Summary
Workday reported fiscal 2026 third quarter total revenues of $2.432 billion, up 12.6% from the prior-year quarter. GAAP operating income was $259 million, up 57.0% from $165 million a year earlier. Net income reached $252 million, up 30.6%, and diluted earnings per share were $0.94, up 30.6% from $0.72. The GAAP operating margin was 10.6%, up 3.0 percentage points from 7.6% in the same period last year. On a non-GAAP basis, operating income was $692 million, or 28.5% of revenues, compared to $569 million, or 26.3%. Non-GAAP diluted earnings per share were $2.32, compared to $1.89.
Cash generation remained strong. Operating cash flow was $588 million for the quarter, up 44.8% from $406 million. For the nine-month period, operating cash flow was $1.66 billion, up 23.1% from $1.35 billion. Free cash flow, which subtracts capital expenditures from operating cash flow, was $550 million for the quarter, compared to $359 million. Capital expenditures were $38 million for the quarter, down 19.1% from $47 million. For the nine-month period, capital expenditures were $102 million, down 44.3% from $183 million. Deferred revenue stood at $3.94 billion, up 12.2% from $3.51 billion a year earlier. Workday repurchased approximately 3.4 million shares of Class A common stock for $803 million during the quarter. The company had $4.4 billion remaining under its share repurchase authorizations.
Operationally, Workday closed the acquisition of Paradox in the third quarter and completed the acquisition of Sana Labs AB in November 2025 for approximately $1.0 billion in cash. The company announced a new AI Centre of Excellence in Dublin, Ireland, with a three-year 175 million investment and 200 specialized AI roles. Healthcare became Workday's sixth industry to cross $1 billion in annual recurring revenue. The company added new customers such as the County of San Luis Obispo and Fuji Electric, and expanded relationships with CommonSpirit Health and Novartis. The gross revenue retention rate was approximately 97% as of October 31, 2025. Headcount was 20,588, roughly flat with 20,493 a year earlier. Workday also continued its Fiscal 2026 Restructuring Plan, which reduced its workforce by approximately 7.5%. The One Big Beautiful Bill Act, signed into law on July 4, 2025, is expected to reduce the company's domestic cash tax outflows for the remainder of fiscal 2026. Workday is monitoring OECD Pillar Two rules.
Guidance points to continued growth. For the fiscal 2026 fourth quarter ending January 31, 2026, Workday expects subscription revenues of $2.355 billion, representing growth of 15.5%, and a non-GAAP operating margin of at least 28.5%. For the full fiscal year 2026, the company expects subscription revenues of $8.828 billion, growth of 14.4%, and a non-GAAP operating margin of approximately 29%. Capital expenditures are expected to be approximately $200 million in fiscal 2026.
Risks include macroeconomic pressures such as increased tariffs, elevated inflation, fluctuating interest rates and foreign currency exchange rates, and geopolitical instability. Workday faces deal scrutiny, lengthening sales cycles, and reduced growth in headcount level commitments upon renewals. The company has provided flexible payment terms to some customers. Other risks include security breaches, service outages, privacy regulations, competition, reliance on partners, acquisition integration challenges, and regulatory risks related to AI. Workday also notes potential delays or reductions in information technology spending and adverse litigation outcomes.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2026 | Q2 FY2026 | QoQ | Q3 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $2.43B | $2.35B | +3.6% | $2.16B | +12.6% |
| Research & development | $666.0M | $660.0M | +0.9% | $647.0M | +2.9% |
| Sales & marketing | $677.0M | $641.0M | +5.6% | $620.0M | +9.2% |
| General & administrative | $234.0M | $216.0M | +8.3% | $198.0M | +18.2% |
| Total operating expenses | $2.17B | $2.10B | +3.5% | $2.00B | +8.9% |
| Operating income (loss) | $259.0M | $248.0M | +4.4% | $165.0M | +57.0% |
| Operating margin | 10.7% | 10.6% | +0.1 pp | 7.6% | +3.0 pp |
| Net income (loss) | $252.0M | $228.0M | +10.5% | $193.0M | +30.6% |
| Net margin | 10.4% | 9.7% | +0.6 pp | 8.9% | +1.4 pp |
| Diluted EPS | $0.94 | $0.84 | +$0.10 | $0.72 | +$0.22 |
| Customers | 11,000 | 11,000 | ±0.0% | 10,500 | +4.8% |
Risks
Recent macroeconomic events including increased tariffs, elevated inflation, fluctuating interest rates and foreign currency exchange rates, and geopolitical instability continue to create uncertainty. MD&A says these conditions have contributed to deal scrutiny, lengthening sales cycles, reduced growth in headcount level commitments upon renewals, and more flexible payment terms.
Workday's sales cycles for many new customers are six to twelve months and can extend for eighteen months or more, and subscription revenue is tied to customer employee headcount. MD&A reports a moderation of revenue growth rates due to deal scrutiny and the lengthening of certain sales cycles, particularly within net new opportunities, plus reduced growth in headcount level commitments upon renewals.
The enterprise cloud and AI applications market is intensely competitive, with Oracle, SAP, Microsoft, ServiceNow, and other vendors expanding AI-powered offerings including generative and agentic AI. Competitors may bring products to market earlier, offer lower prices or concessions, and make it harder for Workday to maintain differentiation and monetize its AI solutions.
Workday is defending a lawsuit alleging certain AI-related products and services enable discrimination, and it is working to comply with the EU AI Act's requirements and deadlines. These AI-related legal and regulatory risks could cause reputational harm, regulatory action, litigation, and slower adoption of its offerings.
Workday recently was targeted in a social engineering campaign against many large organizations, resulting in unauthorized access to some internal systems including business contact information in a third-party customer relationship management platform. It also disclosed a July 2025 issue affecting reporting from high-volume data sources for certain customers and has experienced co-location data center outages.
The Fiscal 2026 Restructuring Plan reduced Workday's workforce by approximately 7.5% and contributed to $172 million of restructuring expenses for the nine months ended October 31, 2025. The restructuring could disrupt operations and negatively affect Workday's ability to attract, retain, and motivate employees.
In November 2025, Workday completed the acquisition of Sana Labs AB for approximately $1.0 billion in cash. Acquisitions can divert management attention, disrupt operations, require integration of security and controls, and fail to deliver expected benefits.
Privacy and cross-border data regulations are expanding, including GDPR penalties of up to 4% of worldwide revenue, the EU Data Act, and the U.S. Department of Justice Data Security Program restricting transactions involving bulk sensitive personal data. Compliance may require service changes, limit adoption, and increase operating costs.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Total Subscription Revenue Backlog
Non-GAAP Operating Income
Total Customers
12-Month Subscription Revenue Backlog
Free Cash Flow
Gross Revenue Retention Rate
Summary, forecast, risks and KPIs are extracted from Workday, Inc.'s SEC filings for Q3 FY2026 (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.