Summary
Workday opened fiscal 2023 with total revenues of $1.43 billion in the first quarter, up 22.1% from the prior-year quarter. Subscription services revenue reached $1.27 billion, an increase of 23.2%. Subscription services revenue accounted for 89% of total revenues, and gross retention was over 95%. The top line held up, but GAAP profitability moved the other way. The operating loss was $72.84 million, or -5.1% of revenues, and the loss widened 90.1% from the prior-year quarter. GAAP operating margin was -5.1%, down 1.8 percentage points. Net loss was $102.17 million, and the loss widened 119.6%. Diluted EPS was -$0.41, and the per-share loss widened 115.8%.
Non-GAAP results showed the same tension. Non-GAAP operating income was $288.6 million, or 20.1% of revenues, compared with $288.5 million, or 24.6% of revenues, in the prior-year quarter. Non-GAAP basic and diluted net income per share was $0.86 and $0.83, compared with $0.93 and $0.87. Management tied the GAAP and non-GAAP margin declines to higher headcount, the rollout of a performance-based cash bonus program, a return to travel and in-person events, and other growth investments, partly offset by higher revenues. The gap between GAAP and non-GAAP results remains large because of share-based compensation and other excluded items.
Cash generation and backlog offered support. Operating cash flow was $439.72 million, down 2.8% from the prior-year quarter. Deferred revenue, current portion, was $2.82 billion, up 19.4%. Total subscription revenue backlog was $12.65 billion, up 25.5%, and the 24-month backlog was $7.97 billion, up 20.9%. Workday ended the quarter with $6.26 billion in cash, cash equivalents, and marketable securities. Headcount was 15,932, up 21% from 13,119.
Management pointed to full-year and next-quarter guidance. For fiscal 2023, subscription revenue is expected to be $5.537 billion to $5.557 billion, representing 22% year-over-year growth. For the second quarter, subscription revenue is guided to $1.353 billion to $1.355 billion, also 22% year-over-year growth. Full-year non-GAAP operating margin guidance is 18.5%. The company said it is maintaining that margin target as it invests in the long-term opportunity. Non-GAAP operating expenses were $1.1 billion, up 29%, driven by higher headcount, a new performance-based cash bonus program, facilities and IT costs, third-party data center capacity, travel, and marketing.
Operational news was busy. Workday plans to create 1,000 new jobs at its European headquarters in Dublin over the next two years and to build a new European headquarters at Grangegorman. It completed a $3.0 billion senior notes offering. It also announced two new ESG solutions and was named one of the World's Most Ethical Companies. Risks remain familiar and material. The company cited the COVID-19 pandemic, the Russia-Ukraine conflict, inflation, interest rate increases, supply chain constraints, competition, security breaches, service outages, and the challenge of managing growth. It warned that economic uncertainty could hurt new business, renewals, sales and marketing, revenue growth, customer deployments, collections, and product development. The company said demand for its products remains strong and it continues to achieve solid new subscription bookings, though it noted that macroeconomic uncertainty could increase. The 2022 Notes are convertible in the second quarter of fiscal 2023 and become due in the third quarter, which will result in a cash outflow of approximately $1.15 billion. Workday also has a $1.0 billion credit agreement as a liquidity backstop.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.43B | $1.38B | +4.3% | $1.18B | +22.1% |
| Research & development | $541.5M | $537.7M | +0.7% | $441.6M | +22.6% |
| Sales & marketing | $429.3M | $410.9M | +4.5% | $326.5M | +31.5% |
| General & administrative | $133.9M | $138.6M | -3.4% | $112.2M | +19.3% |
| Total operating expenses | $1.51B | $1.48B | +2.1% | $1.21B | +24.2% |
| Operating income (loss) | -$72.8M | -$101.0M | +27.9% | -$38.3M | -90.1% |
| Operating margin | -5.1% | -7.3% | +2.3 pp | -3.3% | -1.8 pp |
| Net income (loss) | -$102.2M | -$73.3M | -39.5% | -$46.5M | -119.6% |
| Net margin | -7.1% | -5.3% | -1.8 pp | -4.0% | -3.2 pp |
| Diluted EPS | -$0.41 | -$0.29 | -$0.12 | -$0.19 | -$0.22 |
Risks
Workday cites the ongoing COVID-19 pandemic, the Russia-Ukraine conflict, inflation, and the U.S. Federal Reserve's March 2022 interest rate increases as creating continuing global economic and geopolitical volatility. MD&A states that if economic uncertainty increases, Workday may see negative impacts on new business, customer renewals, sales and marketing efforts, revenue growth rates, customer deployments, and customer collections.
Risk factors state Workday faces intense competition for highly skilled employees, especially product development, machine learning and AI engineers, cybersecurity professionals, and senior sales executives. The filing says hiring and retention pressures increased significantly through the COVID-19 pandemic, and MD&A reports headcount rose 21% to 15,932 as of April 30, 2022.
Workday discloses specific security events, including the April 2021 breach of acquired Peakon's development environment where source code was copied, and the December 2021 Log4j vulnerability that required mitigation and upgrades. It also notes increased supply chain and Russia-Ukraine-related cyber attack risks and says future attacks could materially affect business and operating results.
In April 2022 Workday issued $3.0 billion of senior notes and entered a $1.0 billion revolving credit facility, adding substantial indebtedness and covenant requirements including a leverage ratio. MD&A also notes the 2022 Notes are convertible in Q2 FY2023 and become due in Q3 FY2023, resulting in an expected cash outflow of approximately $1.15 billion.
GAAP operating margin declined from -3.3% in FY2022 Q1 to -5.1% in FY2023 Q1, and non-GAAP operating margin declined from 24.6% to 20.1%. MD&A attributes the decline to higher headcount, a new performance-based cash bonus program, a return to travel and in-person events, and other growth investments, partially offset by higher revenues.
Workday is increasingly building AI and machine learning into its offerings and says ethical, reputational, competitive, and legal issues could arise, including potential government regulation of AI ethics. Failure to address AI ethics could undermine confidence and slow adoption, while resolving issues may increase research and development costs.
Workday's typical sales cycle is six to twelve months but can extend to eighteen months or more, and subscription revenue is recognized over contracts typically three years or longer. MD&A reports total subscription revenue backlog of $12.7 billion, with $8.0 billion expected to be recognized over the next 24 months, so downturns in new sales may not appear immediately in operating results.
Workday faces intense competition from Oracle and SAP as well as UKG, ADP, Infor, Ceridian, Microsoft, Anaplan, and Coupa. Legacy vendors are expanding cloud offerings through acquisitions and alliances, and competitors may offer lower prices or concessions, potentially reducing sales, margins, or market position.
Workday acquired Peakon, Zimit, and VNDLY in fiscal 2022 and expects more acquisitions. The filing says integration may divert management, dilute stockholders, create unanticipated costs or liabilities, and require impairment charges if expected returns are not achieved; MD&A says acquisitions and investments will increase costs in the near term.
Workday invests in early to late stage companies and may not realize a return, including loss of all or a substantial part of an investment. Fair value changes or impairments of marketable and non-marketable equity investments could create material volatility in quarterly results; MD&A reports $15 million of purchases of non-marketable equity and other investments in FY2023 Q1.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Total Subscription Revenue Backlog
24-Month Subscription Revenue Backlog
Gross Revenue Retention
Summary, forecast, risks and KPIs are extracted from Workday, Inc.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.