Title

Earning Preview: Workday revenue is expected to increase by 15.57%, and institutional views are bullish

Abstract

Workday will release fiscal fourth-quarter results on February 24, 2026 Post Market; consensus points to mid‑teens revenue growth and a sharp year‑over‑year uplift in adjusted EPS as investors gauge the impact of leadership changes, cost actions, and AI monetization on near‑term execution.

Market Forecast

For Workday’s fiscal fourth quarter (ended January 31, 2026), the market expects revenue of 2.52 billion (+15.57% YoY), adjusted EPS of 2.32 (+30.77% YoY), and EBIT of 721.34 million (+31.81% YoY); no formal forecasts for gross margin or net margin have been indicated in the available consolidated estimates. Subscription services remain the core engine, and the outlook implies a healthy mix of renewals, expansions, and new modules that should sustain growth momentum across the portfolio. Within the revenue base, subscription services carried 2.24 billion last quarter, and investors expect this pillar to drive this quarter’s overall YoY growth of 15.57% as adoption of advanced capabilities broadens.

Last Quarter Review

In the prior quarter, Workday delivered revenue of 2.43 billion (+12.59% YoY), a gross profit margin of 75.70%, GAAP net profit attributable to shareholders of 252.00 million, a net profit margin of 10.36%, and adjusted EPS of 2.32 (+22.75% YoY). A key highlight was operating leverage: EBIT reached 692.00 million (+21.62% YoY), and adjusted EPS landed above the earlier estimate, reflecting cost discipline and scale. Main business performance was anchored by subscription services revenue of 2.24 billion, contributing 92.27% of total revenue, with professional services at 188.00 million; overall revenue expanded 12.59% YoY as the large recurring base continued to grow.

Current Quarter Outlook

Subscription services — renewal momentum, seat expansions, and mix upgrades

Subscription services account for the vast majority of Workday’s top line and remain the single most consequential driver of this quarter’s performance. The company’s revenue mix last quarter was 92.27% subscription, underscoring how renewals, price/seat expansions, and new module attach rates shape quarterly variability. The 15.57% YoY revenue growth implied by consensus suggests continued strength in net retention and mid‑cycle deployment ramps, with limited reliance on one‑off professional services. Investors will focus on how renewal cohorts convert to larger footprints, particularly in environments where budget cycles may still favor mission‑critical platforms and measurable productivity gains. Given that last quarter gross margin was 75.70%, additional software‑mix tailwinds and steady cloud infrastructure efficiency should support margin stability even without a formal gross‑margin outlook. The sequential bridge from last quarter’s 2.43 billion to an estimated 2.52 billion is consistent with robust subscription billings and collections patterns typical of a fiscal fourth quarter. Execution around multi‑suite deals—such as customers augmenting core HCM with payroll, workforce planning, or analytics—can add incremental subscription ARR and act as a buffer if new logo activity moderates. The resulting dynamics tend to flow through to EBIT and EPS, and the forecasts of 721.34 million EBIT and 2.32 adjusted EPS indicate a continued trajectory of operating leverage if top‑line growth tracks to plan.

AI‑enhanced platforms and Financial Management — the growth vector within the portfolio

The most promising growth vector spans AI‑enhanced capabilities across Workday’s HCM and Financial Management suites, where workflow automation and insight features can drive higher ARPU and stickiness. While Workday does not disclose a granular revenue breakout for these add‑ons, their uptake is embedded within the subscription base that totaled 2.24 billion last quarter, and consensus implies these capabilities help sustain this quarter’s mid‑teens total revenue growth. The commercialization thread runs through several levers: embedding AI to reduce time‑to‑value in talent processes, accelerating close‑to‑report cycles in finance, and refining demand/supply planning in workforce management. Each of these can underpin price realization via module upgrades or higher tier bundles. The practical near‑term investor question is not whether such features exist but whether they materially bend the revenue curve over a single quarter. Given the 30.77% YoY uplift implied for adjusted EPS alongside 31.81% YoY EBIT growth, the street appears to be baking in both moderate monetization and clear expense control. The principal sensitivity is not demand intent but deployment timing and attach velocity—particularly in larger enterprises where proof‑of‑value cycles can stagger across departments and geographies. If management demonstrates that AI features materially improve conversion in late‑stage pipelines, that can support a higher quality of revenue mix and a more durable uplift in margin. Conversely, if AI‑related contributions remain early‑stage and skew to pilots, incremental growth may come more from broad platform expansion than from step‑function ARPU changes this quarter.

Near‑term stock price drivers — leadership transition, cost actions, and guidance cadence

Two operational developments could shape investor reaction around the print. First, the leadership transition announced in early February—returning co‑founder Aneel Bhusri to the CEO role—has heightened attention on continuity of execution and strategic prioritization. From a financial modeling perspective, the street will look for clear commentary on whether go‑to‑market and product roadmaps remain intact and whether any near‑term leadership changes affect close rates in late‑quarter enterprise cycles. Continuity messaging and tangible datapoints on large‑deal momentum could mitigate any perceived execution risk. Second, reports of roughly 400 planned workforce reductions indicate a renewed focus on cost allocation and investment prioritization. While this action may entail modest restructuring charges, consensus EPS of 2.32 and EBIT of 721.34 million imply confidence that operating margin expansion opportunities remain intact. Investors will parse whether savings are reinvested into product and customer success or preserved to support margins if macro prudence persists in enterprise software budgets. Beyond these two items, several standard watch‑outs will be front and center: subscription revenue growth relative to prior commentary, non‑GAAP operating margin progression, and billings and cRPO trends as leading indicators for fiscal 2027. Clean execution across these metrics, supported by stable renewal patterns and steady large‑deal conversions, would validate the mid‑teens revenue growth trajectory implied for this quarter; any deceleration in forward‑looking demand signals could overshadow an in‑line revenue/EPS outcome.

Analyst Opinions

The balance of fresh views since January 1, 2026 skews bullish: among notable updates, two are positive versus one cautious, yielding a 2:1 bullish tilt. One large sell‑side house maintained an Outperform stance while trimming its price target, a posture consistent with strong fundamentals tempered by valuation and leadership‑transition sensitivity. Another broker reiterated an Overweight view and also reset its target to reflect recent multiple compression rather than a thesis change on growth or margins. Countering these, a well‑followed institution kept a Hold rating, citing execution uncertainty tied to the CEO transition and risks to outer‑year guidance. The majority view emphasizes that Workday’s near‑term setup remains anchored by a predictable subscription base and improving profitability metrics. The case for upside rests on three pillars supported by the quarter’s estimates: revenue growth at 15.57% YoY that is consistent with healthy renewals and expansions, EBIT growth of 31.81% YoY evidencing operating leverage, and adjusted EPS growth of 30.77% YoY showing that expense discipline and scale are translating into shareholder economics. Bulls argue that returning leadership can provide strategic clarity and continuity, while focused cost actions should preserve flexibility to invest in high‑return product areas without undermining the margin trajectory. They also highlight that AI‑enabled features embedded in core suites can catalyze incremental attach and retention, and that progress can be gauged via qualitative deal anecdotes and attach rates rather than a single numeric breakout. A further point from the bullish camp is that current‑quarter expectations appear internally consistent: the revenue mix is heavily subscription, last quarter’s gross margin was 75.70%, and projected EBIT and EPS growth outpace revenue growth, congruent with a software margin model scaling into higher volumes. This alignment reduces the risk of a miss driven by cost drift, assuming revenue lands close to 2.52 billion. In contrast, the minority cautious view focuses on two execution sensitivities: the timing of decision cycles amid leadership change and the translation of AI narratives into signed, monetizable contracts. That stance often looks to forward indicators such as cRPO and billings to validate sustained demand through fiscal 2027, and signals that any softness there could weigh on post‑print performance even if headline revenue/EPS are in line. Weighing these perspectives, the majority sees a favorable skew so long as subscription momentum is evident, commentary on late‑stage enterprise opportunities is constructive, and profitability steps forward as implied by the 721.34 million EBIT estimate. The practical takeaway from the consensus is that Workday’s quarter will be judged on clean execution in subscription growth and margins, with the leadership transition and cost actions likely to be viewed through the lens of continuity, focus, and capital discipline. Should management provide visibility on sustained mid‑teens growth, stable renewal dynamics, and AI‑driven attach progressing through enterprise funnels, the bullish narrative would find further validation in the near term.