Workday Inc. reported fiscal 2026 third‑quarter revenue of $2.432 billion, up 12.6% year‑over‑year, and subscription revenue of $2.244 billion, a 14.6% increase. Non‑GAAP diluted earnings per share were $2.32, beating the consensus range of $2.13 to $2.18 by $0.14 to $0.19 per share. The beat reflects disciplined cost management and a higher mix of high‑margin subscription contracts, which offset modest growth in professional‑services revenue.
The company’s non‑GAAP operating margin expanded to 28.5% from 26.3% in the same quarter a year earlier. The lift is driven by a 15% rise in subscription revenue, which carries a higher margin than professional services, and by incremental efficiencies in the platform‑operations team. The margin improvement signals that Workday’s scale is translating into better profitability.
Segment‑level data show that AI‑enabled offerings, particularly Workday Illuminate, accounted for more than 1.5 points of ARR growth and were adopted by over 75% of core customers, generating more than 1 billion AI actions on the platform this year. The company also secured several large enterprise wins, including Ardent Health, Kelly Services, and Specialized, all of which expanded both HR and finance modules. These wins illustrate the company’s ability to cross‑sell within its unified cloud platform.
CEO Carl Eschenbach said the quarter “demonstrated the strength of our AI portfolio and the value we deliver to customers by unifying people, money, and AI on one trusted platform.” CFO Zane Rowe added that the company’s “continued progress across key growth initiatives” underpins the raised guidance and that the firm remains confident in sustaining margin expansion.
Workday raised its full‑year subscription‑revenue outlook to $8.828 billion, a 14% increase from the prior year’s $7.73 billion guidance. The company reiterated its non‑GAAP operating‑margin target of 29% for FY26, up from the previously disclosed 28%. The guidance lift reflects stronger-than‑expected demand for AI‑driven solutions and a higher mix of subscription contracts, while the margin target signals confidence that cost controls will keep pace with revenue growth.
Market reaction to the results was mixed. While the earnings beat and guidance raise were welcomed, some analysts noted that the Q4 operating‑margin guidance of 28.5% was slightly below expectations, and a few reports mentioned a potential revenue miss, which tempered enthusiasm. Overall, the data suggest that investors are weighing the company’s robust growth trajectory against modest margin headwinds.
Headwinds remain modest. Management acknowledged that the Q4 operating‑margin guidance is a bit lower than the prior quarter’s 28.7%, reflecting the need to invest in AI capabilities and platform enhancements. Nonetheless, the company’s strong backlog growth of 17.6% year‑over‑year and continued customer expansion indicate resilience and a solid path forward.
The content on BeyondSPX is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk.