Summary
Workday reported fiscal 2024 third quarter total revenue of $1.87 billion, up 16.7% from $1.60 billion in the prior-year quarter. GAAP operating income was $87.86 million, or 4.7% of revenue, a swing to a profit from an operating loss a year earlier. Net income was $113.71 million, or $0.43 per diluted share, also a swing to a profit. Management points to revenue growth, moderating expense growth, and lower depreciation tied to a change in the estimated useful lives of data center equipment. The cost base grew in the quarter, but not as fast as the top line.
For the nine months ended October 31, 2023, total revenue was $5.34 billion, up 16.8% from $4.57 billion. GAAP operating income was $104.31 million and net income was $192.50 million, or $0.73 per diluted share; both swung to profits from losses in the prior-year period. Operating cash flow was $1.15 billion, up 19.8% from $962.74 million. In the quarter, operating cash flow was $450.78 million, up 10.3% from $408.67 million. Deferred revenue closed the quarter at $3.30 billion.
The non-GAAP picture is stronger still. Non-GAAP operating income was $462.1 million, or 24.8% of revenue, compared with $314.2 million, or 19.7% of revenue, a year earlier. Non-GAAP diluted net income per share was $1.53, compared with $0.99. Free cash flow, which the company defines as operating cash flow minus total capital expenditures, was $390.8 million for the quarter compared with $349.8 million, and $969.2 million for the nine months compared with $676.3 million.
Backlog metrics point to durable demand. Total subscription revenue backlog was $18.45 billion, up 30.9% from a year earlier. The 12-month backlog was $6.05 billion, up 21.9%, and the 24-month backlog was $10.58 billion, up 22.7%. Management reported gross and net retention rates over 95% and over 100%. Workday passed 5,000 core HCM customers in the quarter, and EMEA surpassed $1 billion in annual recurring revenue. New full platform wins included AdventHealth, Aurelius Group, Bentley Systems, Globe Life, Houston Methodist, and Kern County. The company rolled out generative AI features, a Manager Insights Hub in Workday Adaptive Planning, and updates to Workday Extend, and it expanded alliances with ADP and Accenture. Headcount stood at 18,369, up 5% year over year.
Guidance for the full fiscal year 2024 moved higher. Management raised subscription revenue guidance to $6.598 billion, which it says represents 19% year-over-year growth, and lifted the full-year non-GAAP operating margin target to 23.8%. Capital expenditures are expected to be approximately $250 million for fiscal 2024. The stated aim is durable long-term growth alongside margin expansion.
Risks remain in the foreground. The MD&A cites higher inflation, Federal Reserve rate increases, instability in the global banking system, geopolitical factors, and the lingering effects of the pandemic as drags on the economy. Workday has seen some sales cycles lengthen and revenue growth rates moderate, especially in net new opportunities, and has offered some customers more flexible payment terms. Continued uncertainty could weigh on renewals, collections, sales and marketing, deployments, and product development. The filing also names security breaches, service outages, deployment delays, competition and pricing pressure, reliance on partners, AI regulation, and the loss of key employees. Management still describes demand as strong and new subscription bookings as solid.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.87B | $1.79B | +4.4% | $1.60B | +16.7% |
| Research & development | $618.7M | $609.7M | +1.5% | $565.7M | +9.4% |
| Sales & marketing | $537.8M | $524.2M | +2.6% | $470.2M | +14.4% |
| General & administrative | $176.0M | $168.5M | +4.4% | $153.7M | +14.5% |
| Total operating expenses | $1.78B | $1.75B | +1.6% | $1.63B | +9.4% |
| Operating income (loss) | $87.9M | $36.3M | +142.3% | -$26.3M | +433.8% |
| Operating margin | 4.7% | 2.0% | +2.7 pp | -1.6% | +6.4 pp |
| Net income (loss) | $113.7M | $78.7M | +44.6% | -$74.7M | +252.2% |
| Net margin | 6.1% | 4.4% | +1.7 pp | -4.7% | +10.8 pp |
| Diluted EPS | $0.43 | $0.30 | +$0.13 | -$0.29 | +$0.72 |
| Net retention rate | 95.0% | 95.0% | ±0.0 pp | — | — |
Risks
In November 2023, Workday discovered an issue in its product that caused document notifications to be sent to unintended recipients within the same organization; it stopped the notifications and notified impacted customers. The filing also references an August 2022 Workday Recruiting issue that temporarily made certain information discoverable to unintended parties.
Workday is increasingly building AI, including generative AI and large language models, into core offerings; evolving legal and regulatory requirements could raise research and development costs or divert resources. A lawsuit alleges its products enable discrimination, and failure to innovate or unexpected Workday AI behavior could harm reputation and demand.
MD&A says higher inflation, Federal Reserve interest rate increases, instability in the global banking system, geopolitical factors, and the remaining effects of COVID-19 have negatively impacted the global economy. Workday has experienced lengthening of certain sales cycles and moderation of revenue growth rates, particularly within net new opportunities, and has provided certain customers with more flexible payment terms.
Workday depends on third-party data centers and hosted infrastructure partners including AWS, Google, and Microsoft; it has experienced disruptions at certain U.S. data centers due to high temperatures and power outages that caused a brief temporary outage for a subset of customers. Infrastructure scaling failures could lead to service credits, refunds, contract terminations, and customer losses.
Workday disclosed executive changes, including Chano Fernandez resigning as Co-CEO in December 2022 and Barbara Larson stepping down as CFO in June 2023, with more changes expected. It faces intense competition, especially for AI, cybersecurity, senior sales, and engineering talent, and equity award value affects recruiting and retention.
Workday faces intense competition from Oracle and SAP and others including Microsoft, UKG, ADP, Infor, and Ceridian; legacy vendors are expanding cloud offerings through acquisitions and alliances. With generative AI, competition is expected to intensify and competitors may offer lower prices or price concessions, delayed payment terms, or financing terms.
Customers have no obligation to renew subscriptions; Workday has faced and may continue to face requests for price concessions and delayed payment terms, and economic uncertainty may make these more frequent. Attrition of senior management or purchasing decision-makers at customers has impacted direct sales efforts.
Workday relies on its network of partners to drive additional revenue growth and for a majority of deployment services; if partners are disrupted, fail to perform, or are acquired by competitors, its ability to sell and distribute products may be harmed. Changes to go-to-market models may also cause friction with partners.
Workday issued $3.0 billion of senior notes in April 2022 and has a $1.0 billion revolving credit facility under the 2022 Credit Agreement with a financial covenant requiring a specific leverage ratio. Breach could accelerate repayment and reduce cash available for the business.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Non-GAAP Operating Income
24-Month Subscription Revenue Backlog
Gross Revenue Retention
Free Cash Flow
Net Revenue Retention
Total Subscription Revenue Backlog (RPO)
12-Month Subscription Revenue Backlog (cRPO)
Summary, forecast, risks and KPIs are extracted from Workday, Inc.'s SEC filings for Q3 FY2024 (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.