Marketable securities | $ | $ | $ | ( | $ | ||||||||||||||||||
As of January 31, 2026, debt securities consisted of the following (in millions):
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Aggregate Fair Value | ||||||||||||||||||||
| U.S. treasury securities | $ | $ | $ | $ | |||||||||||||||||||
| U.S. agency obligations | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| Supranational securities | |||||||||||||||||||||||
| Total debt securities | $ | $ | $ | $ | |||||||||||||||||||
| Included in Cash and cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Included in Marketable securities | $ | $ | $ | $ | |||||||||||||||||||
The following table presents the fair values of debt securities as of July 31, 2026, by remaining contractual maturity (in millions). Actual maturities may differ from contractual maturities because borrowers may have certain prepayment conditions.
| Due within 1 year | $ | ||||
| Due 1 year through 5 years | |||||
Due 5 years through 10 years | |||||
Due after 10 years | |||||
| Total debt securities | $ | ||||
We classify our debt securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We consider all debt securities as funds available for use in current operations, including those with maturity dates beyond one year, and therefore classify these securities as current assets on the Condensed Consolidated Balance Sheets. Debt securities included in Marketable securities on the Condensed Consolidated Balance Sheets consist of securities with original maturities at the time of purchase greater than three months, and the remaining securities are included in Cash and cash equivalents.
Interest receivable of $24 million and $33 million was included in on the Condensed Consolidated Balance Sheets as of July 31, 2026, and January 31, 2026, respectively.
As of July 31, 2026, and January 31, 2026, unrealized losses on our debt securities were not material. We did not
11
Equity Investments
Equity investments consisted of the following (in millions):
| Condensed Consolidated Balance Sheets Location | July 31, 2026 | January 31, 2026 | |||||||||||||||||||||
| Money market funds | Cash and cash equivalents | $ | $ | ||||||||||||||||||||
| Non-marketable equity investments measured using the measurement alternative | Other assets | ||||||||||||||||||||||
| Total equity investments | $ | $ | |||||||||||||||||||||
Non-Marketable Equity Investments Measured Using the Measurement Alternative
Non-marketable equity investments measured using the measurement alternative include investments in privately held companies without readily determinable fair values in which we do not own a controlling interest or exercise significant influence. These investments are recorded at cost and are adjusted for observable transactions for same or similar securities of the same issuer or impairment events. The carrying values for our non-marketable equity investments are summarized below (in millions):
| July 31, 2026 | January 31, 2026 | ||||||||||
| Total initial cost | $ | $ | |||||||||
| Cumulative net unrealized gains | |||||||||||
| Carrying value | $ | $ | |||||||||
During the three and six months ended July 31, 2026, and 2025, there were no material gains or losses recorded on our non-marketable equity investments.
Note 4. Fair Value Measurements
We use a fair value hierarchy that requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Other inputs that are directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs that are supported by little or no market activity.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of July 31, 2026 (in millions):
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| U.S. treasury securities | $ | $ | $ | $ | |||||||||||||||||||
| U.S. agency obligations | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| Supranational securities | |||||||||||||||||||||||
| Money market funds | |||||||||||||||||||||||
| Foreign currency derivative assets | |||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency derivative liabilities | $ | $ | $ | $ | |||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
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The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of January 31, 2026 (in millions):
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| U.S. treasury securities | $ | $ | $ | $ | |||||||||||||||||||
| U.S. agency obligations | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Asset-backed securities | |||||||||||||||||||||||
| Supranational securities | |||||||||||||||||||||||
| Money market funds | |||||||||||||||||||||||
| Foreign currency derivative assets | |||||||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency derivative liabilities | $ | $ | $ | $ | |||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
Non-Marketable Equity Investments Measured at Fair Value on a Non-Recurring Basis
Non-marketable equity investments that have been remeasured due to an observable event or impairment are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold. For further information, see Note 3, Investments.
Fair Value Measurements of Other Financial Instruments
We carry our debt at face value less unamortized debt discount and issuance costs on the Condensed Consolidated Balance Sheets and present the fair value for disclosure purposes only. The fair values of all of our debt obligations are categorized as Level 2 financial instruments. For further information on the fair values of our debt and the inputs used in the calculations, see Note 10, Debt.
Note 5. Deferred Costs
Deferred costs, which consist of deferred sales commissions, were $974 million and $940 million as of July 31, 2026, and January 31, 2026, respectively. Amortization expense for the deferred costs was $83 million and $72 million for the three months ended July 31, 2026, and 2025, respectively, and $162 million and $140 million for the six months ended July 31, 2026, and 2025, respectively. There was no
Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following (in millions):
| July 31, 2026 | January 31, 2026 | ||||||||||
| Computers, equipment, and software | $ | $ | |||||||||
| Buildings | |||||||||||
| Leasehold improvements | |||||||||||
| Furniture, fixtures, and transportation equipment | |||||||||||
| Land and land improvements | |||||||||||
| Property and equipment, gross | |||||||||||
| Less: accumulated depreciation and amortization | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Depreciation expense totaled $56 million and $59 million for the three months ended July 31, 2026, and 2025, respectively, and $111 million and $121 million for the six months ended July 31, 2026, and 2025, respectively.
13
There were no 34 million for the six months ended July 31, 2025, related to certain property and equipment as a result of restructuring activities. For further information, see Note 19, Restructuring.
Note 7. Acquisition-Related Intangible Assets, Net
Acquisition-related intangible assets consisted of the following as of July 31, 2026 (in millions):
| Gross Carrying Value | Accumulated Amortization | Net Book Value | |||||||||||||||
| Developed technology | $ | $ | ( | $ | |||||||||||||
| Customer relationships | ( | ||||||||||||||||
| Backlog | ( | ||||||||||||||||
| Trade name | ( | ||||||||||||||||
| Total acquisition-related intangible assets | $ | $ | ( | $ | |||||||||||||
Acquisition-related intangible assets consisted of the following as of January 31, 2026 (in millions):
| Gross Carrying Value | Accumulated Amortization | Net Book Value | |||||||||||||||
| Developed technology | $ | $ | ( | $ | |||||||||||||
| Customer relationships | ( | ||||||||||||||||
| Backlog | ( | ||||||||||||||||
| Trade name | ( | ||||||||||||||||
| Total acquisition-related intangible assets | $ | $ | ( | $ | |||||||||||||
Amortization expense related to acquisition-related intangible assets was $34 million and $21 million for the three months ended July 31, 2026, and 2025, respectively, and $70 million and $42 million for the six months ended July 31, 2026, and 2025, respectively.
As of July 31, 2026, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in millions):
| Fiscal Period: | |||||
| Remainder of 2027 | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Thereafter | |||||
| Total future estimated amortization expense | $ | ||||
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Note 8. Other Assets
Other assets consisted of the following (in millions):
| July 31, 2026 | January 31, 2026 | ||||||||||
| Non-marketable equity and other investments | $ | $ | |||||||||
| Contract assets | |||||||||||
| Prepayments for goods and services | |||||||||||
| Technology patents and other intangible assets, net | |||||||||||
| Derivative assets | |||||||||||
| Deposits | |||||||||||
| Other | |||||||||||
| Total other assets | $ | $ | |||||||||
Technology patents and other intangible assets with estimable useful lives are amortized on a straight-line basis. As of July 31, 2026, our future estimated amortization expense was as follows (in millions):
| Fiscal Period: | |||||
| Remainder of 2027 | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Thereafter | |||||
| Total future estimated amortization expense | $ | ||||
Note 9. Derivative Instruments
We conduct business on a global basis in multiple foreign currencies, subjecting Workday to foreign currency exchange risk. To mitigate this risk, we utilize derivative hedging contracts as described below. We do not enter into any derivatives for trading or speculative purposes.
Our foreign currency contracts are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.
Cash Flow Hedges
We enter into foreign currency forward contracts to hedge a portion of our forecasted revenue and expense transactions (“cash flow hedges”). We designate these forward contracts as cash flow hedging instruments since the accounting criteria for such designation has been met.
As of July 31, 2026, and January 31, 2026, the notional values of the cash flow hedges that we held to buy U.S. dollars in exchange for other currencies were $3.3 billion and $3.0 billion, respectively, and the notional values of the cash flow hedges that we held to sell U.S. dollars in exchange for other currencies were $812 million and $874 million, respectively. All contracts had maturities of less than 42 months.
15
Non-Designated Hedges
We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities (“non-designated hedges”). These forward contracts are intended to offset foreign currency gains or losses associated with the underlying monetary assets and liabilities and are recorded on the Condensed Consolidated Balance Sheets at fair value. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair value of these forward contracts are recorded in Other income, net on the Condensed Consolidated Statements of Operations in the period incurred. Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows.
As of July 31, 2026, and January 31, 2026, the notional values of the non-designated hedges that we held to buy U.S. dollars in exchange for other currencies were $445 million and $442 million, respectively, and the notional values of the non-designated hedges that we held to sell U.S. dollars in exchange for other currencies were $656 million and $565 million, respectively.
The fair values of outstanding derivative instruments were as follows (in millions):
| Condensed Consolidated Balance Sheets Location | July 31, 2026 | January 31, 2026 | |||||||||||||||
| Derivative assets: | |||||||||||||||||
| Cash flow hedges | Prepaid expenses and other current assets | $ | $ | ||||||||||||||
| Cash flow hedges | Other assets | ||||||||||||||||
| Non-designated hedges | Prepaid expenses and other current assets | ||||||||||||||||
| Total derivative assets | $ | $ | |||||||||||||||
| Derivative liabilities: | |||||||||||||||||
| Cash flow hedges | Accrued expenses and other current liabilities | $ | $ | ||||||||||||||
| Cash flow hedges | Other liabilities | ||||||||||||||||
| Non-designated hedges | Accrued expenses and other current liabilities | ||||||||||||||||
| Total derivative liabilities | $ | $ | |||||||||||||||
The effect of cash flow hedges on the Condensed Consolidated Statements of Operations was as follows (in millions):
| Three Months Ended July 31, | ||||||||||||||||||||||||||
| Condensed Consolidated Statements of Operations Location | 2026 | 2025 | ||||||||||||||||||||||||
| Total | Gains (losses) related to cash flow hedges | Total | Gains (losses) related to cash flow hedges | |||||||||||||||||||||||
| Revenues | $ | $ | ( | $ | $ | |||||||||||||||||||||
| Costs and expenses | ( | |||||||||||||||||||||||||
| Six Months Ended July 31, | ||||||||||||||||||||||||||
| Condensed Consolidated Statements of Operations Location | 2026 | 2025 | ||||||||||||||||||||||||
| Total | Gains (losses) related to cash flow hedges | Total | Gains (losses) related to cash flow hedges | |||||||||||||||||||||||
| Revenues | $ | $ | ( | $ | $ | |||||||||||||||||||||
| Costs and expenses | ||||||||||||||||||||||||||
16
Pre-tax gains (losses) associated with cash flow hedges were as follows (in millions):
| Condensed Consolidated Statements of Operations and Statements of Comprehensive Income Locations | Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| Gains (losses) recognized in OCI | Net change in unrealized gains (losses) on cash flow hedges | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||
| Gains (losses) reclassified from AOCI into income (effective portion) | Revenues | ( | ( | ||||||||||||||||||||||||||
| Gains (losses) reclassified from AOCI into income (effective portion) | Costs and expenses | ( | |||||||||||||||||||||||||||
Losses associated with non-designated hedges were as follows (in millions):
| Condensed Consolidated Statements of Operations Location | Three Months Ended July 31, | Six Months Ended July 31, | |||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| Losses related to non-designated hedges | Other income, net | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
We manage our exposure to counterparty risk by entering into foreign currency forward contracts with a diversified group of nine major financial institutions and by actively monitoring outstanding positions. We are subject to netting agreements with all of these counterparties, under which we are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. After consideration of these netting arrangements, the total net settlement amount related to our foreign currency forward contracts is an asset position of $12 million and a liability position of $62 million as of July 31, 2026, and an asset position of $1 million and a liability position of $128 million as of January 31, 2026.
Although legally enforceable master netting arrangements exist between Workday and each counterparty, it is our policy to present the derivatives gross on the Condensed Consolidated Balance Sheets. Our foreign currency forward contracts are not subject to any credit contingent features or collateral requirements.
Note 10. Debt
Outstanding debt consisted of the following (in millions):
| July 31, 2026 | January 31, 2026 | ||||||||||
| 2027 Notes | $ | $ | |||||||||
| 2029 Notes | |||||||||||
| 2032 Notes | |||||||||||
| Total principal amount | |||||||||||
| Less: unamortized debt discount and issuance costs | ( | ( | |||||||||
| Net carrying amount | |||||||||||
| Less: debt, current | ( | ||||||||||
| Debt, noncurrent | $ | $ | |||||||||
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As of July 31, 2026, our future principal payments for the outstanding debt were as follows (in millions):
| Fiscal Period: | |||||
| Remainder of 2027 | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Thereafter | |||||
| Total principal amount | $ | ||||
Senior Notes
In fiscal 2023, we issued $3.0 billion aggregate principal amount of senior notes, consisting of $1.0 billion aggregate principal amount of 3.500 % notes due April 1, 2027 (“2027 Notes”), $750 million aggregate principal amount of 3.700 % notes due April 1, 2029 (“2029 Notes”), and $1.25 billion aggregate principal amount of 3.800 % notes due April 1, 2032 (“2032 Notes,” and together with the 2027 Notes and the 2029 Notes, “Senior Notes”). Interest is payable semi-annually in arrears on April 1 and October 1 of each year.
The Senior Notes are unsecured obligations and rank equally with all existing and future unsecured and unsubordinated indebtedness of Workday. We may redeem the Senior Notes in whole or in part at any time or from time to time, at specified redemption dates and prices. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Senior Notes under specified terms. The indenture governing the Senior Notes also includes covenants (including certain limited covenants restricting our ability to incur certain liens and enter into certain sale and leaseback transactions), events of default, and other customary provisions. As of July 31, 2026, and January 31, 2026, we were in compliance with all covenants associated with the Senior Notes.
We incurred debt discount and issuance costs of approximately $27 million in connection with the Senior Notes offering, which were allocated on a pro rata basis to the 2027 Notes, 2029 Notes, and 2032 Notes. The debt discount and issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the contractual term of each arrangement. The effective interest rates on the 2027 Notes, 2029 Notes, and 2032 Notes, which are calculated as the contractual interest rates adjusted for the debt discount and issuance costs, are 3.67 %, 3.82 %, and 3.90 %, respectively.
As of both July 31, 2026, and January 31, 2026, the total estimated fair value of the Senior Notes was $2.9
Credit Agreement
In fiscal 2023, we entered into a credit agreement (“2022 Credit Agreement”) which provides for a revolving credit facility in an aggregate principal amount of $1.0 billion. As of July 31, 2026, and January 31, 2026, we had no 0.000 % to 0.500 % or a secured overnight financing rate (“SOFR”) plus 10 basis points, plus a margin of 0.750 % to 1.500 %, with such margin being determined based on our consolidated leverage ratio or debt rating. We are also obligated to pay an ongoing commitment fee on undrawn amounts.
The 2022 Credit Agreement contains customary representations, warranties, and affirmative and negative covenants, including a financial covenant, events of default, and indemnification provisions in favor of the lenders. The negative covenants include restrictions on the incurrence of liens and indebtedness, certain merger transactions, and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires that we do not exceed a maximum leverage ratio of 3.50 :1.00, subject to a step-up to 4.50 :1.00 at our election for a certain period following an acquisition. As of July 31, 2026, and January 31, 2026, we were in compliance with all covenants included in the 2022 Credit Agreement.
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Interest Expense on Debt
The following table sets forth total interest expense recognized related to our debt (in millions):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Contractual interest expense | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost related to amortization of debt discount and issuance costs | |||||||||||||||||||||||
| Less: capitalized interest expense | ( | ( | |||||||||||||||||||||
| Total interest expense | $ | $ | $ | $ | |||||||||||||||||||
Note 11. Leases
We have entered into operating lease agreements for our office space, data centers, and other property and equipment. Operating lease right-of-use assets were $680 million and $719 million as of July 31, 2026, and January 31, 2026, respectively, and operating lease liabilities were $783 million and $834 million as of July 31, 2026, and January 31, 2026, respectively.
The components of operating lease expense were as follows (in millions):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Short-term lease cost | |||||||||||||||||||||||
| Variable lease cost | |||||||||||||||||||||||
| Total operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
Supplemental cash flow information related to our operating leases was as follows (in millions):
| Six Months Ended July 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash paid for operating lease liabilities | $ | $ | |||||||||
| Operating lease right-of-use assets obtained in exchange for new operating lease liabilities | |||||||||||
Other information related to our operating leases was as follows:
| July 31, 2026 | January 31, 2026 | ||||||||||
| Weighted average remaining lease term (in years) | |||||||||||
| Weighted average discount rate | % | % | |||||||||
As of July 31, 2026, maturities of operating lease liabilities were as follows (in millions):
| Fiscal Period: | |||||
| Remainder of 2027 | $ | ||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| 2031 | |||||
| Thereafter | |||||
| Total lease payments | |||||
| Less: imputed interest | ( | ||||
| Total operating lease liabilities | $ | ||||
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Note 12. Commitments and Contingencies
Purchase Obligations
Our purchase obligations are primarily related to agreements for third-party hosted infrastructure platforms, data center equipment and software, business technology software and support, and sales and marketing activities. During the six months ended July 31, 2026, there were no material changes outside the ordinary course of business to our non-cancelable purchase obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.
Legal Matters
We are a party to various legal proceedings and claims that arise in the ordinary course of business. We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. In our opinion, as of July 31, 2026, there was not at least a reasonable possibility that we had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.
Note 13. Stockholders’ Equity
Common Stock
As of July 31, 2026, there were 196 million shares of Class A common stock and 45 million shares of Class B common stock outstanding. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 10 votes per share. Each share of Class B common stock can be converted into a share of Class A common stock at any time at the option of the holder.
Share Repurchase Programs
We repurchase shares of our Class A common stock under share repurchase programs authorized by our Board of Directors. Under these programs, we may repurchase shares of our Class A common stock through open market purchases, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, or by other means, in accordance with applicable securities laws and other restrictions. The timing and total amount of share repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase programs have no expiration date, may be suspended or discontinued at any time, and do not obligate us to acquire any amount of Class A common stock.
Share repurchase programs authorized by our Board of Directors that were in effect during the three and six months ended July 31, 2026, and 2025, were as follows (in millions):
Authorization Date | Amount Authorized | Authorization Completion Date | ||||||||||||
August 2024 | Q3 fiscal 2026 | |||||||||||||
May 2025 | Q4 fiscal 2026 | |||||||||||||
| September 2025 | Q2 fiscal 2027 | |||||||||||||
The table below sets forth information regarding repurchase of shares under our share repurchase programs (in millions, except number of shares which are reflected in thousands, and per share data):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Total number of shares repurchased | |||||||||||||||||||||||
Average price paid per share (1) | $ | $ | $ | $ | |||||||||||||||||||
Amount repurchased (1) | $ | $ | $ | $ | |||||||||||||||||||
(1)Amounts exclude excise tax and commissions.
All repurchases were made in open market transactions. As of July 31, 2026, our share repurchase programs were fully completed with no authorization remaining. In August 2026, our Board of Directors authorized the repurchase of up to an additional $4.0 billion of our outstanding shares of Class A common stock. For further information, see Note 20, Subsequent Event.
20
Employee Equity Plans
In June 2026, our stockholders approved the amendment and restatement of the 2022 Equity Incentive Plan (the “A&R 2022 Plan”), which increased the total number of shares of common stock reserved for issuance by 20 million. Forfeited shares and shares withheld in connection with the net share settlement of restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) are added back to the reserves of the A&R 2022 Plan. As of July 31, 2026, 21 million shares of Class A common stock were available for future grants under the A&R 2022 Plan.
In June 2026, our stockholders approved the amendment and restatement of the 2012 Employee Stock Purchase Plan (“A&R ESPP”), which increased the total number of shares of common stock reserved for issuance by 7 million. Under the A&R ESPP, eligible employees are granted options to purchase shares at the lower of 85 % of the fair market value of the stock at the time of grant or 85 % of the fair market value at the time of exercise. Options to purchase shares are granted twice yearly on or about June 1 and December 1, and are exercisable on or about the succeeding November 30 and May 31, respectively. As of July 31, 2026, 8 million shares of Class A common stock were available for issuance under the A&R ESPP.
Restricted Stock Units and Performance-Based Restricted Stock Units
The Stock Plans provide for the issuance of RSUs and PSUs to employees and non-employees. RSUs generally vest over four years . Activity during the six months ended July 31, 2026, was as follows (in thousands, except per share data):
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
| Outstanding balance as of January 31, 2026 | $ | ||||||||||
| Granted - restricted stock units | |||||||||||
Granted - performance-based restricted stock units (1) | |||||||||||
| Vested | ( | ||||||||||
Forfeited and canceled (2) | ( | ||||||||||
Outstanding balance as of July 31, 2026 | |||||||||||
(1)Includes approximately 73 thousand PSUs granted to executives. The PSUs are subject to vesting based on the achievement of annual performance-based conditions determined at the beginning of each fiscal year. The PSUs will vest at the end of a or three-year service period, with the number of shares vesting ranging from 0 % to 150 % of the target, based on the average attainment of the annual performance conditions.
(2)Includes shares withheld in connection with the net share settlement of RSUs and PSUs.
As of July 31, 2026, there was a total of $3.2 billion in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs and PSUs, which is expected to be recognized over a weighted-average period of approximately three years .
Market-Based Restricted Stock Units
In the first quarter of fiscal 2027, 0.5 million shares of market-based RSUs were granted to Mr. Bhusri in connection with his appointment as CEO that vest based on appreciation of the price of our Class A common stock over a multi-year period and upon continued service (“PVU Award”). We estimated the fair value of the PVU Award on the grant date using the Monte Carlo simulation model with the following assumptions: (i) expected volatility of 40 %, (ii) risk-free interest rate of 3.72 %, and (iii) total performance period of five years . The weighted-average grant date fair value of the PVU Award was $107.22 per share. We recognize expense for the PVU Award over the requisite service period of five years using the accelerated attribution method. Provided that the requisite service is rendered, the total fair value of the PVU Award at the date of grant is recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the achievement of the specified market criteria.
As of July 31, 2026, there was a total of $48 million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately five years .
21
Note 14. Contract Balances and Performance Obligations
Contract Balances
Contract assets and unearned revenue balances were as follows (in millions):
| Condensed Consolidated Balance Sheets Location | July 31, 2026 | January 31, 2026 | |||||||||||||||
Contract assets: | |||||||||||||||||
Contract assets, current | Trade and other receivables, net | $ | $ | ||||||||||||||
Contract assets, noncurrent | Other assets | ||||||||||||||||
Total contract assets | $ | $ | |||||||||||||||
| Unearned revenue: | |||||||||||||||||
Unearned revenue, current (1) | Unearned revenue | $ | $ | ||||||||||||||
Unearned revenue, noncurrent | Unearned revenue, noncurrent | ||||||||||||||||
Total unearned revenue | $ | $ | |||||||||||||||
(1)Included in this balance are amounts related to professional services that are subject to cancellation and pro-rated refund rights of $75 million and $89 million as of July 31, 2026, and January 31, 2026, respectively.
Revenues of $1.9 billion and $1.7 billion were recognized during the three months ended July 31, 2026, and 2025, respectively, that were included in the unearned revenue balances as of April 30, 2026, and 2025, respectively. Revenues of $3.4 billion and $3.1 billion were recognized during the six months ended July 31, 2026, and 2025, respectively, that were included in the unearned revenue balances as of January 31, 2026, and 2025, respectively.
Transaction Price Allocated to the Remaining Performance Obligations
As of July 31, 2026, approximately $27.4 billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize revenues on approximately $9.0 billion and $16.0 billion of these remaining performance obligations over the next 12 and 24 months, respectively, with the balance recognized thereafter. Revenues from remaining performance obligations for professional services contracts as of July 31, 2026, were not material.
Note 15. Other Income, Net
Other income, net consisted of the following (in millions):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Interest income | $ | $ | $ | $ | |||||||||||||||||||
Interest expense (1) | ( | ( | ( | ( | |||||||||||||||||||
| Other | ( | ( | ( | ||||||||||||||||||||
Total other income, net | $ | $ | $ | $ | |||||||||||||||||||
(1)Interest expense primarily includes the contractual interest expense of our debt obligations and the related non-cash interest expense attributable to amortization of the debt discount and issuance costs, net of amounts capitalized. For further information, see Note 10, Debt.
Note 16. Income Taxes
We reported an income tax benefit of $172 million and an income tax provision of $111 million for the six months ended July 31, 2026, and 2025, respectively. The income tax benefit for the six months ended July 31, 2026, was primarily attributable to an intra-entity transfer of certain intellectual property rights as part of an internal legal entity restructuring. In connection with the transaction, we recognized $374 million of deferred tax assets related to deductible temporary differences associated with certain tax attributes transferred at carryover basis. This benefit was partially offset by income tax expense primarily attributable to earnings in the U.S. and profitable foreign jurisdictions. The income tax provision for the six months ended July 31, 2025, was primarily attributable to earnings in the U.S. and profitable foreign jurisdictions.
We are subject to income tax audits in the U.S. and foreign jurisdictions. We record liabilities related to uncertain tax positions and believe that we have provided adequate reserves for income tax uncertainties in all open tax years. Due to our history of tax losses, all years remain open to tax audit.
22
We periodically evaluate the realizability of our deferred tax assets based on all available evidence, both positive and negative, such as historic results, future reversals of existing deferred tax liabilities, and projected future taxable income, as well as prudent and feasible tax-planning strategies. The assessment requires significant judgment and is performed in each of the applicable jurisdictions. As of July 31, 2026, we continue to maintain valuation allowances related to tax credits in certain state jurisdictions and net operating loss in certain foreign jurisdictions. Given our current and anticipated future earnings in a certain foreign jurisdiction, there is a reasonable possibility that we may release a significant portion of the valuation allowance related to our deferred tax assets in that jurisdiction, although the timing of any such release is uncertain. Any such release would decrease income tax expense in the period in which it is recorded. We will continue to evaluate the need for valuation allowances for our deferred tax assets.
Note 17. Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share is computed by giving effect to all potentially dilutive shares of common stock, including outstanding share-based awards consisting primarily of unvested RSUs and ESPP obligations. We determine the dilutive effect of outstanding share-based awards using the treasury stock method.
The holders of our Class A and Class B common stock have identical liquidation and dividend rights but different voting rights. Accordingly, we present net income per share for Class A and Class B common stock together as the two-class method does not result in a difference.
The following table presents the calculation of basic and diluted net income per share (in millions, except number of shares, which are reflected in thousands, and per share data):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 (1) | 2026 | 2025 (1) | ||||||||||||||||||||
| Net income per share, basic: | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares outstanding, basic | |||||||||||||||||||||||
| Net income per share, basic | $ | $ | $ | $ | |||||||||||||||||||
| Net income per share, diluted: | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares outstanding, basic | |||||||||||||||||||||||
| Dilutive effect of share-based awards | |||||||||||||||||||||||
| Weighted-average shares outstanding, diluted | |||||||||||||||||||||||
| Net income per share, diluted | $ | $ | $ | $ | |||||||||||||||||||
(1)The prior period net income per share for Class A and Class B common stock has been presented together to conform to current period presentation, which had no impact on our previously reported basic or diluted net income per share.
The computation of diluted net income per share does not include the effect of the following potentially outstanding weighted-average shares of common stock because their effect would have been anti-dilutive (in thousands):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
Total weighted-average shares related to outstanding share-based awards | |||||||||||||||||||||||
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Note 18. Geographic Information
Revenues
We sell our subscription contracts and related services in two primary geographical markets: to customers located in the U.S. and to customers located outside of the U.S. Revenues by geography are generally based on the address of the customer as specified in our customer subscription agreement. The following table sets forth revenues by geographic area (in millions):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| U.S. | $ | $ | $ | $ | |||||||||||||||||||
| Other countries | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
Long-Lived Assets
Our long-lived assets are attributed to a country based on the physical location of the assets. We define long-lived assets as property and equipment and operating lease right-of-use assets because many of these assets cannot be readily moved and are relatively illiquid, subjecting them to geographic risk. None of our other assets are subject to significant geographic risk. Aggregate Property and equipment, net and Operating lease right-of-use assets by geographic area were as follows (in millions):
| July 31, 2026 | January 31, 2026 | ||||||||||
| U.S. | $ | $ | |||||||||
| Ireland | |||||||||||
| Other countries | |||||||||||
| Total long-lived assets | $ | $ | |||||||||
Note 19. Restructuring
Fiscal 2027 Restructuring Plan
In February 2026, we announced a restructuring plan (“Fiscal 2027 Restructuring Plan”) intended to better align our people and resources to our highest priorities in fiscal 2027. The plan resulted in the reduction of approximately 2 % of our workforce, and the impairment of certain office space and long-lived assets. The activities associated with this plan were substantially completed in the first quarter of fiscal 2027, with no material remaining liability as of July 31, 2026. The remaining liability was $41 million as of January 31, 2026.
We incurred total charges of $135 million in connection with this plan in fiscal 2026. The charges consisted of $55 million related to employee transition, severance payments, employee benefits, and share-based compensation, and $80 million related to impairments of office space and certain long-lived assets. During the three and six months ended July 31, 2026, we did not record any material charges under this plan.
Fiscal 2026 Restructuring Plan
In February 2025, we announced a restructuring plan (“Fiscal 2026 Restructuring Plan”) intended to prioritize our investments and continue advancing our ongoing focus on durable growth. This plan resulted in the reduction of approximately 7.5 % of our workforce and the exit of certain owned office space. The activities associated with this plan were substantially completed in the second quarter of fiscal 2026, with no remaining liability as of January 31, 2026.
We incurred total charges of $233 million in connection with this plan, consisting of $196 million related to employee transition, severance payments, employee benefits, and share-based compensation, and $37 million related to an impairment of office space. During the three and six months ended July 31, 2025, we recorded charges under this plan of $1 million and $167 million, respectively.
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Note 20. Subsequent Event
In August 2026, our Board of Directors authorized a new share repurchase program under which we may purchase up to an additional $4.0 billion of our outstanding shares of Class A common stock. We may repurchase shares of our Class A common stock through open market purchases, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, or by other means, in accordance with applicable securities laws and other restrictions. The timing and total amount of share repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. This share repurchase program has no expiration date, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, which are subject to safe harbor protection under the Private Securities Litigation Reform Act of 1995. All statements contained in this report other than statements of historical fact, including statements regarding our future financial condition and operating results, business strategy and plans, and objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “seek,” “plan,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations, beliefs, and projections about future events, conditions, and trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, assumptions, and changes in circumstances that are difficult to predict and many of which are outside of our control, such as those arising from the impact of recent macroeconomic events, including geopolitical instability, increased tariffs, elevated inflation and energy prices, and fluctuating interest rates and foreign currency exchange rates, as well as those described in the “Risk Factors” section, which we encourage you to read carefully. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
In light of these risks, uncertainties, assumptions, and potential changes in circumstances, the future events, conditions, and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied by the forward-looking statements. Accordingly, you should not rely upon any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activities, performance, or achievements. We are under no duty to update any of these forward-looking statements after the date of this report or to conform these statements to actual results or revised expectations, except as required by applicable law. If we do update any forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this report.
Overview
Workday is the enterprise AI platform that operates at the core of human resources, finance, and information technology. We deliver cloud-based, AI-powered applications for human capital management (“HCM”), financial management, spend management, and planning. Our diverse customer base includes emerging, medium-sized, and large global organizations within numerous industries, including financial services, government, healthcare, higher education, hospitality, manufacturing, professional and business services, retail, technology and media, and transportation. Workday helps customers deliver better employee experiences, increase productivity, improve operational efficiencies, and provide insights for faster, data-driven decision-making.
We have achieved significant growth since our inception in 2005, when we pioneered HCM in the cloud. As a result of our innovation and commitment to customer success, today we are a Fortune 500 company with more than 11,500 customers around the world. As we continue to grow, we are focused on driving sustainable, long-term subscription revenue growth by adding new customers and expanding our relationships with existing customers through increased adoption of our suite of solutions. Central to this effort is investing in strategic growth areas including developing innovative AI solutions, expanding internationally, growing our partner ecosystem, deepening our presence in industry verticals and the medium enterprise market, and exploring strategic acquisitions to complement our organic innovation. Our investments across these targeted growth areas may require additional costs, but we remain committed to optimizing resource allocation and realizing a return on our investments. Over time, we believe these investments will support revenue growth and a more scalable business.
We are focused on expanding our operating margin by driving scale and building efficiencies across the business through investments in people, processes, and systems. As a result of our focus on expanding operating margin, we expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues will decrease over the longer term as we grow our revenues and invest in a disciplined manner to support our long-term growth objectives.
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Financial Results Overview
The following table provides an overview of our key metrics (in millions, except percentages, basis points, and headcount data):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||
| Total revenues | $ | 2,649 | $ | 2,348 | 13 | % | $ | 5,191 | $ | 4,588 | 13 | % | |||||||||||||||||||||||
| Subscription services revenues | $ | 2,471 | $ | 2,169 | 14 | % | $ | 4,826 | $ | 4,228 | 14 | % | |||||||||||||||||||||||
| GAAP operating income | $ | 313 | $ | 248 | 26 | % | $ | 651 | $ | 287 | 126 | % | |||||||||||||||||||||||
Non-GAAP operating income (1) | $ | 824 | $ | 680 | 21 | % | $ | 1,633 | $ | 1,358 | 20 | % | |||||||||||||||||||||||
| GAAP operating margin | 11.8 | % | 10.6 | % | 124 bps | 12.5 | % | 6.3 | % | 627 bps | |||||||||||||||||||||||||
Non-GAAP operating margin (1) | 31.1 | % | 29.0 | % | 212 bps | 31.5 | % | 29.6 | % | 186 bps | |||||||||||||||||||||||||
| Operating cash flows | $ | 1,215 | $ | 1,073 | 13 | % | |||||||||||||||||||||||||||||
Free cash flows (1) | $ | 1,076 | $ | 1,009 | 7 | % | |||||||||||||||||||||||||||||
As of July 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
| Total subscription revenue backlog | $ | 27,403 | $ | 25,375 | 8 | % | |||||||||||||||||||||||||||||
| 12-month subscription revenue backlog | $ | 9,034 | $ | 7,910 | 14 | % | |||||||||||||||||||||||||||||
| Headcount | 20,896 | 19,517 | 7 | % | |||||||||||||||||||||||||||||||
| July 31, 2026 | January 31, 2026 | Change | |||||||||||||||||||||||||||||||||
| Cash, cash equivalents, and marketable securities | $ | 3,403 | $ | 5,443 | (37) | % | |||||||||||||||||||||||||||||
(1)See “Non-GAAP Financial Measures” below for further information.
Impact of Current Economic and Market Conditions
Recent macroeconomic events and evolving market conditions are impacting aspects of our business including customer behavior and the way we market, price, and sell our solutions. External factors such as increased tariffs, elevated inflation and energy prices, the evolving legislative and regulatory environment, and fluctuating interest rates and foreign currency exchange rates, as well as geopolitical instability and conflicts, continue to impact the global economy and create uncertainty, volatility, and disruption of financial markets. As a result, we have experienced, and may continue to experience, a moderation of revenue growth rates due to deal scrutiny and the lengthening of certain sales cycles, particularly within net new opportunities, as well as reduced growth in headcount-level commitments upon renewals of existing customers. The extended sales cycles are particularly evident in the government, higher education, and healthcare industries which are tied to federal funding. Further, we have provided, and may continue to provide, certain customers with more flexible payment terms. Additionally, to address the rapidly changing technology market and AI landscape, we are addressing shifts in customer buying behavior and demand through actions such as new pricing models and sales and marketing strategies, all of which are dependent on our ability to optimally price our solutions, customer adoption and usage, and our costs to deliver our solutions. For further discussion of the potential impacts of recent macroeconomic events and market conditions on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.
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Components of Results of Operations
Revenues
We derive our revenues from subscription services and professional services. Subscription services revenues primarily consist of fees that provide customers access to our cloud applications, with standard and enhanced customer support. Professional services revenues include fees for deployment services, optimization services, and training.
Subscription services revenues accounted for approximately 93% of our total revenues for the three and six months ended July 31, 2026, and represented 97% of our total unearned revenue as of July 31, 2026. Subscription services revenues are driven primarily by the number of customers, the number of workers at each customer, the specific applications subscribed to by each customer, and the price of our applications.
The mix of applications to which each customer subscribes can affect our financial performance due to price differentials in our applications. Pricing for our applications varies based on many factors, including the complexity and maturity of the application and its acceptance in the marketplace. New products or services offerings by competitors in the future could also impact the mix and pricing of our offerings.
Subscription services revenues are recognized over time as services are delivered, beginning on the date our service is made available to the customer. Our subscription contracts typically have a term of three years or longer and are generally noncancelable. We generally invoice our customers annually in advance for subscription services. We may provide certain customers flexible payment terms and the timing of revenue recognition may differ from the timing of invoicing to our customers.
Our professional services consulting engagements are billed on a time and materials or fixed price basis. We generally invoice our customers as the work is performed for time and materials arrangements, and in advance for fixed price arrangements. For contracts billed on a time and materials basis, revenues are recognized over time as the professional services are performed. For contracts billed on a fixed price basis, revenues are recognized over time based on the proportion of the professional services performed. In some cases, we supplement our consulting teams by subcontracting resources from our service partners and deploying them on customer engagements. As the Workday-related consulting practices of our partner firms continue to develop, we expect these partners to increasingly contract directly with our subscription customers for services engagements.
Subscription Revenue Backlog
Our subscription revenue backlog, which is also referred to as remaining performance obligations for subscription contracts, represents contracted subscription services revenues that have not yet been recognized and includes billed and unbilled amounts. Subscription revenue backlog may fluctuate from period-to-period due to a number of factors, including the timing of renewals and overall renewal rates, new business growth, average contract duration, industry and product mix, business combinations, and seasonality.
Costs and Expenses
Costs of subscription services revenues. Costs of subscription services revenues consist primarily of expenses associated with hosting our applications and delivering standard and enhanced customer support services. These costs include employee-related expenses, expenses related to data center capacity and third-party hosted infrastructure, depreciation of our data center equipment, amortization of certain acquisition-related intangible assets, and allocated overhead.
Costs of professional services revenues. Costs of professional services revenues consist primarily of employee-related expenses associated with these services, subcontractor expenses, travel expenses, and allocated overhead.
Product development expenses. Product development expenses consist primarily of employee-related expenses associated with our efforts to add new features and applications, increase functionality, and enhance the ease of use of our cloud applications, as well as expenses related to third-party hosted infrastructure, and allocated overhead.
Sales and marketing expenses. Sales and marketing expenses consist primarily of employee-related expenses, sales commissions, marketing programs, travel expenses, amortization of certain acquisition-related intangible assets, and allocated overhead. Marketing programs consist of advertising, events, corporate communications, brand awareness, brand ambassador campaigns, and product marketing activities. Sales commissions are considered incremental costs of obtaining a contract with a customer. Sales commissions for new revenue contracts are capitalized and amortized on a straight-line basis over a period of benefit that we have determined to be five years.
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General and administrative expenses. General and administrative expenses consist primarily of employee-related expenses for our finance and accounting, legal, human resources, and information systems personnel, as well as professional services fees, allocated overhead, and other corporate expenses.
We allocate shared costs, such as facilities, IT, benefits, and recruiting, primarily based on headcount. As such, overhead expenses are reflected in each of the costs and expenses categories.
Restructuring expenses. Restructuring expenses are associated with a formal restructuring program and consist of charges related to workforce reductions, including employee transition, severance payments, and share-based compensation, as well as charges associated with the closure of facilities and other exit and disposal activities.
Results of Operations
Revenues
Our total revenues were as follows (in millions, except percentages):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||||||||||||||
| 2026 | 2025 | % Change | 2026 | 2025 | % Change | ||||||||||||||||||||||||||||||
| Subscription services | $ | 2,471 | $ | 2,169 | 14 | % | $ | 4,826 | $ | 4,228 | 14 | % | |||||||||||||||||||||||
| Professional services | 178 | 179 | (1) | % | 365 | 360 | 2 | % | |||||||||||||||||||||||||||
| Total revenues | $ | 2,649 | $ | 2,348 | 13 | % | $ | 5,191 | $ | 4,588 | 13 | % | |||||||||||||||||||||||
Total revenues were $2.6 billion for the three months ended July 31, 2026, compared to $2.3 billion for the prior year period, an increase of $301 million, or 13%. Subscription services revenues were $2.5 billion for the three months ended July 31, 2026, compared to $2.2 billion for the prior year period, an increase of $302 million, or 14%. Approximately 60% of the increase in subscription services revenues was attributable to expansion within our customers that existed as of the beginning of the comparable prior year period, and the remaining 40% was attributable to customers added after the beginning of the comparable prior year period. Professional services revenues were $178 million for the three months ended July 31, 2026, compared to $179 million for the prior year period, a decrease of $1 million, or 1%. Professional services revenues remained relatively flat as we continued to expand and leverage our service providers.
Total revenues were $5.2 billion for the six months ended July 31, 2026, compared to $4.6 billion for the prior year period, an increase of $603 million, or 13%. Subscription services revenues were $4.8 billion for the six months ended July 31, 2026, compared to $4.2 billion for the prior year period, an increase of $597 million, or 14%. Approximately 60% of the increase in subscription services revenues was attributable to expansion within our customers that existed as of the beginning of the prior fiscal year, and the remaining 40% was attributable to customers added after the beginning of the prior fiscal year. Professional services revenues were $365 million for the six months ended July 31, 2026, compared to $360 million for the prior year period, an increase of $6 million, or 2%. Professional services revenues remained relatively flat as we continued to expand and leverage our service providers.
Gross Revenue Retention Rate
Our growth in subscription services revenues attributable to existing customers is further reflected by our gross revenue retention rate of approximately 97% as of July 31, 2026. Our gross revenue retention rate measures the percentage of recurring revenue retained from existing customers and is calculated by taking total annual recurring revenue (“ARR”) of our customers as of the corresponding prior period-end and comparing that to ARR from that same set of customers as of the current period-end. The metric takes into account recurring revenues lost to product or customer churn but does not account for additional revenue earned from add-ons or net expansions, which include volume and price adjustments. Our high gross revenue retention rate demonstrates our ability to maintain our existing customer base and drive strong overall customer satisfaction.
Our gross revenue retention rate is based on ARR, which represents the annualized value of active subscription contracts as of the end of each period. Each subscription contract is annualized by dividing the total contract value by the number of days in the contract term and then multiplying by 365. We exclude certain subscription contracts from the calculation, including contracts with terms less than one year that are distinct from our core product offering, such as contracts for tenants which are used for implementation and testing. To the extent that we are negotiating a renewal with a customer after the expiration of the subscription, ARR is only adjusted if the customer churns. We calculate ARR on a constant currency basis using exchange rates set at the beginning of each fiscal year.
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Subscription Revenue Backlog
As of July 31, 2026, our total subscription revenue backlog was $27.4 billion, and 12-month subscription revenue backlog was $9.0 billion. As of July 31, 2025, our total subscription revenue backlog was $25.4 billion, and 12-month subscription revenue backlog was $7.9 billion. The increase in subscription revenue backlog was primarily driven by expansion within our existing customer base, sales to new customers, and timing of renewals for existing customers.
Costs and Expenses
Our costs and expenses were as follows (in millions):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Costs of subscription services | $ | 436 | $ | 370 | $ | 848 | $ | 720 | |||||||||||||||
| Costs of professional services | 216 | 212 | 408 | 399 | |||||||||||||||||||
| Product development | 747 | 660 | 1,451 | 1,322 | |||||||||||||||||||
| Sales and marketing | 706 | 641 | 1,386 | 1,264 | |||||||||||||||||||
| General and administrative | 231 | 216 | 447 | 429 | |||||||||||||||||||
Restructuring | 0 | 1 | 0 | 167 | |||||||||||||||||||
| Total costs and expenses | $ | 2,336 | $ | 2,100 | $ | 4,540 | $ | 4,301 | |||||||||||||||
Total costs and expenses were $2.3 billion for the three months ended July 31, 2026, compared to $2.1 billion for the prior year period, an increase of $236 million, or 11%. The increase in total costs and expenses included increases of $126 million in employee-related expenses, $43 million in facilities and IT-related expenses, $32 million in third-party hosted infrastructure expenses, $14 million in amortization of acquisition-related intangible assets, and $11 million in amortization of deferred sales commissions.
Total costs and expenses were $4.5 billion for the six months ended July 31, 2026, compared to $4.3 billion for the prior year period, an increase of $240 million, or 6%. The increase in total costs and expenses included increases of $185 million in employee-related expenses, $82 million in third-party hosted infrastructure expenses, $80 million in facilities and IT-related expenses, $29 million in amortization of acquisition-related intangible assets, and $22 million in amortization of deferred sales commissions, offset by a reduction of $167 million in restructuring expenses.
Costs of Subscription Services
Costs of subscription services were $436 million for the three months ended July 31, 2026, compared to $370 million for the prior year period, an increase of $66 million, or 18%. The increase in costs of subscription services included increases of $33 million in third-party hosted infrastructure expenses, $14 million in employee-related expenses, $9 million in amortization of acquisition-related intangible assets, and $9 million in facilities and IT-related expenses.
Costs of subscription services were $848 million for the six months ended July 31, 2026, compared to $720 million for the prior year period, an increase of $128 million, or 18%. The increase in costs of subscription services included increases of $80 million in third-party hosted infrastructure expenses, $20 million in amortization of acquisition-related intangible assets, $17 million in employee-related expenses, and $11 million in facilities and IT-related expenses.
We expect costs of subscription services will continue to increase in absolute dollars as we improve and expand our technical operations infrastructure, including third-party hosted infrastructure, and as we grow our enhanced customer support services.
Costs of Professional Services
Costs of professional services were $216 million for the three months ended July 31, 2026, compared to $212 million for the prior year period, an increase of $4 million, or 2%. Costs of professional services remained relatively flat.
Costs of professional services were $408 million for the six months ended July 31, 2026, compared to $399 million for the prior year period, an increase of $9 million, or 2%. Costs of professional services remained relatively flat.
We expect costs of professional services as a percentage of total revenues to continue to decline as we expand and leverage our service partners to deploy our applications and focus on growing our subscription revenues.
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Product Development
Product development expenses were $747 million for the three months ended July 31, 2026, compared to $660 million for the prior year period, an increase of $88 million, or 13%. The increase in product development expenses included increases of $71 million in employee-related expenses and $22 million in facilities and IT-related expenses.
Product development expenses were $1.5 billion for the six months ended July 31, 2026, compared to $1.3 billion for the prior year period, an increase of $130 million, or 10%. The increase in product development expenses included increases of $102 million in employee-related expenses and $38 million in facilities and IT-related expenses.
We expect product development expenses will continue to increase in absolute dollars as we improve and extend our applications and develop new technologies.
Sales and Marketing
Sales and marketing expenses were $706 million for the three months ended July 31, 2026, compared to $641 million for the prior year period, an increase of $65 million, or 10%. The increase in sales and marketing expenses included increases of $28 million in employee-related expenses, $11 million in amortization of deferred sales commissions, and $8 million related to marketing programs.
Sales and marketing expenses were $1.4 billion for the six months ended July 31, 2026, compared to $1.3 billion for the prior year period, an increase of $122 million, or 10%. The increase in sales and marketing expenses included increases of $51 million in employee-related expenses, $22 million in amortization of deferred sales commissions, $17 million in facilities and IT-related expenses, and $9 million related to marketing programs.
We expect sales and marketing expenses to increase in absolute dollars as we continue to invest domestically and internationally to expand awareness of our brand and product offerings to attract new and existing customers.
General and Administrative
General and administrative expenses were $231 million for the three months ended July 31, 2026, compared to $216 million for the prior year period, an increase of $15 million, or 7%. The increase in general and administrative expenses included an increase of $8 million in employee-related expenses.
General and administrative expenses were $447 million for the six months ended July 31, 2026, compared to $429 million for the prior year period, an increase of $19 million, or 4%. The increase in general and administrative expenses included increases of $11 million in facilities and IT-related expenses and $7 million in employee-related expenses.
We expect general and administrative expenses will continue to increase in absolute dollars as we continue to grow our business and invest in our people, processes, and systems to support our global operations.
Restructuring
There were no material restructuring expenses recognized during the three and six months ended July 31, 2026.
Restructuring expenses were $1 million and $167 million for the three and six months ended July 31, 2025, respectively. These expenses included $133 million related to employee transition, severance payments, employee benefits, and share-based compensation, and $34 million related to an impairment of office space.
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Share-based Compensation
Costs and expenses include share-based compensation expense as follows (in millions):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Costs of subscription services | $ | 44 | $ | 39 | $ | 80 | $ | 81 | |||||||||||||||
| Costs of professional services | 30 | 28 | 56 | 58 | |||||||||||||||||||
| Product development | 217 | 170 | 401 | 353 | |||||||||||||||||||
| Sales and marketing | 93 | 84 | 183 | 177 | |||||||||||||||||||
| General and administrative | 78 | 70 | 151 | 140 | |||||||||||||||||||
Restructuring | 0 | 0 | 0 | 42 | |||||||||||||||||||
| Total share-based compensation expense | $ | 462 | $ | 391 | $ | 871 | $ | 851 | |||||||||||||||
Percentage of total revenues | 17.4 | % | 16.7 | % | 16.8 | % | 18.5 | % | |||||||||||||||
Share-based compensation expense increased by $71 million for the three months ended July 31, 2026, compared to the prior year period, primarily due to additional grants to new and existing employees.
Share-based compensation expense increased by $20 million for the six months ended July 31, 2026, compared to the prior year period, primarily due to additional grants to new and existing employees, offset by a reduction in restructuring expenses.
Equity compensation is an important element of our compensation philosophy. We expect share-based compensation expense to grow in absolute dollars as we continue to issue share-based awards to our employees but decline as a percentage of total revenues.
Operating Income and Operating Margin
GAAP operating income was $313 million, or 11.8% of revenues, for the three months ended July 31, 2026, compared to the prior year GAAP operating income of $248 million, or 10.6% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses.
GAAP operating income was $651 million, or 12.5% of revenues, for the six months ended July 31, 2026, compared to the prior year GAAP operating income of $287 million, or 6.3% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth, a reduction in restructuring expenses, and moderation of operating expenses.
Non-GAAP operating income was $824 million, or 31.1% of revenues, for the three months ended July 31, 2026, compared to the prior year non-GAAP operating income of $680 million, or 29.0% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses.
Non-GAAP operating income was $1.6 billion, or 31.5% of revenues, for the six months ended July 31, 2026, compared to the prior year non-GAAP operating income of $1.4 billion, or 29.6% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses.
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Reconciliations of our GAAP to non-GAAP operating income and operating margin were as follows (in millions, except percentages). See “Non-GAAP Financial Measures” below for further information.
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating income | $ | 313 | $ | 248 | $ | 651 | $ | 287 | |||||||||||||||
Share-based compensation expense (1) | 462 | 391 | 871 | 809 | |||||||||||||||||||
| Employer payroll tax-related items on employee stock transactions | 13 | 12 | 32 | 39 | |||||||||||||||||||
| Amortization of acquisition-related intangible assets | 34 | 21 | 70 | 42 | |||||||||||||||||||
Acquisition-related costs | 2 | 7 | 9 | 14 | |||||||||||||||||||
Restructuring costs | 0 | 1 | 0 | 167 | |||||||||||||||||||
| Non-GAAP operating income | $ | 824 | $ | 680 | $ | 1,633 | $ | 1,358 | |||||||||||||||
| Operating margin | 11.8 | % | 10.6 | % | 12.5 | % | 6.3 | % | |||||||||||||||
Share-based compensation expense (1) | 17.4 | % | 16.7 | % | 16.8 | % | 17.6 | % | |||||||||||||||
| Employer payroll tax-related items on employee stock transactions | 0.5 | % | 0.5 | % | 0.6 | % | 0.8 | % | |||||||||||||||
| Amortization of acquisition-related intangible assets | 1.3 | % | 0.9 | % | 1.4 | % | 0.9 | % | |||||||||||||||
Acquisition-related costs | 0.1 | % | 0.3 | % | 0.2 | % | 0.3 | % | |||||||||||||||
Restructuring costs | 0.0 | % | 0.0 | % | 0.0 | % | 3.7 | % | |||||||||||||||
| Non-GAAP operating margin | 31.1 | % | 29.0 | % | 31.5 | % | 29.6 | % | |||||||||||||||
(1)Share-based compensation expense in the GAAP to non-GAAP reconciliation tables above excludes share-based compensation associated with restructuring activities of $42 million for the six months ended July 31, 2025. This expense is included in Restructuring costs. There was no comparable activity for the six months ended July 31, 2026.
Other Income, Net
Other income, net was as follows (in millions):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Other income, net | $ | 14 | $ | 56 | $ | 31 | $ | 120 | |||||||||||||||
Other income, net decreased by $42 million and $89 million for the three and six months ended July 31, 2026, respectively, compared to the prior year periods. The decreases were primarily due to lower interest income resulting from the liquidation of marketable debt securities to fund acquisition activities and share repurchases.
Provision For (Benefit From) Income Taxes
The provision for (benefit from) income taxes was as follows (in millions):
| Three Months Ended July 31, | Six Months Ended July 31, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Provision for (benefit from) income taxes | $ | (305) | $ | 76 | $ | (172) | $ | 111 | |||||||||||||||
The income tax benefit for the three and six months ended July 31, 2026, was primarily attributable to an intra-entity transfer of certain intellectual property rights as part of an internal legal entity restructuring. In connection with the transaction, we recognized $374 million of deferred tax assets related to deductible temporary differences associated with certain tax attributes transferred at carryover basis. This benefit was partially offset by income tax expense primarily attributable to earnings in the U.S. and profitable foreign jurisdictions.
The income tax provision for the three and six months ended July 31, 2025, was primarily attributable to earnings in the U.S. and profitable foreign jurisdictions.
For further information, see Note 16, Income Taxes, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
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Liquidity and Capital Resources
As of July 31, 2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $3.4 billion, which were primarily held for working capital and general corporate purposes. Our cash equivalents and marketable securities are primarily composed of, in order from largest to smallest, corporate bonds, U.S. treasury securities, money market funds, asset-backed securities, U.S. agency obligations, and supranational securities.
We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to the remaining term of contracted noncancelable subscription agreements, which are not reflected on the Condensed Consolidated Balance Sheets, and, if necessary, our borrowing capacity under our 2022 Credit Agreement that provides for $1.0 billion of unsecured financing, are sufficient to meet our working capital, capital expenditure, share repurchase, and debt repayment needs over the next 12 months and beyond.
Our future capital requirements depend on many factors, including the effects of macroeconomic trends, customer growth rates, subscription renewal activity, headcount levels, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, infrastructure development, and our investment and acquisition activities. As part of our strategy, we may choose to seek additional debt or equity financing, which may not be available on terms favorable to us or at all. Additionally, our cash provided by operating activities could be affected by various risks and uncertainties, including the “Risk Factors” included in Part II, Item 1A of this report.
Our cash flows were as follows (in millions):
| Six Months Ended July 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | $ | 1,215 | $ | 1,073 | |||||||
| Investing activities | 1,043 | (510) | |||||||||
| Financing activities | (3,099) | (850) | |||||||||
| Effect of exchange rate changes | 0 | 2 | |||||||||
| Net decrease in cash, cash equivalents, and restricted cash | $ | (841) | $ | (285) | |||||||
Operating Activities
Cash provided by operating activities was $1.2 billion and $1.1 billion for the six months ended July 31, 2026, and 2025, respectively. The improvement in cash provided by operating activities was primarily driven by higher cash collections of $723 million mainly due to increased sales, partially offset by increased supplier payments of $196 million to support our continued growth, increased employee-related payments of $191 million, higher income tax payments of $73 million, and decreased interest income of $58 million.
Investing Activities
Cash provided by investing activities was $1.0 billion for the six months ended July 31, 2026, which primarily resulted from net cash inflows of $1.1 billion related to marketable debt securities activity and net cash inflows of $29 million related to non-marketable equity investments activity, offset by capital expenditures of $139 million mainly for office space projects.
Cash used in investing activities was $510 million for the six months ended July 31, 2025, which primarily resulted from net cash outflows of $431 million related to marketable debt securities activity, capital expenditures of $64 million mainly for office space projects, and purchases of $15 million for non-marketable equity investments.
We expect capital expenditures will be approximately $270 million in fiscal 2027, primarily related to investments in our office facilities to support our continued growth.
Financing Activities
Cash used in financing activities was $3.1 billion for the six months ended July 31, 2026, which primarily resulted from repurchases of common stock of $2.9 billion under our share repurchase programs and taxes paid of $273 million related to net share settlement of equity awards, offset by proceeds of $98 million from the issuance of common stock from employee equity plans.
Cash used in financing activities was $850 million for the six months ended July 31, 2025, which primarily resulted from repurchases of common stock of $589 million under our share repurchase programs and taxes paid of $372 million related to net share settlement of equity awards, offset by proceeds of $111 million from the issuance of common stock from employee equity plans.
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Free Cash Flows
In evaluating our performance internally, we focus on long-term, sustainable growth in free cash flows. We define free cash flows, a non-GAAP financial measure, as net cash provided by operating activities minus capital expenditures. See “Non-GAAP Financial Measures” below for further information.
Free cash flows were $1.1 billion for the six months ended July 31, 2026, compared to $1.0 billion for the prior year period. The improvement was primarily driven by higher cash collections of $723 million mainly due to increased sales, partially offset by increased supplier payments of $196 million to support our continued growth, increased employee-related payments of $191 million, increased capital expenditures of $75 million, higher income tax payments of $73 million, and decreased interest income of $58 million.
Reconciliation of our GAAP net cash provided by operating activities to non-GAAP free cash flows is as follows (in millions):
| Six Months Ended July 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash provided by operating activities | $ | 1,215 | $ | 1,073 | |||||||
| Less: Capital expenditures | (139) | (64) | |||||||||
| Free cash flows | $ | 1,076 | $ | 1,009 | |||||||
Share Repurchase Programs
We repurchase shares of our Class A common stock under share repurchase programs authorized by our Board of Directors. Under these programs, in accordance with applicable securities laws and other restrictions, we may repurchase shares of our Class A common stock through open market purchases, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, or by other means. The timing and total amount of share repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The share repurchase programs have no expiration date, may be suspended or discontinued at any time, and do not obligate us to acquire any amount of Class A common stock.
Share repurchase programs authorized by our Board of Directors that were in effect during the three and six months ended July 31, 2026, and 2025, were as follows (in millions):
Authorization Date | Amount Authorized | Authorization Completion Date | ||||||||||||
August 2024 | 1,000 | Q3 fiscal 2026 | ||||||||||||
May 2025 | 1,000 | Q4 fiscal 2026 | ||||||||||||
| September 2025 | 4,000 | Q2 fiscal 2027 | ||||||||||||
As of July 31, 2026, our share repurchase programs were fully completed with no authorization remaining. In August 2026, our Board of Directors authorized the repurchase of up to an additional $4.0 billion of our outstanding shares of Class A common stock. For further information, see Note 13, Stockholders’ Equity, and Note 20, Subsequent Event, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Contractual Obligations
Our contractual obligations primarily consist of borrowings under our Senior Notes, agreements for third-party hosted infrastructure platforms for business operations, leases for office space and co-location facilities for data center capacity, and other purchase obligations entered into in the ordinary course of business. There have been no material changes outside the ordinary course of business to our contractual obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.
Non-GAAP Financial Measures
Regulation S-K Item 10(e), “Use of non-GAAP financial measures in Commission filings,” defines and prescribes the conditions for use of non-GAAP financial information. Our measures of non-GAAP operating income, non-GAAP operating margin, and free cash flows meet the definition of non-GAAP financial measures.
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Non-GAAP Operating Income and Non-GAAP Operating Margin
We use the non-GAAP financial measures of non-GAAP operating income and non-GAAP operating margin to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate our financial performance. We believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.
Our non-GAAP operating income and non-GAAP operating margin exclude the components listed below. For the reasons set forth below, we believe that excluding these components provides useful information to investors and others in understanding and evaluating our operating results and prospects in the same manner as management, in comparing financial results across accounting periods and to those of peer companies, and to better understand the long-term performance of our core business.
•Share-based compensation expense. Share-based compensation primarily consists of non-cash expenses for employee restricted stock units (“RSUs”) and our employee stock purchase plan (“ESPP”). Although share-based compensation is an important aspect of the compensation of our employees and executives, this expense is determined using a number of factors, including our stock price, volatility, and forfeiture rates, that are beyond our control and generally unrelated to operational decisions and performance in any particular period. Further, share-based compensation expense is not reflective of the value ultimately received by the grant recipients.
•Employer payroll tax-related items on employee stock transactions. We exclude the employer payroll tax-related items on employee stock transactions in order to show the full effect that excluding share-based compensation expense has on our operating results. Similar to share-based compensation expense, this tax expense is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of our business.
•Amortization of acquisition-related intangible assets. For business combinations, we generally allocate a portion of the purchase price to intangible assets. The amount of the allocation is based on estimates and assumptions made by management and is subject to amortization. The amount of purchase price allocated to intangible assets and the term of the related amortization can vary significantly and are unique to each acquisition and thus we do not believe this activity is reflective of our ongoing operations. Although we exclude the amortization of acquisition-related intangible assets from these non-GAAP financial measures, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.
•Acquisition-related costs. Acquisition-related costs include direct transaction costs, such as due diligence and advisory fees, and certain compensation and integration-related expenses. We exclude the effects of acquisition-related costs as we believe these transaction-specific expenses are inconsistent in amount and frequency and do not correlate to the operation of our business.
•Restructuring costs. Restructuring costs are associated with a formal restructuring plan and are primarily related to workforce reductions, the closure of facilities, and other exit and disposal activities. We exclude these expenses because they are not reflective of ongoing business and operating results.
Free Cash Flows
We define free cash flows as net cash provided by operating activities minus capital expenditures. We use free cash flows as a measure of financial progress in our business, as it balances operating results, cash management, and capital efficiency. We believe information regarding free cash flows provides investors and others with an enhanced view of cash flow generation from the ongoing operations of our business.
Limitations on the Use of Non-GAAP Financial Measures
A limitation of our non-GAAP financial measures of non-GAAP operating income, non-GAAP operating margin, and free cash flows is that they do not have uniform definitions. Our definitions will likely differ from the definitions used by other companies, including peer companies, and therefore comparability may be limited. Further, these non-GAAP financial measures have certain limitations as they do not reflect all items of expense or cash that affect our operations and are reflected in the corresponding GAAP financial measures. In the case of share-based compensation, if we did not pay out a portion of compensation in the form of share-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position.
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We compensate for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to view our non-GAAP financial measures in conjunction with the most comparable GAAP financial measures.
See “Results of Operations—Operating Income and Operating Margin” for reconciliations from the most directly comparable GAAP financial measures of GAAP operating income and GAAP operating margin, to the non-GAAP financial measures of non-GAAP operating income and non-GAAP operating margin, for the three and six months ended July 31, 2026, and 2025.
See “Liquidity and Capital Resources—Free Cash Flows” for a reconciliation from the most comparable GAAP financial measure, net cash provided by operating activities, to the non-GAAP financial measure, free cash flows, for the six months ended July 31, 2026, and 2025.
Critical Accounting Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates, judgments, and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
We believe that the following accounting policies include specific estimates that involve a high degree of judgment and complexity, and are the most critical to aid in fully understanding and evaluating our financial condition and operating results:
•Revenue recognition
•Deferred commissions
•Income taxes
•Business combinations, goodwill, and acquisition-related intangible assets
For a further discussion of our critical accounting estimates, refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2026. During the six months ended July 31, 2026, there were no significant changes to our critical accounting estimates.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Recent macroeconomic events have resulted in negative impacts on global economies and financial markets, which may increase our foreign currency exchange risk and interest rate risk. For further discussion of the potential impacts of these events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.
Foreign Currency Exchange Risk
We transact business globally in multiple currencies. As a result, our operating results and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. As of July 31, 2026, our most significant currency exposures were the euro, British pound, Canadian dollar, and Australian dollar.
Due to our exposure to market risks that may result from changes in foreign currency exchange rates, we enter into foreign currency derivative hedging transactions to mitigate these risks. For further information, see Note 9, Derivative Instruments, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Interest Rate Risk on our Investments
We had cash, cash equivalents, and marketable securities totaling $3.4 billion and $5.4 billion as of July 31, 2026, and January 31, 2026, respectively. Cash equivalents and marketable securities were invested primarily in U.S. treasury securities, U.S. agency obligations, corporate bonds, commercial paper, money market funds, asset-backed securities, and supranational securities. The cash, cash equivalents, and marketable securities are held primarily for working capital and general corporate purposes. Our investment portfolios are managed to preserve capital and meet liquidity needs. We do not enter into investments for trading or speculative purposes.
Our cash equivalents and our portfolio of debt securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we sell securities that decline in market value due to changes in interest rates. Further, since our debt securities are classified as “available-for-sale,” if the fair value of the security declines below its amortized cost basis, then any portion of that decline attributable to credit losses is recognized on the Condensed Consolidated Statements of Operations.
A hypothetical increase or decrease of 100 basis points in interest rates would have resulted in an approximately $43 million market value reduction or increase in our investment portfolio as of July 31, 2026. A hypothetical increase or decrease of 100 basis points in interest rates would have resulted in an approximately $59 million market value reduction or increase in our investment portfolio as of January 31, 2026. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.
Interest Rate Risk on our Debt
The Senior Notes have fixed annual interest rates, and therefore we do not have economic interest rate exposure on these debt obligations. However, the fair values of the Senior Notes are exposed to interest rate risk. Generally, the fair values of the Senior Notes will increase as interest rates fall and decrease as interest rates rise.
Borrowings under our 2022 Credit Agreement will bear interest, at our option, at a base rate plus a margin of 0.000% to 0.500% or a secured overnight financing rate (“SOFR”) plus 10 basis points, plus a margin of 0.750% to 1.500%, with such margin being determined based on our consolidated leverage ratio or debt rating. Because the interest rates applicable to borrowings under the 2022 Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of borrowing.
For further information, see Note 10, Debt, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report.
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In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission (“SEC”) rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
(b) Changes in Internal Control Over Financial Reporting
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officer and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are regularly involved with claims, suits, purported class or representative actions, and may be involved in regulatory and government investigations and other proceedings, involving competition, intellectual property, data security and privacy, bankruptcy, tax and related compliance, labor and employment, commercial disputes, and other matters. Such claims, suits, actions, regulatory and government investigations, and other proceedings can impose a significant burden on management and employees, could prevent us from offering one or more of our applications, services, or features to others, could require us to change our technology or business practices, or could result in monetary damages, fines, civil or criminal penalties, reputational harm, or other adverse consequences.
These claims, suits, actions, regulatory and government investigations, and other proceedings may include speculative, substantial, or indeterminate monetary amounts. We record a liability when we believe that it is probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both the likelihood of there being a liability and the estimated amount of a liability related to such matters. With respect to our outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible liability will not, either individually or in aggregate, have a material adverse effect on our business, financial condition, operating results, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.
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ITEM 1A. RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including the condensed consolidated financial statements and the related notes included elsewhere in this report, before making an investment decision. The risks and uncertainties described below reflect our beliefs and opinions as to the factors and events that could materially and adversely affect our business or the market price of our securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not any of the risks, events, or uncertainties described below have occurred in the past. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that materially and adversely affect our business. If any of the following risks actually occurs, our business operations, financial condition, operating results, and prospects could be materially and adversely affected. The market price of our securities could decline due to the materialization of these or any other risks, and you could lose part or all of your investment.
Summary of Risk Factors
The following summary provides an overview of the material risks we are exposed to in the normal course of our business activities. This risk factor summary does not contain all of the information that may be important to you, and you should read these together with the more detailed discussion of risks set forth following this section, as well as elsewhere in this report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional risks beyond those summarized below, or discussed elsewhere in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may apply to our activities or operations as currently conducted or as we may conduct them in the future, or to the markets in which we currently operate or may in the future operate. Consistent with the foregoing, we are exposed to a variety of risks, including those associated with the following:
•any compromise of our information technology systems or security measures (including of our critical suppliers and service partners), or the unauthorized access of customer or user data;
•any slowdown or failure of our technical operations infrastructure, including data centers operated by third parties, or the impact of service outages or delays in the deployment of our applications, or the failure of our applications to perform properly;
•our ability to compete effectively in the intensely competitive markets in which we participate, including against non-specialist AI-native solutions;
•privacy concerns and evolving domestic or foreign laws and regulations;
•any loss of key employees or the inability to attract, develop, and retain highly skilled employees;
•our reliance on our network of partners to drive additional growth of our revenues;
•our ability to realize a return on our current development efforts or offer new features, such as those involving AI, enhancements, and modifications to our products and services, and our ability to realize a return on the investments we have made toward entering new markets and new lines of business;
•exposure to risks inherent to international expansion and sales to customers outside the U.S. or with international operations;
•our ability to realize the expected business or financial benefits of company, employee, or technology acquisitions;
•government contracts and related procurement regulations;
•any dissatisfaction of our users with the deployment, training, and support services provided by us and our partners;
•delays in the reflection of downturns or upturns in new sales in our operating results associated with long sales cycles and our subscription model;
•our ability to predict the rate of customer subscription renewals or adoptions;
•the technical, legal, and regulatory environment in connection with our use of new and evolving technologies in our offerings, such as AI;
•any adverse litigation results;
•our ability to successfully integrate our applications with third-party technologies;
•any failure to protect our intellectual property rights or any lawsuits against us for alleged infringement of third-party proprietary rights;
•the impact of continuing global economic and geopolitical volatility and conflicts;
•the fluctuation of our quarterly results;
•our existing and future debt obligations; and
•the limited ability of third parties to influence corporate matters due to our dual class structure and to seek a merger, tender offer, or proxy contest due to Delaware law and provisions in our organizational documents.
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Risks Related to Our Business and Industry
Any slowdown or failure in our technical operations infrastructure or applications may subject us to liabilities and adversely affect our reputation and operating results.
We have experienced significant growth in the number of users, transactions, and data that our operations infrastructure supports. If we do not accurately predict our infrastructure requirements or fail to adapt and scale, we may see an increase in service outages or delays, or significant increases in operating costs, which may adversely affect our business and operating results.
We have experienced, and may in the future experience, defects, system disruptions, outages, and other performance problems, including the failure of our applications to perform properly. These problems may be caused by a variety of factors, including infrastructure and software or code changes, vendor issues, software and system defects, human error, viruses, worms, security attacks (internal and external), fraud, spikes in customer usage, and denial of service issues. For example, in July 2025, we identified and subsequently remediated an issue impacting reporting from high-volume data sources in the tenants of certain customers that may have yielded incomplete queries without displaying an error message. In addition, we may also encounter difficulties integrating acquired technologies, which may result in the failure of our applications to perform properly. All of these issues may result in increased operational costs, delays in new feature rollouts, customer loss, reputational damage, and legal or regulatory liability, including liability under customer contracts.
Such issues have, and may in the future, result in certain parties having unauthorized access to data, which could increase the scope of our liability. Because of the large amount of data that we collect and process in our systems, and the sensitive nature of such data, it is possible that these issues could result in significant disruption, data loss or corruption, or cause the data to be incomplete or contain inaccuracies that our customers and other users regard as significant.
Furthermore, our applications are essential to many of the business processes for our customers. For example, our financial management application is essential to our and our customers’ financial planning, reporting, and compliance programs. Any interruption in our service may affect the availability, accuracy, or timeliness of such programs and as a result could damage our reputation, cause our customers to terminate their use of our applications, require us to issue refunds for prepaid and unused subscription services, require us to compensate our customers for certain losses, and prevent us from gaining additional business from current or future customers. In addition, because we use Workday’s financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers and negatively impact demand for our applications.
Our insurance policies, including our errors and omissions insurance, may be inadequate or may not be available in the future on acceptable terms, or at all, to protect against claims and other legal actions arising from breaches of our contracts, disruptions in our service, including those caused by cybersecurity incidents, failures or disruptions to our infrastructure, catastrophic events and disasters, or otherwise. In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly.
We depend on data centers and other infrastructure operated by third parties, as well as internet availability, and any disruption in these operations could adversely affect our business and operating results.
We host our applications and serve our customers and users globally from data centers operated by third parties and rely upon third-party vendors to operate certain aspects of our services. We control our applications and data, but we do not control the facilities, operations, and physical security of these locations. Disruption of or interference at these locations has and could in the future impact our operations and our business could be adversely impacted. For example, we have experienced disruptions at certain of our co-location data centers in the U.S. due to high temperatures and power outages that resulted in a brief temporary outage of our services for a subset of our customers. These facilities may also be subject to cybersecurity breaches, capacity constraints, financial difficulties, break-ins, sabotage, intentional acts of vandalism and similar misconduct, natural catastrophic events, as well as local administrative actions, changes to legal or permitting requirements, and litigation to stop, limit, or delay operations, and our disaster recovery planning may not account for all eventualities.
Furthermore, our customers and other users access our applications through their internet service providers. If a service provider fails to provide sufficient capacity to support our applications or otherwise experiences service outages, such failure could interrupt our customers’ and other users’ access to our applications, which could adversely affect their perception of our applications’ reliability and our revenues. In addition, certain countries have implemented or may implement legislative and technological actions that either do or can effectively regulate access to the internet, including the ability of internet service providers to limit access to specific websites or content.
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Any changes in service levels with our infrastructure providers, or any errors, defects, disruptions, or other performance problems with our applications or the infrastructure on which they run, including internet infrastructure, could adversely affect our reputation and may damage our customers’ or other users’ data or result in lengthy interruptions in our services. Interruptions in our services might adversely affect our reputation and operating results, cause us to issue refunds or service credits to customers, subject us to potential liabilities, result in contract terminations, or adversely affect our renewal rates.
The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.
The markets for enterprise cloud applications, including AI-powered solutions, are highly competitive, with relatively low barriers to entry for some applications or services. Some of our competitors are larger and have greater name recognition, significantly longer operating histories, access to larger customer bases, larger marketing budgets, and significantly greater resources to devote to the research, development, promotion, and sale of their products and services than we do. This may allow our competitors to respond more effectively than us to new or emerging technologies and changes in market conditions.
Our primary competitors are Oracle and SAP, well-established providers of financial management and HCM applications, which have long-standing relationships with customers and partners. Some customers may be hesitant to switch vendors or to adopt cloud applications such as ours and may prefer to maintain their existing relationships with competitors. We also face competition from other enterprise software vendors, from regional competitors that only operate in certain geographic markets, and from vendors of specific applications that address only one or a portion of our applications, some of which offer cloud-based or AI-powered solutions. These vendors include, without limitation: Anaplan, Inc., ADP, Coupa Software Inc., Dayforce, Inc., Microsoft, ServiceNow, Inc., and UKG Inc. We may also face greater competition from non-specialist solutions relying on generic large language models (“LLMs”), generative AI, and general-purpose agents to address a broad range of business needs. In order to take advantage of customer demand for cloud and AI-powered applications, legacy vendors are expanding their cloud or AI-powered applications through acquisitions, strategic alliances, and organic development. In addition, other cloud or AI platform companies that provide services in different target markets or industries may develop applications or acquire companies that operate in our target markets or industries, and some potential customers may elect to develop their own internal applications. As the market evolves and as existing and new market participants introduce new types of technologies, such as generative and agentic AI, and different approaches that enable organizations to address their HCM and financial needs, our ability to maintain market differentiation may affect our competitive position.
Furthermore, our current or potential competitors may be acquired by, or merge with, third parties with greater available resources and the ability to initiate or withstand substantial price competition. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their offerings, integrations, or resources. Many of our competitors also have major distribution agreements with consultants, system integrators, and resellers and such partners may prefer to maintain their existing relationships with competitors. With the introduction of new technologies, such as generative AI, we expect competition to intensify in the future. As we attempt to sell our products and solutions to potential and current customers, we must demonstrate that our products and solutions are superior to other solutions available to their organizations, including generic LLMs, software created using natural language prompts and generative AI (referred to as vibe coding) and other emerging technologies. If our competitors’ products, services, or technologies, including generative and agentic AI capabilities, become more accepted than our products, if their customer support efforts are preferred by customers, if they are successful in bringing their products or services to market earlier than ours, if they scale at a faster rate, or if their products or services are more technologically capable or resonate more with the market than ours, including having more or easier to use integrations for software solutions used and preferred by our customers, then our revenues could be adversely affected. In addition, our competitors may offer their products and services at a lower price, or may offer price concessions, delayed payment terms, financing terms, or other terms and conditions that are more enticing to potential customers. Due to the complex nature of implementing financial management solutions, the lifecycle of the contracts for such solutions tends to be long. Therefore, if we lose a current customer to a competitor or fail to secure a prospective customer for financial management solutions, there is a long duration before we will be able to approach that customer again with our sales efforts for such solutions. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses, or a failure to maintain or improve our competitive market position, any of which could adversely affect our business and operating results.
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We may lose key employees or be unable to attract, enable, and retain highly skilled employees.
Our success and future growth depend largely upon the continued services of our executive officers, other members of senior management, and other key employees. We do not have employment agreements with our executive officers or other key employees that require them to continue to work for us for any specified period, and they could terminate their employment with us at any time. In February 2026, Aneel Bhusri, formerly Executive Chair, assumed the role of CEO and Carl Eschenbach ceased to serve as CEO. Key employee and executive leadership changes have the potential to disrupt our business, impact our ability to preserve our culture, negatively affect our ability to attract and retain talent, or otherwise have a serious adverse effect on our business and operating results. We have and may continue to execute our growth plan through strategic investments to attract and retain executive officers, senior management, or other key employees that may not be offset by increased performance or revenues.
To execute our growth plan, we must attract, enable, develop, and retain highly qualified talent. Our ability to compete and succeed in a highly competitive environment is directly correlated to our ability to recruit and retain highly skilled and experienced employees, especially in the areas of product development, cybersecurity, senior sales executives, and engineers with significant experience in designing and developing software and internet-related services, especially in AI and emerging technologies. The expansion of our sales infrastructure, both domestically and internationally, is necessary to grow our customer base and business. Our business may be adversely affected if our efforts to attract and enable new members of our direct sales force do not generate a corresponding increase in revenues. We have experienced, and we expect to continue to experience, significant competition in hiring and retaining employees with appropriate qualifications.
We must also continue to retain, develop, and motivate existing employees through our compensation practices, company culture, and career development opportunities. The compensation and incentives we provide to attract, retain, and motivate employees may not meet the expectations of current and prospective employees as the competition for talent intensifies, and if our stock price decreases or increases at a slower rate than our talent competitors, our equity awards become less effective. As a part of our annual refresh grant cycle in May 2026, we awarded additional equity grants to our most critical talent to bolster their commitment to our company and to further incentivize their performance towards our goals. Further, our current and future office environments and hybrid work policy may not meet the expectations of our employees or prospective employees, and may amplify challenges in recruiting and retention. We believe that a critical component of our success has been our corporate culture and core values. As we continue to grow and change, we may find it difficult to maintain our corporate culture among a larger number of employees who are dispersed throughout various geographic regions, including difficulties due to managing the complexities of communicating with all employees. Efforts to restructure our workforce may be disruptive and adversely impact employee morale or our corporate culture. Failure to maintain or adapt our culture could negatively affect our ability to attract new employees or to retain our current employees and our business and future growth prospects could be adversely affected.
We rely on our network of partners to drive additional growth of our revenues, and if these partners fail to perform, our ability to sell and distribute our products may be impacted, and our operating results and growth rate may be harmed.
Our strategy for additional growth depends, in part, on sales generated through our network of partners and professional services provided by our partners. If the operations of these partners are disrupted, including as a direct or indirect result of recent macroeconomic conditions, our own operations may suffer, which could adversely impact our operating results. Identifying partners, negotiating and documenting relationships with them, and marketing and promoting partnerships requires significant time and resources, and we cannot ensure that these partnerships will result in increased customer adoption or usage of our applications or increased revenue. We may be at a disadvantage if our competitors are effective in providing incentives to our current or potential partners to favor their products or services or to prevent or reduce subscriptions to our services, or in negotiating better rates or terms with such partners, particularly in international markets where our potential partners may have existing relationships with our competitors. In addition, acquisitions of our partners by our competitors could end our strategic relationship with such acquired partner and result in a decrease in the number of our current and potential customers.
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Our partner training and educational programs may not be effective or utilized consistently by partners. New partners may require extensive training and/or may require significant time and resources to achieve productivity, and such requirements may deter potential partners due to the significant time and financial investment required. Changes to our direct go-to-market models and expanded product and service offerings may cause friction with our partners, require increased time and financial investment, and may increase the risk in our partner ecosystem. The actions of our partners may subject us to lawsuits, potential liability, and reputational harm if, for example, any of our partners misrepresent the functionality of our products to prospective or current customers, fail to perform services to our customers’ expectations, or violate laws or our corporate policies, such as laws and policies around privacy, cybersecurity, and responsible AI. In addition, we resell certain products and services offered by our partners and could incur potential liability and reputational harm if our partners fail to provide such products and services as represented to customers. Our partners may utilize our platform to develop products and services that could potentially compete with products and services that we offer currently or in the future. Concerns over competitive matters or intellectual property ownership could constrain these partnerships. If we fail to effectively manage and grow our network of partners, maintain good relationships with our partners, or properly monitor the quality and efficacy of their service delivery, or if our partners do not effectively market and sell our subscription services, use greater efforts to market and sell their own products or services or those of our competitors, or fail to meet the needs or expectations of our customers, our ability to sell our products and efficiently provide our services may be impacted, and our operating results and growth rate may be harmed.
If we are not able to realize a return on our current development efforts or offer new features, enhancements, and modifications to our products and services that are desired by current or potential customers, our business and operating results could be adversely affected.
Developing software applications and related enhancements, features, and modifications, including those involving AI, including generative and agentic AI or other emerging technologies, is expensive, and the investment in product development often involves a long return on investment cycle. We believe that we must continue to dedicate a significant amount of resources to our development efforts to maintain our competitive position. Accelerated application introductions and short application life cycles require high levels of expenditures that could adversely affect our operating results if not offset by revenue increases. However, we may not receive significant revenues from these investments for several years, if at all. If we are unable to provide new features, enhancements to user experience, and modifications in a timely and cost-effective manner that achieve market acceptance, align with customer expectations, and that keep pace with rapid technological developments and changing regulatory landscapes, it may negatively impact our customer renewal rates, limit the market for our solutions, or impair our ability to attract new customers and our business and operating results could be adversely affected. For example, AI is propelling advancements in technology, but rapid deployment of generative and agentic AI technologies can increase operational, legal, and reputational risks. If we fail to innovate and keep up with advancements in AI technology; if Workday’s AI-powered solutions, including our current and planned agentic AI solutions, fail to be delivered as planned or at all, fail to operate as expected, or fail to meet customer expectations; if our AI solutions generate inaccurate, incomplete, or misleading outputs and if our customers rely on or use such outputs to their detriment; if we fail to successfully monetize our AI-powered solutions; or if we do not have sufficient access to development resources and the technologies required to build and improve our applications, our business and reputation may be harmed.
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If we are not able to realize a return on the investments we have made toward entering new markets and new lines of business, our business and operating results could be adversely affected.
We continue to seek opportunities to enter into new markets and/or new lines of business, some of which we may have very limited or no experience in. For example, we have and continue to make significant targeted investments in entering the medium-enterprise and U.S. federal government markets and see our success in these markets as key contributors to our future growth. Additionally, we have made and continue to make significant investments in platform offerings and AI, including generative AI and agentic capabilities. As an entrant to new markets and new lines of business, we may not be effective in convincing prospective customers that our solutions will address their needs, and we may not accurately estimate our infrastructure needs, human resource requirements, or operating expenses with regard to these new markets and new lines of business. We may also fail to accurately anticipate adoption rates of these new lines of business or their underlying technology. Also, we may not be able to properly price our solutions in these new markets, which could negatively affect our ability to sell to customers. The markets and monetization strategies for certain of our offerings, including our agentic AI solutions and Workday Data Cloud, remain relatively new and uncertain and as a result, our expansion into such offerings, and related investments, may present additional risks and challenges. For example, we offer certain AI and platform capabilities through a subscription-based flexible pricing model and may increase the number of products through which we do so. Our success is dependent on our ability to determine optimal pricing under this model, our ability to educate customers and effectively market and sell our AI solutions, the level of adoption and usage of our AI solutions by our customers, and our costs to deliver these solutions. Furthermore, customers in these new markets or of the new lines of business may demand more or different features and professional services, which may require us to devote even greater research and development, sales, support, and professional services resources to such customers. If we fail to generate adequate revenues from these new markets and lines of business, or if we fail to do so within the envisioned timeframe, it could have an adverse effect on our business, financial condition, and operating results.
Our international presence, continued expansion, and sales to customers outside the U.S. or with international operations expose us to risks inherent in global operations.
The growth of our business and future prospects depends on our ability to further expand our operations and increase our sales outside of the U.S. as a percentage of our total revenues. Operating globally requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the U.S. Our investments and efforts to further expand internationally may not be successful in creating additional demand for our applications outside of the U.S. or in effectively selling subscriptions to our applications in all of the markets we enter. Risks associated with doing business on a global scale that could adversely affect our business, include:
•the need to develop, localize, and adapt our applications and customer support for specific countries;
•the need to successfully develop and execute on a localized go-to-market strategy;
•the need to adhere to local laws and regulations, including those related to data localization, privacy, and anti-corruption, which may make it more difficult to penetrate certain international market segments with highly specialized compliance, contracting, and data sovereignty requirements;
•difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation and benefits for local markets;
•difficulties in leveraging executive presence, maintaining company culture globally, and conforming with local cultural contexts and customs;
•increased travel, real estate, infrastructure, and legal and regulatory compliance costs associated with international operations;
•different pricing environments, longer sales cycles, and longer trade receivables payment cycles, and collections issues;
•new and different sources of competition;
•potentially weaker protection for intellectual property and other legal rights than in the U.S. and practical difficulties in enforcing intellectual property and other rights;
•laws, contracting approaches, customs, and business practices favoring local vendors over U.S.-based companies, which may be increased by geopolitical tensions;
•restrictive governmental actions focused on cross-border trade, such as import and export restrictions, duties, quotas, potential or imposed tariffs, trade disputes, and barriers or sanctions, as well as any retaliatory actions, that may prevent us from offering certain portions of our products or services to a particular market, may increase our operating costs, or may subject us to monetary fines or penalties;
•compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, privacy, intellectual property, financial services, AI, and data protection laws and regulations, as well as challenges with differing legal, alternative dispute, and regulatory systems;
•increased compliance costs related to government regulatory reviews or audits, including those related to international cybersecurity and sustainability requirements;
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•increased financial accounting and reporting burdens and complexities;
•the effects of currency fluctuations on our revenues and expenses and customer demand for our services;
•restrictions on the transfer of funds;
•adverse tax consequences and tax rulings; and
•unstable economic and political conditions.
Certain of the above factors have and may continue to negatively impact our ability to sell our applications and offer services globally, reduce our competitive position in foreign markets, increase our costs of global operations, reduce demand for our applications and services from global customers, or subject us to legal or regulatory liability. Additionally, the majority of our international costs are denominated in local currencies and we anticipate that over time an increasing portion of our sales contracts may be outside the U.S. and will therefore be denominated in local currencies. Fluctuations in the value of foreign currencies, which may be amplified by macroeconomic events, may impact our operating results when translated into U.S. dollars. Such fluctuations may also impact our ability to predict our future results accurately. If we are not able to successfully hedge against the risks associated with foreign currency fluctuations, our financial condition and operating results could be adversely affected.
We have acquired, and may in the future acquire, other companies, employee teams, or technologies, which could divert our management’s attention, result in additional indebtedness or dilution to our stockholders, and otherwise disrupt our operations and adversely affect our operating results.
We have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our applications, enhance our technical capabilities, obtain personnel, or otherwise offer growth opportunities. The pursuit of acquisitions may divert the attention of management, disrupt ongoing business, and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
These impacts may continue through integration activities. Moreover, we may be unable to complete proposed transactions timely or at all for a variety of reasons, such as our failure to obtain any necessary funding, the failure to obtain required regulatory or other approvals, or the impact of litigation or other disputes. We also may not achieve the anticipated benefits from an acquisition due to a number of factors, including:
•inability or difficulty integrating the intellectual property, technology infrastructure, and operations of the acquired business, including difficulty in addressing potential identified or unknown security risks or vulnerabilities of the acquired business or product;
•inability to retain key personnel or challenges in integrating the workforce from the acquired company, including the inability to maintain our culture and values;
•acquisition-related costs, liabilities, or tax impacts, some of which may be unanticipated;
•the impact on stockholder dilution and our operating results from the additional stock-based compensation issued in connection with the acquisition;
•difficulty in leveraging the data of the acquired business if it includes personal data;
•a failure to maintain the information systems of an acquired business, including difficulties in increasing or maintaining the security standards for acquired technology, which could increase the risk of a security breach of such system;
•a failure to implement, restore, or maintain controls, procedures, or policies at the acquired company and an increased risk of non-compliance;
•multiple product lines or service offerings as a result of our acquisitions that are offered, priced, and supported differently, as well as the potential for such acquired product lines and service offerings to impact the profitability of existing products;
•the opportunity cost of diverting management and financial resources away from other products, services, and strategic initiatives;
•difficulties and additional expenses associated with synchronizing product offerings, customer relationships, and contract portfolio terms and conditions between Workday and the acquired business;
•known and unknown liabilities or risks associated with the acquired businesses, including those arising from existing contractual obligations or litigation matters;
•adverse effects on our brand, reputation, or existing business relationships with business partners and customers as a result of the acquisition, including integrating acquired technologies and a delay in market acceptance of and difficulty in transitioning new and existing customers to acquired product lines or services;
•risks and challenges presented by the use of innovative technologies that we acquire, such as AI;
•potential write-offs of acquired assets and potential financial and credit risks associated with acquired customers;
•inability to maintain relationships with key customers, suppliers, and partners of the acquired business;
•difficulty in predicting and controlling the effect of integrating multiple acquisitions concurrently;
•lack of experience in new geographies, markets, products, or technologies;
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•difficulty in integrating operations and assets of an acquired foreign entity with differences in language, culture, or country-specific currency and regulatory risks;
•the inability to obtain (or a material delay in obtaining) regulatory approvals necessary to complete transactions or to integrate operations, or potential remedies imposed by regulatory authorities as a condition to or following the completion of a transaction, which may include divestitures, ownership or operational restrictions or other structural or behavioral remedies; and
•the failure of strategic acquisitions to perform as expected or to meet financial projections, which may be heightened due to recent macroeconomic events and market volatility.
In addition, a significant portion of the purchase price of companies we acquire has been and may in the future be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our operating results. Acquisitions could also result in use of substantial portions of our available cash, which may limit other potential uses of cash, and dilutive issuances of equity securities or the issuance of debt, which could adversely affect our operating results. If we finance acquisitions by issuing debt, we could face constraints related to the terms of and repayment obligation related to the incurrence of such indebtedness. In addition, if an acquired business fails to meet our expectations, our business, financial condition, and operating results may suffer.
Our business could be adversely affected if our users are not satisfied with the deployment, training, and support services provided by us and our partners.
Implementation of our applications may be technically complicated because they are designed to enable complex and varied business processes across large organizations, integrate data from a broad and complex range of workflows and systems, and manage, develop, and build AI-powered solutions and agents, and may involve deployment in a variety of environments. Incorrect or improper implementation or use of our applications, including generative and agentic AI capabilities, could result in customer and user dissatisfaction and harm our business and operating results.
In order for our customers to successfully implement our applications, they need access to highly skilled and trained service professionals. Third parties provide a majority of deployment services for our customers, but professional services may also be performed by our own staff or by a combination of the two. If customers are not satisfied with the quality, timing, and cost of work performed by us or a third party or with the type of professional services or applications delivered, or if we or a third party have not delivered on commitments made to our customers, then we could incur additional costs to address the situation, the revenue recognition of the contract could be impacted, and the dissatisfaction with our services could damage our ability to expand the applications subscribed to by our customers. Negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers both domestic and abroad.
Customers and other users also depend on our support organization to provision the environments used by our customers and to resolve technical issues relating to our applications. Increased demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. Failure to maintain high-quality technical support and training, or a market perception that we do not maintain high-quality support or training, could adversely affect our reputation, our ability to offer and sell our applications, our renewal rates, and our business and operating results.
Our future success depends on the rate of customer subscription renewals, and our revenues or operating results could be adversely impacted if we do not achieve renewals at expected rates or on anticipated terms.
Our customers have no obligation to renew their subscriptions for our applications after the expiration of either the initial or renewed subscription period and it is difficult to predict attrition rates given our varied customer base and the number of multi-year subscription contracts. Our customers’ renewal rates fluctuate as a result of a number of factors, including our mix of customer base and their level of satisfaction with our offerings and pricing, their awareness and adoption of the benefits and features of our applications, their ability to continue their operations and spending levels, reductions in their headcount, the evolution of their business, and the macroeconomic environment. Acquisitions of our customers by other companies have led, and could continue to lead, to cancellation of our contracts with those customers, thereby reducing the number of our existing and potential customers. If our customers do not renew their subscriptions for our applications on similar pricing terms or renew for fewer elements of our offerings or for a lower headcount, our revenues may decline, and we may not be able to meet our revenue projections, which could negatively impact our business and the market price of our Class A common stock.
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Our future success also depends, in part, on our ability to sell additional products to our current customers, and the success rate of such endeavors is difficult to predict, especially with regard to any new lines of business that we may introduce from time to time. This has and may continue to require increasingly costly marketing and sales efforts that are targeted at senior management, and if these efforts are not successful, our business and operating results may suffer. Similarly, the rate at which our customers purchase new or enhanced services, including certain of our AI and platform capabilities that we offer through a subscription-based flexible pricing model, depends on a number of factors, including general economic conditions and customer receptiveness to any price changes related to these additional features and services.
The use of new and evolving technologies in our offerings at Workday, including generative and agentic AI capabilities, may result in reputational harm and increased litigation, and adversely affect our operating results.
We are increasingly building and integrating AI into the Workday product suite, including generative and agentic AI, and we are increasingly using AI products and technologies in the course of running our business at Workday. As with many cutting-edge innovations, these technologies can present new risks and challenges. A quickly evolving technical, legal, and regulatory environment may cause us to incur increased research and development costs, or divert resources from other development efforts, to address ethical, legal, operational, or compliance requirements or other issues related to AI. For example, the European Union’s (“EU”) AI Act (“EU AI Act”) puts new requirements on providers and deployers of AI technologies and we are currently working to ensure compliance with corresponding deadlines. Additionally, existing laws and regulations apply to the development and deployment of AI in new ways, the nature and extent of which are difficult to predict and subject to change over time. The risks and challenges presented by these technologies could undermine public confidence in AI and could increase costs and burdens to us and our customers, which could slow its adoption and affect our business. Many of our products are powered by AI, some of which include the use of generative and agentic AI, for use cases that could potentially impact human, civil, privacy, or employment rights and dignities. To the extent that the products and technologies we develop and deploy rely on the use of generative or agentic capabilities provided by third parties, we face additional uncertainties and liabilities, especially where such third-party capabilities may be insufficient, biased, inaccurate, or of poor quality. Any failure to accurately identify and address our responsibilities and liabilities in this uncertain environment, including with respect to third-party capabilities, and to adequately address relevant ethical and social issues that may arise with such technologies and use cases, as well as failure by others in our industry or actions taken by our customers, employees, suppliers, or end users (including misuse of these technologies), could negatively affect the adoption of our offerings and subject us to reputational harm, regulatory action, or litigation, which may harm our financial condition and operating results. We are currently defending against a lawsuit alleging that certain of our AI-related products and services enable discrimination, and although we believe that such claims lack merit, and the majority of the claims have been dismissed, legal proceedings can be lengthy, expensive, and disruptive to our operations and customers (particularly where, as in the present litigation, the plaintiff may seek to also litigate against certain of Workday’s customers). We may be subject to other litigation and regulatory actions that may cause financial, competitive, and developmental impacts, and could lead to legal liability. Regardless of outcome, these types of claims have and could continue to cause reputational harm to our brand, including our ability to sell newly acquired products that use AI. Our employees, customers, or customers’ employees who are dissatisfied with our public statements, policies, practices, or solutions related to the development and use of AI may express opinions that could introduce reputational or business harm, or cease their relationship with us.
If we fail to develop and maintain widespread positive awareness of our brand, our business may suffer.
We believe that developing and maintaining widespread positive awareness of our brand is critical to our growth and that the importance of maintaining positive brand awareness will increase as competition in our markets increases. Successfully promoting and maintaining our brand will depend on our ability to provide reliable solutions that meet the needs of our customers, our ability to successfully differentiate our products and solutions from those of our competitors, and the effectiveness of our marketing efforts. However, brand promotion activities may not generate the awareness or increased revenues we anticipate, and even if they do, any increase in revenues may not offset the significant expenses we incur in promoting our brand.
If we fail to successfully promote and maintain positive awareness of our brand, or we fail to expand positive awareness of our newer solutions or products, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building investments. We have and may continue to experience reputational harm from, among other things, the introduction of new products, features, or services that do not meet customer expectations; our use of new and evolving technologies, including AI; service outages or disruptions; issues with product quality or performance; backlash from customers, government entities, or other stakeholders that disagree with our product offering decisions or public policy, ethical, or political positions; significant litigation or regulatory or government actions that negatively reflect on our business practices; and data security breaches or compliance failures. Additionally, the performance of our partners may affect our brand and reputation if customers do not have a positive experience with our partners’ solutions or services. Any unfavorable publicity or perception of our brand or our applications, including any unfavorable candidate or end user experience, could negatively impact our ability to attract and retain customers and also make it more difficult to hire and retain employees.
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If we are unable to successfully integrate our applications with a variety of third-party technologies, our business and operating results could be adversely affected.
We depend on relationships with third-party technology and content providers and other key suppliers, and are also dependent on third parties for the license of certain software and development tools that are incorporated into or used with our applications or used to help improve our own internal systems, processes, or controls. For example, we leverage software and services for development tools and to deliver applications from many third-party suppliers including AWS and Google Cloud. If the operations of these third parties are disrupted, our own operations may suffer, which could adversely impact our operating results. Additionally, if we are unsuccessful in establishing or maintaining our relationships with these third parties, or if the quality of their products or performance is inadequate, our ability to compete in the marketplace or to grow our revenues could be impaired and our operating results may suffer.
To the extent that our applications depend upon the successful integration and operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software, as well as cybersecurity threats or attacks related to such software could prevent the deployment or impair the functionality of our applications, delay new application introductions, result in a failure of our applications, result in increased costs, including warranty and other related claims from customers, and injure our reputation.
Any failure of our applications to operate effectively with future network platforms and other third-party technologies, or changes in such technologies that degrade the functionality of our products or give preferential treatment to competitive services, could reduce the demand for our applications, result in customer and end user dissatisfaction, and adversely affect our business and operating results.
The extent to which the continuing global economic and geopolitical volatility, and any resulting effect on customer spending, will continue to impact our business, financial condition, and operating results will depend on future developments, which are highly uncertain and difficult to predict.
We operate on a global scale, and as a result, our business and revenues are impacted by global economic and geopolitical conditions. Global economic developments, including new or increased tariffs, geopolitical volatilities and conflicts, downturns or recessions, political instability, and global health crises may negatively affect us or our ability to accurately forecast and plan our future business activity. In addition, volatile economic and geopolitical situations have led and could lead to further economic disruption. Any sustained adverse impacts from these and other recent macroeconomic events could materially and adversely affect our business, financial condition, operating results, and earnings guidance that we may issue from time to time, which could have a material effect on the value of our Class A common stock.
Our future revenues rely on continued demand by existing customers and the acquisition of new customers who may be subject to economic hardship due to recent macroeconomic events, including concerns about the impact of potential or imposed tariffs, inflation or the interest rate environment, and may delay or reduce their enterprise software spending to preserve capital and liquidity. In connection with recent macroeconomic events, we have experienced and may continue to experience delays in purchasing decisions from existing and prospective customers, increased demand for price concessions and delayed payment terms, and a reduction in customer demand. Our business, financial condition, and operating results may be negatively impacted in future periods due to the prolonged impacts of recent macroeconomic events, which may not be fully reflected in our operating results and overall financial performance until future periods.
To the extent recent macroeconomic events adversely affect our business, financial condition, and operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly operating results, including our revenues, subscription revenue backlog, operating margin, profitability, and cash flow, may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Additionally, we typically sign a significantly higher percentage of agreements with new customers as well as renewal agreements with existing customers in the fourth quarter of each year, and this year-over-year compounding effect in billing patterns causes the value of invoices that we generate in the fourth quarter to continually increase in proportion to our billings in the other three quarters of our fiscal year.
Our quarterly financial results may fluctuate as a result of a variety of factors, including the risks described in this “Risk Factors” section, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. The extent to which recent macroeconomic events could continue to impact our operating results will depend on future developments, which are highly uncertain and difficult to predict. Fluctuations in our quarterly results and related impacts to any earnings guidance we may issue from time to time, including any modification or withdrawal thereof, may negatively impact the value of our securities.
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Catastrophic or climate-related events may disrupt our business.
Our corporate headquarters are located in Pleasanton, California, and we host our applications in data centers operated by third parties located in the U.S., Europe, Canada, and the Asia-Pacific region. The west coast of the U.S. contains active earthquake zones and the southeast is subject to seasonal hurricanes or other extreme weather conditions. Additionally, we rely on internal technology systems, our website, our network, and third-party infrastructure and enterprise applications, which are located in a wide variety of regions, for our development, marketing, operational support, hosted services, and sales activities. In the event of a major earthquake, hurricane, or other natural disaster, or a catastrophic event such as fire, power loss, telecommunications failure, vandalism, civil unrest, cyber-attack, geopolitical instability, war, terrorist attack, acts of violence, insurrection, pandemics or other public health emergencies, or the effects of climate change (such as drought, flooding, heat waves, wildfires, increased storm severity, and sea level rise), we may be unable to continue our operations and have, and may in the future, endure system interruptions, and may experience delays in our product development, lengthy interruptions in our services, breaches of data security, and loss of critical data, all of which could cause reputational harm or otherwise have an adverse effect on our business and operating results. In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards, or stakeholder expectations regarding climate change that may impact our business, financial condition, and operating results.
Our disclosures related to corporate responsibility and sustainability-related matters expose us to risks that could adversely affect our reputation and performance.
The positions we take on corporate responsibility and sustainability-related matters, human capital management initiatives, and ethical issues from time to time may impact our brand, reputation, or ability to attract or retain customers. In particular, our brand and reputation are associated with our environmental sustainability commitments (including our science-based targets), strong corporate governance practices, inclusivity, and ethical use, and any perceived changes in our dedication to these commitments could impact our relationships with potential and current customers, employees, stockholders, and other stakeholders.
Standards and requirements for tracking and reporting corporate responsibility and sustainability-related matters continue to evolve. Our failure to accomplish stated commitments or accurately track and report on these matters on a timely basis, or at all, could adversely affect our reputation and could expose us to increased scrutiny from the investment community as well as enforcement authorities. In addition, our processes and controls may not always comply with evolving standards for identifying, measuring, and reporting sustainability metrics, including sustainability-related disclosures that may be required by various regulatory bodies, and such standards have and may continue to change over time. If our sustainability or other corporate responsibility practices do not align with or meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment, business partner, acquirer, or service provider could be negatively impacted. Conflicting laws, regulations, and executive orders and a lack of harmonization of legal and regulatory environments and stakeholder expectations across the jurisdictions in which we operate may create enhanced compliance risks and costs.
Risks Related to Cybersecurity, Data Privacy, and Intellectual Property
If our information technology systems are compromised or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, our operations may be disrupted, our applications may become unavailable, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities.
Our applications involve the storage and transmission of our customers’ and other users’ sensitive and proprietary information, including personal or identifying information regarding our customers, their employees, job candidates, customers, prospects, and suppliers, as well as financial, accounting, health, and payroll data. Additionally, our operations and the availability of the services we provide also depend on our information technology systems. As a result, a compromise of our applications or systems, or unauthorized access to, acquisition, use, tampering, release, alteration, theft, loss, or destruction of sensitive data, or unavailability of data or our applications, has and could disrupt our operations or impact the availability or performance of our applications; expose us and our customers to regulatory obligations and enforcement actions, litigation, investigations, remediation and indemnity obligations, or supplemental disclosure obligations; damage our reputation and brand; result in loss of customer, consumer, and partner confidence in the security of our applications; result in an increase in our insurance premiums, suspension or loss of authorization under the Federal Risk and Authorization Management Program (“FedRAMP”) or other authorizations; impair our competitive position; and result in other potential liabilities or related fees, expenses, or loss of revenues, any of which could adversely affect our business and operating results.
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In the normal course of business, we are and have been the target of malicious cyber-attack attempts and have experienced and may in the future experience other security events, including the compromise of our information systems by computer hackers, employees, contractors, or vendors, as well as those involving attempts to exploit vulnerabilities in third-party technologies or services on which we rely and those involving software bugs, human error, technical malfunctions, or other malfeasance. The financial and personnel resources we employ to implement and maintain security measures, including our information security risk insurance policy, may not be sufficient to address our security needs. The security measures we have in place vary in maturity across the organization and may not be sufficient to protect against security risks, preserve our operations and services and the integrity of customer and personal information, and prevent data loss, misappropriation, and other security breaches. Our logging may not be and has not been sufficient to fully investigate the scope of an incident.
Cybersecurity threats and attacks are often targeted at companies such as ours and may take a variety of forms ranging from individuals or groups of security researchers, to insiders, to sophisticated hacker organizations, including state-sponsored actors and financially motivated actors. These threats may be directed at us or at third parties in our supply chain, including cloud service providers, software vendors, open-source software maintainers, and other service providers or partners whose products or services are integrated with or support our platform and solutions. As our market presence grows and as our ecosystem of partners, integrations, and service providers expands, we face increased risks of cybersecurity attack or other security threats, including supply chain attacks. Additionally, as AI technologies, including generative AI models, develop rapidly, threat actors are using these technologies to create sophisticated new attack methods that are increasingly automated, targeted, damaging, and more difficult to defend against. Threat actors may also target our AI models and related infrastructure in ways that we cannot yet anticipate. Further, remote work and resource access, including our hybrid work model, has and may continue to result in an increased risk of cybersecurity-related events, including phishing and other social engineering attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of our employees and our service providers continuing to work remotely from non-corporate managed networks. Examples of key cybersecurity risks include viruses, worms, ransomware, and other malicious software programs, along with social engineering attacks, fraud, credential theft or abuse, exploitation of software bugs or other defects, targeted attacks against cloud services and other hosted software, and exploitation of unmanaged software or systems. As the techniques used to obtain unauthorized access or sabotage systems change frequently, are becoming increasingly sophisticated and complex, and often are not identified until they are launched against a target, and because evidence of unauthorized activity may not have been captured or retained, or may be proactively destroyed by unauthorized actors, we may be unable to anticipate or timely detect these attacks, assess the true impact they may have on our business and operations, or to implement adequate preventative measures. Any cyber-attacks and other security events may have a significant or material impact on our business and operating results.
There may also continue to be attacks targeting any vulnerabilities in our applications, internally built infrastructure, enhancements, and updates to our existing offerings, or in the many different underlying networks and services that power the internet that our products depend on, most of which are not under our control or the control of our vendors, partners, or customers. Systems and processes designed to protect our applications, systems, software, and data, as well as customer data and other user data, and to prevent data loss and detect security breaches, may not be effective against all cybersecurity threats or perceived threats. We have been subject to such incidents, including through third-party service providers and in connection with acquisitions we have made. In addition, our software development practices have not and may not identify all potential privacy or security issues, and inadvertent disclosures of data have occurred and may occur again.
Furthermore, we have acquired or partnered with a number of companies, products, services, and technologies over the years, and incorporated third-party products, services, and technologies into our own products and services. Addressing security issues associated with acquisitions, partnerships, incorporated technologies, and our supply chain requires significant resources, and we have inherited and may in the future inherit additional risks upon integration with or use by Workday. In addition, if a high-profile security breach occurs with respect to an industry peer, our customers and potential customers may generally lose trust in the security of financial management, spend management, human capital management, planning, or analytics applications, or in cloud applications for enterprises in general.
We rely on sophisticated information systems and technology, including those provided by third parties, for the secure collection, processing, transmission, and storage of confidential, proprietary, and personal information, and to support our business operations and the availability of our applications. In the past several years, supply chain attacks have increased in frequency and severity. As we are both a provider and consumer of information systems and technology, we are at higher risk of being impacted either directly or indirectly by these attacks. The control systems, cybersecurity program, infrastructure, physical facilities of, and personnel associated with third parties that we rely on or partner with are beyond our control. Our customers may authorize third-party technology providers to access their customer data and any unauthorized use of the third-party technology may result in unauthorized access to such data. The audits we periodically conduct of some of our third-party vendors are unable to prevent security events impacting the information technology systems of third parties we rely on.
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Privacy concerns, evolving regulation of cloud computing, cross-border data transfer, and other domestic or foreign laws and regulations, including those that seek to regulate access to data, may reduce the adoption of our applications, result in significant costs and compliance challenges, and adversely affect our business and operating results.
Legal requirements related to collecting, storing, handling, retaining, and transferring (collectively, “processing”) personal data are rapidly evolving at both the national and international level in ways that require our business to adapt to comply with applicable laws and support customer compliance. As the complexity of our products grows, the regulatory focus on privacy intensifies worldwide, and jurisdictions increasingly consider and adopt privacy laws, the risks related to our business’s processing of personal data also grow. The volume and complexity of these regulatory requirements may continue to increase, including in response to heightened geopolitical tensions and the rapid adoption of AI technologies. In addition, possible adverse interpretations of existing privacy-related laws and regulations by regulators in jurisdictions where our customers operate, as well as the potential adoption of new privacy-related requirements, could impose significant obligations affecting our business or prevent us from offering certain services in jurisdictions where we operate.
The global privacy and data protection compliance landscape continues to become increasingly complex, fragmented, and financially relevant to business operations. As a result, our data processing creates current and prospective risks related to increased regulatory compliance costs, government enforcement actions and/or financial penalties for non-compliance, and reputational harm. For example, the EU-U.S. Data Privacy Framework (“DPF”) is in place and provides one method under which EU data can legally be transferred to the U.S. However, it is facing legal challenges. As legal challenges to the DPF remain unresolved, uncertainty may continue regarding the legal requirements for transferring personal data from Europe, an integral aspect of our business that remains governed by, and subject to, General Data Protection Regulation (“GDPR”) requirements. Gaps in compliance with the GDPR data processing requirements by either ourselves or our subprocessors could lead to regulatory enforcement actions, which can result in monetary penalties of up to 4% of worldwide revenue, private lawsuits, reputational damage, and loss of customers. Other EU laws, including the EU Data Act, which primarily governs access to and use of non-personal data generated by digital services, have been, and may continue to be implemented, interpreted, and enforced in ways that impose additional rules and restrictions on the deployment, operation, or use of our products and services and may require us to adapt our business practices or contractual arrangements to comply with such requirements. In addition, potential changes to the laws and regulations that relate to the processing of personal data, including legislative proposals pending in the EU and elsewhere, may change the scope or timing of our compliance obligations. Other countries such as Russia, China, Vietnam, and India have also passed or are in the process of passing laws imposing new requirements, including requirements related to consent and varying degrees of restrictive data residency or localization.
Additionally, a final rule issued by the U.S. Department of Justice establishing a “Data Security Program” came into effect on April 8, 2025. The rule prohibits or restricts certain transactions that could result in access to bulk U.S. sensitive personal data or U.S. government-related data by countries of concern, including China (which includes Hong Kong and Macau). The rule imposes certain diligence, security, audit and record-keeping requirements, and may adversely impact certain of our global business operations, including by restricting or conditioning certain data access or transfers involving subsidiaries, affiliates, and vendors.
Other regulatory developments in the U.S. present additional risks. For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act, gives California consumers, including employees, certain rights similar to those provided by the GDPR, and also provide for statutory damages or fines on a per violation basis that could be very large depending on the regulator's assessed severity of the violation. In addition, numerous states have enacted, or are considering, comprehensive privacy laws and other laws that touch on the processing of personal data in specific contexts, including in connection with AI and automated systems. Certain of these laws and related regulations, including those governing the use of automated decision-making technologies in employment and other consequential decisions, have recently taken effect or will take effect in the near term, further contributing to a fragmented and evolving regulatory landscape that has and may continue to create compliance challenges.
Furthermore, the U.S. Congress has considered, and may in the future adopt, federal privacy-related legislation and data regulation, and regulators, including the U.S. Federal Trade Commission, have brought and continue to bring enforcement actions related to data protection practices and may undertake its own privacy-related rulemaking. In addition to government activity, privacy advocacy and other industry groups have established or may establish various new, additional, or different self-regulatory standards that customers may require us to adhere to, which may place additional burdens on us. Increasing sensitivity of individuals to the unauthorized processing of personal data, whether real or perceived, and an increasingly uncertain trust climate has and may continue to create negative public reaction to technologies, products, and services such as ours or otherwise expose us to liability.
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In addition, as AI technologies are increasingly used across the industry, including in connection with data analytics, automation, customer service, and decision-support features, the speed, scale, and complexity of data processing may increase, which may heighten data privacy risks. AI-enabled or agentic AI features may be targeted, misused, or produce outputs or inferences that implicate personal data in ways that are difficult to anticipate or control, potentially resulting in regulatory scrutiny, litigation, or reputational harm, even in the absence of a data breach.
Taken together, the costs of compliance with and other obligations imposed by privacy and data protection laws and regulations have and may continue to require modification of our services and operations, limit use or adoption of our services, slow the pace at which we close sales transactions, or otherwise adversely affect our business. In addition, privacy and data protection laws, regulations and related enforcement activities may lead to significant fines, penalties, or liabilities for noncompliance. These requirements may impact how personal data must be stored, accessed, and deleted within the products and services and impose certain limitations on how it may be used or shared. Further, the perception of privacy concerns, whether or not valid, may inhibit the adoption, effectiveness, or use of our applications or otherwise impact our business. Compliance with applicable laws and regulations regarding personal data may require changes in services, business practices, or internal systems that result in increased costs, lower revenue, reduced efficiency, or greater difficulty competing with foreign-based firms which could adversely affect our business and operating results.
Any failure to protect our intellectual property rights domestically and internationally could impair our ability to protect our proprietary technology and our brand.
Our success and ability to compete depend in part upon our intellectual property. We rely on patent, copyright, trade secret and trademark laws, trade secret protection, and confidentiality or license agreements with our employees, customers, suppliers, partners, and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate. We have patent applications pending in the U.S. and throughout the world, but we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued to us in the future may not provide us with competitive advantages or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties, including those affiliated with state-sponsored actors, to copy or reverse engineer our applications, including with the assistance of insiders, and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer, and disclosure of our technology may be unenforceable under the laws of jurisdictions outside the U.S. In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the U.S.
We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. These agreements may not be effective in controlling access to and distribution of our applications and proprietary information. Further, these agreements do not prevent our competitors or partners from independently developing technologies that are substantially equivalent or superior to our applications.
We may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect, and enforce our intellectual property rights could have a serious adverse effect on our brand and business.
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We may be sued by third parties for alleged infringement of their proprietary rights.
There is considerable patent and other intellectual property development activity in our industry. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry. From time to time, third parties may claim that our applications and underlying technology infringe or violate their intellectual property rights, even if we are unaware of the intellectual property rights that others may claim cover some or all of our technology or services, and we may be found to be infringing such rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services, require us to change our products, technology, or business practices, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications, or refund fees, which could be costly. In addition, we may be sued by third parties who seek to target us for actions taken by our customers, including through the use or misuse of our products. Even if we were to prevail in an intellectual property dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. Furthermore, from time to time we may introduce or acquire new products, including in areas where we historically have not competed, which could increase our exposure to patent and other intellectual property claims.
Our applications utilize open source software, including open source AI models and platforms, and our strategy of investing in and acquiring such technologies introduces new and heightened risks. Any failure to comply with the terms of one or more of these open source licenses, or to manage the unique risks of open source AI, could negatively affect our business.
Our applications include software covered by open source licenses, which may include, by way of example, the GNU General Public License and the Apache License. Furthermore, our strategy includes acquiring and investing in open-source AI platforms and utilizing AI models that may be governed by novel or untested licenses with ambiguous terms, use-based restrictions, or uncertain legal interpretation. Few terms used in either traditional or new AI-focused open source licenses have been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our applications. We attempt to comply with all open source licensing conditions that apply to our use of open source software. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open source software in a certain manner. Our increasing integration of proprietary AI agents and platforms with open source components may heighten this “copyleft” risk. In addition, the license terms for certain previously open source software or models that we use have changed and the license terms for future versions of open source software that we use might change, requiring us to pay for a commercial license or re-engineer all or a portion of our technologies. In addition to risks related to open source license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business.
Beyond licensing compliance, our use of and investment in open source AI models and platforms create distinct and significant risks. Open source AI models may be trained on data of unknown or uncertain provenance, which could include copyrighted or otherwise proprietary, confidential, or private information. If our applications or the agents our customers build using our platforms incorporate such models, we could face claims for copyright infringement and other violations. Open source AI components may also be subject to “data poisoning” and other security vulnerabilities. Many of the risks associated with usage of open source software, particularly in the rapidly evolving field of AI, cannot be eliminated and could negatively affect our business.
Risks Related to Legal and Regulatory Matters
Unfavorable laws, regulations, interpretive positions, or standards governing new and evolving technologies that we incorporate into our products and services, including those involving AI uses, could result in significant cost and compliance challenges and adversely affect our business and operating results.
Many of our products and services currently utilize or will utilize new and evolving technologies such as AI. The overall regulatory environment governing these types of technologies is likely to evolve as government interest in these technologies increases. Regulation of these technologies, as well as other technologies that we utilize in our products and services, also varies greatly among international, federal, state, and local jurisdictions and is subject to significant uncertainty. Governments and agencies domestic and abroad may in the future change or amend existing laws, or adopt new laws, regulations, or guidance, or take other actions which may severely impact the permitted uses of our technologies. New and changing laws, regulations, executive orders, directives, and enforcement priorities can also create uncertainty about how such laws and regulations will be interpreted and applied to Workday.
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For example, the technologies underlying AI and its uses are subject to a variety of laws and regulations, including those governing intellectual property, privacy, data protection, cybersecurity, consumer protection, competition, and equal opportunity, and are expected to be subject to new laws and regulations or new applications of existing laws and regulations. AI is the subject of ongoing review by various U.S. and international governmental and regulatory agencies, and various U.S. states and other foreign jurisdictions are applying, or are considering applying, their cybersecurity, data protection, and product safety laws to AI and its uses or are considering general legal frameworks for AI and its uses, such as the EU AI Act.
Any failure by us to comply with applicable laws, regulations, guidance, or other rules could result in costly litigation, penalties, or fines. In addition, these regulations and any related enforcement actions could establish and further expand our obligations to customers, individuals, and other third parties with respect to our products and services, limit the countries in which such products and services may be used, restrict the way we structure and operate our business, require us to divert development and other resources, and reduce the types of customers and individuals who can use our products and services. Furthermore, our customers may operate in foreign jurisdictions, including countries in which we don’t operate, and may be subject to additional laws and regulations outside the scope of our products. Increased regulation and oversight of products or services which utilize or rely on these technologies may result in costly compliance burdens or otherwise increase our operating costs, detrimentally affecting our business. These new technologies could subject us to additional litigation brought by private parties, which could be costly, time-consuming, and distracting to management and could result in substantial expenses and losses.
We are subject to risks related to government contracts and related procurement regulations, which may adversely impact our business and operating results.
Our contracts with federal, state, local, and foreign government entities are subject to various procurement regulations and other requirements relating to their formation, award, administration, and performance, which present certain risks and challenges not present in private commercial agreements. These risks and challenges include varying governmental budgeting processes and appropriations, contracting policies and requirements, changes in governmental administrations and policies, fluctuations due to government spending cuts and shutdowns, pressure to reduce deficits through spending reductions, highly competitive and lengthy bidding processes, and adherence to complex regulatory requirements and executive orders, and may impact government spending or result in termination of government contracts or delays in contract awards, which could adversely affect our business and operating results. Further, we have experienced and may in the future experience challenges by third parties to contracts awarded with government entities, and our contracting with certain government entities may result in negative publicity or reputational harm.
Laws and regulations provide public sector customers with various rights, many of which are not typically found in commercial contracts. For example, some governmental contracts provide for termination by the government at any time, with or without cause, which can adversely affect our business and operating results and impact other existing or prospective government contracts. U.S. federal, state, and local government and foreign government contracts are generally subject to government funding authorizations and appropriations, and contracts may also be terminated due to a lack of government funds. Changes in government procurement policies, priorities, regulations, or technology initiatives may negatively impact our potential for growth in the government sector.
We have made, and may continue to make, significant investments to support our efforts to sell to government entities, including obtaining various authorizations and certifications. For example, we have obtained authorization under FedRAMP, which allows us to participate in the U.S. federal government market. Such authorization is subject to rigorous compliance and if we were to lose our authorization, it could inhibit or preclude our ability to contract with certain U.S. federal and state government customers. If we fail to maintain FedRAMP authorization, we may fail to retain existing customers or attract new customers that rely on our authorization under FedRAMP, which could subject us to liability, result in reputational harm, and adversely impact our financial condition or operating results. Government certification requirements applicable to our products and services may change, which could restrict our ability to sell into the public sector until we have received a certification or until we can account for these changes in our service or corporate controls.
We may be subject to additional audits and investigations relating to our government contracts, and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, suspension of payments, payment of fines, and suspension or debarment from future government business, as well as harm to our reputation and financial results.
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Adverse litigation results could have a material adverse impact on our business.
We are regularly involved with claims, suits, purported class or representative actions, and may be involved in regulatory and government investigations and other proceedings, involving competition, intellectual property, data security and privacy, bankruptcy, tax and related compliance, labor and employment, commercial disputes, and other matters. Such claims, suits, actions, regulatory and government investigations, and other proceedings can impose a significant burden on management and employees, could prevent us from offering one or more of our applications, services, or features to others, could require us to change our technology or business practices, or could result in monetary damages, fines, civil or criminal penalties, and have and could continue to cause reputational harm or other adverse consequences. Adverse outcomes in some or all of these claims may result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business. The litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future. A material adverse impact in our condensed consolidated financial statements could occur for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.
Unanticipated tax laws or any change in the application of existing tax laws to us or our customers and unanticipated changes in our effective tax rate may adversely impact our profitability and financial results.
We operate and are subject to taxes in the U.S. and numerous other jurisdictions throughout the world. Changes to federal, state, local, or international tax laws on income, sales, use, indirect, or other tax laws, statutes, rules, regulations, or ordinances on multinational corporations have recently been enacted or are currently being considered by the U.S. and other countries where we do business. Contemplated legislative initiatives include, but are not limited to, changes to transfer pricing policies and definitional changes to permanent establishment that could be applied solely or disproportionately to services provided over the internet. These contemplated tax initiatives, if finalized and adopted by countries, may ultimately impact our effective tax rate and could adversely affect our sales activity resulting in a negative impact on our operating results and cash flows.
In addition, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us (possibly with retroactive effect), which could require us to pay additional tax amounts, fines or penalties, and interest for past amounts. Existing tax laws, statutes, rules, regulations, or ordinances could also be interpreted, changed, modified, or applied adversely to our customers (possibly with retroactive effect), which could require our customers to pay additional tax amounts with respect to services we have provided, fines or penalties, and interest for past amounts. If we are unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, thereby adversely impacting our operating results and cash flows. If our customers must pay additional fines or penalties, it could adversely affect demand for our services.
Significant judgment is often required in the determination of our worldwide provision for income taxes. Our effective tax rate could be impacted by changes in the valuation of deferred tax assets and liabilities and our ability to utilize them. We are also subject to tax examinations and it is possible that the final determination of any examinations will have an adverse effect on our operating results or financial position.
Risks Related to Financial Matters
Because we encounter long sales cycles when selling to large customers and we recognize subscription services revenues over the term of the contract, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern.
We generally recognize subscription services revenues over time as services are delivered to the customer, which typically occurs over a period of three years or longer. As a result, most of the subscription services revenues we report in each quarter are derived from the recognition of unearned revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscription contracts in any single quarter may not be reflected in our revenue results for that quarter but will negatively impact our revenue in future quarters. Additionally, because much of our sales efforts are targeted at large enterprise customers, we face greater costs, longer sales cycles, less predictability in completing some of our sales, and varying deployment timeframes.
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Our typical sales cycles for many new customers are six to twelve months but can extend for eighteen months or more, and we expect that this lengthy sales cycle may continue or expand as customers increasingly adopt applications across our platform. We have seen and may continue to see instances of increased scrutiny from existing and prospective customers and the lengthening of certain sales cycles. For example, we have recently experienced lengthening of certain sales cycles, particularly within net new opportunities. The extended sales cycles are particularly evident in the government, higher education, and healthcare industries which are tied to federal funding. Longer sales cycles could cause our operating and financial results to suffer in a given period. Accordingly, the effect of significant downturns in sales and market acceptance of new applications, as well as potential changes in our pricing policies or rate of renewals, may not be fully reflected in our operating results until future periods. Additionally, we may be unable to adjust our cost structure to reflect any such changes in revenues. As a result, increased growth in the number of our customers could result in our recognition of more costs than revenues in the earlier periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as subscription services revenues from new customers generally are recognized over the applicable subscription term. Furthermore, our subscription-based model is largely based on the size of our customers’ employee headcount. Therefore, the addition or loss of employees by our customers, including any significant reductions in force by our customers, or customer insolvencies resulting from severe economic hardship, can and has had an impact on our subscription services revenues. Prolonged decreases in our customers’ headcounts can materially impact our business and operating results in any given period.
Our current and future indebtedness may adversely affect our financial condition and operating results.
In fiscal 2023, we issued $3.0 billion aggregate principal amount of senior notes (“Senior Notes”), consisting of $1.0 billion aggregate principal amount of 3.500% notes due April 1, 2027, $750 million aggregate principal amount of 3.700% notes due April 1, 2029, and $1.25 billion aggregate principal amount of 3.800% notes due April 1, 2032. Additionally, in fiscal 2023, we entered into a credit agreement (“2022 Credit Agreement”) which provides for a revolving credit facility in an aggregate principal amount of $1.0 billion. As of July 31, 2026, we had no outstanding revolving loans under the 2022 Credit Agreement.
We may incur substantial additional debt in the future, some of which may be secured debt. It is possible that we will not be able to repay this indebtedness when due or refinance this indebtedness on acceptable terms or at all.
In addition, our indebtedness could, among other things:
•make it difficult for us to pay other obligations;
•make it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, debt service requirements, or other purposes;
•adversely affect our liquidity and result in a material adverse effect on our financial condition upon repayment of the indebtedness;
•require us to dedicate a substantial portion of our cash flow from operations to service and repay the indebtedness, reducing the amount of cash flow available for other purposes;
•limit our flexibility in planning for and reacting to changes in our business;
•increase our vulnerability to the impact of adverse economic conditions, including rising interest rates (which can make refinancing existing indebtedness more difficult or costly); and
•negatively impact our credit rating, which could limit our ability to obtain additional financing in the future and adversely affect our business.
Our Senior Notes and 2022 Credit Agreement also impose restrictions on us and require us to maintain compliance with specified covenants. For example, our 2022 Credit Agreement includes a financial covenant that requires us to maintain a specific leverage ratio. Our ability to comply with these covenants may be affected by events beyond our control. If we breach any of the covenants and do not obtain a waiver from the lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable. Any required repayment of our debt as a result of a fundamental change or other acceleration would lower our current cash on hand such that we would not have those funds available for use in our business.
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We are subject to risks associated with our equity investments, including partial or complete loss of invested capital, and significant changes in the fair value of this portfolio could adversely impact our financial results.
We invest in early to late-stage companies for strategic reasons and to support key business initiatives, and we may not realize a return on our equity investments. Many such companies generate net losses and the market for their products, services, or technologies may be slow to develop or never materialize. These companies are often dependent on the availability of later rounds of financing from banks or investors on favorable terms to continue their operations. The financial success of our investment in any company is typically dependent on a liquidity event, such as a public offering, acquisition, or other favorable market event reflecting appreciation to the cost of our initial investment. The capital markets for public offerings and acquisitions are dynamic and the likelihood of liquidity events for the companies we have invested in has and could further deteriorate, which could result in a loss of all or a substantial part of our investment in these companies. Additionally, instability in the global banking system has created bank-specific and broader financial institution liquidity risks and concerns, which may have an adverse impact on the companies we have invested or may invest in.
Further, valuations of non-marketable equity investments are inherently complex due to the lack of readily available market data and the anticipated valuation at the time of our investment may not meet our expectations. In addition, we may experience additional volatility to our results of operations due to changes in market prices of our marketable equity investments and the valuation and timing of observable price changes or impairments of our non-marketable equity investments. Volatility in the global market conditions, including recent economic disruptions, inflation, and ongoing volatility in the public equity markets, may impact our equity investments. This volatility could be material to our results in any given quarter and may cause our stock price to decline. In addition, our ability to mitigate this volatility and realize gains on investments may be impacted by our contractual obligations to hold securities for a set period of time. For example, to the extent a company we have invested in undergoes an initial public offering (“IPO”), we may be subject to a lock-up agreement that restricts our ability to sell our securities for a period of time after the public offering or otherwise impedes our ability to mitigate market volatility in such securities.
We may discover weaknesses in our internal controls over financial reporting, which may adversely affect investor confidence in the accuracy and completeness of our financial reports and consequently the market price of our securities.
As a public company, we are required to design and maintain proper and effective internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and provide a management report on the internal controls over financial reporting, which must be attested to by our independent registered public accounting firm. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated.
The process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 is challenging and costly. As we grow our operations and personnel, we will need to continue to improve our operational, financial, and management controls as well as our reporting systems and procedures. In the future, we may not be able to complete our evaluation, testing, and any required remediation in a timely fashion. If we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities could be negatively affected, and we could become subject to investigations by the Financial Industry Regulatory Authority, the SEC, or other regulatory authorities, which could require additional financial and management resources. In addition, because we use Workday’s financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers, and negatively impact demand for our applications.
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Risks Related to Ownership of Our Class A Common Stock
Our Co-Founders have control over key decision making as a result of their control of a majority of our voting stock.
As of July 31, 2026, our Co-Founder and CEO Emeritus, David Duffield, together with his affiliates, held voting rights with respect to approximately 36 million shares of Class B common stock and 0.1 million shares of Class A common stock. As of July 31, 2026, our Co-Founder, CEO, and Chair of our Board of Directors, Aneel Bhusri, together with his affiliates, held voting rights with respect to approximately 8 million shares of Class B common stock and 0.5 million shares of Class A common stock. In addition, Mr. Bhusri held unvested equity awards representing approximately 1.1 million shares of Class A common stock. Further, Messrs. Duffield and Bhusri have entered into a voting agreement under which each has granted a voting proxy with respect to certain Class B common stock beneficially owned by him effective upon his death or incapacity as described in our registration statement on Form S-1 filed in connection with our IPO. Messrs. Duffield and Bhusri have each initially designated the other as their respective proxies. Accordingly, upon the death or incapacity of either Mr. Duffield or Mr. Bhusri, the other would individually continue to control the voting of shares subject to the voting proxy. Collectively, the shares described above represent a substantial majority of the voting power of our outstanding capital stock. As a result, Messrs. Duffield and Bhusri have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. As stockholders, even as controlling stockholders, they are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally.
In addition, Mr. Bhusri has the ability to significantly influence the management and affairs of our company as a result of his position as a member of our Board of Directors and an officer of Workday. Mr. Bhusri, in his capacity as a board member and officer, however, owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders.
The dual class structure of our common stock has the effect of concentrating voting control with our Co-Founders, as well as with other executive officers, directors, and affiliates, which limits or precludes the ability of non-affiliates to influence corporate matters.
Our Class B common stock has 10 votes per share and our Class A common stock, which is the stock that is publicly traded, has one vote per share. Stockholders who hold shares of Class B common stock, including our executive officers, directors, and other affiliates, together hold a substantial majority of the voting power of our outstanding capital stock as of July 31, 2026. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the conversion of all shares of all Class A and Class B shares to a single class of common stock on the date that is the first to occur of (i) October 17, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr. Duffield and Mr. Bhusri, or (iv) the date on which the holders of a majority of the shares of Class B common stock elect to convert all shares of Class A common stock and Class B common stock into a single class of common stock. This concentrated control will limit or preclude the ability of non-affiliates to influence corporate matters for the foreseeable future.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If, for example, Mr. Duffield and Mr. Bhusri retain a significant portion of their holdings of Class B common stock for an extended period of time, they could, in the future, continue to control a majority of the combined voting power of our Class A common stock and Class B common stock.
Our stock price has been volatile in the past and may be subject to volatility in the future.
The trading price of our Class A common stock has historically been volatile and could be subject to wide fluctuations in response to the risks described in this “Risk Factors” section, and other risks which are beyond our control. The factors that have and may in the future affect the trading price of our securities include, but are not limited to:
•guidance regarding our operating results and other financial metrics that we provide to the public, differences between our guidance and market expectations, our failure to meet our guidance, any withdrawal of previous guidance or changes from our historical guidance;
•changes in investor and analyst valuation models for our Class A common stock;
•the economy as a whole, political and regulatory uncertainty, and market conditions in our industry and the industries of our customers;
•announcements of technological innovations, new applications or enhancements to services, acquisitions, strategic alliances, or significant agreements by us or by our competitors;
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•disruptions in our services due to computer hardware, software, or network problems or any announcements related to security incidents;
•announcements of customer additions and customer cancellations or delays in customer purchases;
•recruitment or departure of key personnel;
•trading activity by directors, executive officers, and significant stockholders, or the perception in the market that the holders of a large number of shares intend to sell their shares;
•actions instituted by activist shareholders or others, and our response to such actions;
•any future issuances of our securities; and
•changes in the amounts or frequency of stock repurchases.
Additionally, the stock markets have at times experienced extreme price and volume fluctuations that have affected and may in the future affect the market prices of equity securities of many companies. These fluctuations have, in some cases, been unrelated or disproportionate to the operating performance of these companies. Further, the trading prices of publicly traded shares of companies in our industry have been particularly volatile and may be very volatile in the future.
In the past, some companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
We may not realize the anticipated long-term stockholder value of our share repurchase programs.
We have share repurchase programs under which we are authorized to repurchase shares of our Class A common stock. Such repurchases may be made through open market transactions, including through the use of trading plans intended to qualify under Rule 10b5-1, through privately negotiated transactions, or by other means, in each case in accordance with applicable securities laws and other restrictions. The share repurchase programs do not have an expiration date, may be suspended or discontinued at any time, and do not obligate us to acquire any amount of our Class A common stock.
Any failure to repurchase stock after we have announced our intention to do so may negatively impact our reputation and investor confidence in us and may negatively impact our stock price. Since first authorizing a share repurchase program, there have been periods of time during which we have been unable to repurchase shares, for example, due to the possession of material nonpublic information.
The existence of our share repurchase programs could cause our stock price to trade higher than it otherwise would and could potentially reduce the market liquidity for our stock. Our share repurchase programs may not enhance long-term stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares and short-term stock price fluctuations could reduce the effectiveness of this program.
Repurchasing our common stock will reduce the amount of cash we have available to fund working capital, repayment of debt, capital expenditures, strategic acquisitions or business opportunities, and other general corporate purposes, and we may fail to realize the anticipated long-term stockholder value of our share repurchase programs. Furthermore, the timing and amount of any repurchases, if any, will be subject to liquidity, market and economic conditions, compliance with applicable legal requirements such as Delaware surplus and solvency tests, and other relevant factors.
Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law (“DGCL”) may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of Workday more difficult, including the following:
•any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class;
•our dual class common stock structure, which provides our Co-Founders with the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock;
•our Board of Directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause;
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•when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of common stock:
◦certain amendments to our restated certificate of incorporation or amended and restated bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock;
◦our stockholders will only be able to take action at a meeting of stockholders and not by written consent; and
◦vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders;
•only our chair of the board, lead independent director of the board, chief executive officer, presidents, or a majority of our Board of Directors are authorized to call a special meeting of stockholders;
•certain litigation against us can only be brought in Delaware;
•we will have two classes of common stock until the date that is the first to occur of (i) October 17, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr. Duffield and Mr. Bhusri, or (iv) the date on which the holders of a majority of the shares of Class B common stock elect to convert all shares of Class A common stock and Class B common stock into a single class of common stock;
•our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without the approval of the holders of Class A common stock; and
•advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
In addition, Section 203 of the DGCL imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock, which may discourage, delay, or prevent a change in control of our company.
Furthermore, the change in control repurchase event provisions of our Senior Notes may delay or prevent a change in control of our company, because those provisions allow note holders to require us to repurchase such notes upon the occurrence of a fundamental change or change in control repurchase event.
These anti-takeover defenses could discourage, delay, or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could depress the market price of our securities.
The exclusive forum provision in our organizational documents may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.
Our restated certificate of incorporation and our bylaws, to the fullest extent permitted by law, provide that the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. There is uncertainty as to whether a court would enforce this exclusive forum provision with respect to claims under the Securities Act. If a court were to find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition, and operating results.
Our bylaws include a provision providing that the federal district courts of the U.S. will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (“Federal Forum Provision”). Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. Application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
In addition, neither the exclusive forum provision in our restated certificate of incorporation nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
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Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholders’ ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
We do not intend to pay dividends for the foreseeable future.
We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
None.
Purchases of Equity Securities by the Issuer
The table below sets forth information regarding our purchases of our Class A common stock during the three months ended July 31, 2026 (in millions, except number of shares which are reflected in thousands, and per share data):
| Period | Total Number of Shares Purchased (2) | Average Price Paid per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Program (2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)(2) | ||||||||||||||||||||||
| May 1, 2026 - May 31, 2026 | 2,070 | $ | 125.64 | 2,070 | $ | 1,048 | ||||||||||||||||||||
| June 1, 2026 - June 30, 2026 | 4,005 | 130.31 | 4,005 | 526 | ||||||||||||||||||||||
| July 1, 2026 - July 31, 2026 | 3,708 | 141.56 | 3,708 | 0 | ||||||||||||||||||||||
| Total | 9,783 | 9,783 | ||||||||||||||||||||||||
(1)Amounts exclude excise tax and commissions.
(2)In September 2025, our Board of Directors authorized the repurchase of up to $4.0 billion of our outstanding shares of Class A common stock. As of July 31, 2026, this share repurchase program was fully completed with no authorization remaining. For further information, see Note 13, Stockholders’ Equity, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Insider Trading Arrangements
During the three months ended July 31, 2026, the following directors and/or officers of Workday adopted or terminated
| Name and Title | Action | Total Shares of Class A Common Stock to be Sold | Adoption Date | Expiration Date | ||||||||||||||||||||||
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ITEM 6. EXHIBITS
The Exhibits listed below are filed as part of this Form 10-Q.
| Incorporated by Reference | Filed Herewith | |||||||||||||||||||||||||||||||||||||
| Exhibit No. | Exhibit | Form | File No. | Filing Date | Exhibit No. | |||||||||||||||||||||||||||||||||
| 10.1† | S-8 | 333-297042 | June 25, 2026 | 4.4 | ||||||||||||||||||||||||||||||||||
| 10.2† | S-8 | 333-297042 | June 25, 2026 | 4.6 | ||||||||||||||||||||||||||||||||||
| 31.1 | X | |||||||||||||||||||||||||||||||||||||
| 31.2 | X | |||||||||||||||||||||||||||||||||||||
| 32.1* | X | |||||||||||||||||||||||||||||||||||||
| 32.2* | X | |||||||||||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | X | ||||||||||||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Schema Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Definition Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Labels Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | X | ||||||||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | X | ||||||||||||||||||||||||||||||||||||
| † | Indicates a management contract or compensatory plan. | |||||||||||||||||||||||||||||||||||||
| * | These exhibits are furnished with this Quarterly Report on Form 10-Q and are not deemed filed with the SEC and are not incorporated by reference in any filing of Workday, Inc. under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in such filings. | |||||||||||||||||||||||||||||||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Workday, Inc. | |||||
Dated: August 27, 2026 | /s/ Zane Rowe | ||||
| Zane Rowe Chief Financial Officer (Principal Financial Officer) | |||||
Dated: August 27, 2026 | /s/ Mark Garfield | ||||
| Mark Garfield Chief Accounting Officer (Principal Accounting Officer) | |||||
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