Workday reported better-than-expected first quarter earnings as the company benefited from "continued efficiencies." Workday said that more than 60% of its customers are now using Workday Illuminate AI.
The HCM and financial software company reported first quarter earnings of 25 cents a share on revenue of $2.24 billion, up 12.6% from a year ago. Non-GAAP first quarter earnings were $2.23 a share.
Wall Street was looking for non-GAAP earnings of $2.01 a share on revenue of $2.22 billion.
Carl Eschenbach, CEO of Workday, said the quarter was solid and "a testament to the durability of our business and the relevance of our platform."
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CFO Zane Rowe added that the company is focused on "executing in this uncertain environment and are reiterating our fiscal 2026 subscription revenue guidance of $8.8 billion while increasing our fiscal 2026 non-GAAP operating margin guidance to approximately 28.5%."
During the quarter Workday launched new Illuminate Agents, added new customers including United Airlines and Mutual of Omaha Insurance Company and saw traction in the technology and media vertical.
As for the outlook, Workday projected second quarter subscription revenue of $2.16 billion, up 13.5% from a year ago. Subscription revenue for fiscal 2026 will be $8.8 billion, up 14%. Non-GAAP margins for fiscal 2026 will be 28.5% up from the 28% projected for the second quarter.
Constellation Research analyst Holger Mueller said:
"Workday had a good quarter, breaking $2 billion in subscription services in a quarter for the first time. Despite restructuring and reducing headcount by about 7.5%, all its key costs in R&D, sales and marketing and G&A were still up. The impairment charge for restructuring practically halved its operating income from 3.2% to 1.8% of revenues. Eschenbach and team are managing Workday on a razor thin margin, and evidently do not want the vendor to slip back in to the red."
