Workday delivered strong Q1 results with subscription revenue growth accelerating to 20% YoY reaching $1.68B, while operating margins expanded 460bps to 25.2%. The company is seeing increased traction from its AI initiatives, with over 65% of customers now using AI-powered features. Professional services revenue declined as expected (-7% YoY) due to strategic shift toward partners. Management raised FY25 subscription revenue guidance, signaling confidence in enterprise spending environment and competitive position.
Rising cloud infrastructure and AI investment costs
Intense competition for technical talent driving up costs
FX headwinds impacting international revenue
Key Opportunities
Financial management cross-sell into HR base ($10B+ TAM)
AI-driven product innovation expanding use cases
International expansion particularly in EMEA and APAC
Middle market penetration through partner ecosystem
Bottom Line
Workday delivered a strong Q1 that demonstrates its strengthening competitive position in enterprise cloud applications. The combination of accelerating subscription growth, expanding margins, and increasing Fortune 500 penetration suggests the company's strategy is working. AI investments and partner ecosystem expansion position Workday well for sustained growth. Key metrics to watch include financial management cross-sell rates, AI feature adoption, and operating leverage as growth investments continue. The raised guidance and strong backlog growth provide confidence in near-term execution despite macro headwinds.