Workday 2026 Q3 Earnings Beats Expectations as Net Income Surges 30.6%

Workday (WDAY) reported fiscal 2026 Q3 earnings on Nov 26, 2025, with revenue rising 12.6% year-over-year to $2.43 billion. The company exceeded analyst expectations, delivering an adjusted EPS of $2.32 versus a forecast of $2.17. CFO Zane Rowe provided Q4 guidance with subscription revenue projected at $2.355 billion, slightly above estimates.

Revenue

Subscription services drove the majority of the increase, contributing $2.24 billion, while professional services added $188 million to the total revenue of $2.43 billion. The segment breakdown highlights Workday’s focus on scalable, recurring revenue streams, with subscription growth outpacing professional services but reflecting a balanced contribution to overall performance.

Earnings/Net Income

Workday’s EPS surged 30.1% to $0.95 in 2026 Q3, with net income climbing 30.6% to $252 million. The significant growth in both metrics underscores Workday’s improving profitability and effective cost management.

Post-Earnings Price Action Review

The strategy of buying Workday shares after its earnings report and holding for 30 days delivered moderate returns but underperformed the market. With a CAGR of 13.17% and a Sharpe ratio of 0.37, the approach offered low risk but conservative gains, aligning with a stability-focused investor profile.

CEO Commentary

Carl Eschenbach emphasized AI-driven momentum, noting 15% subscription growth and a 28.5% non-GAAP operating margin. Strategic priorities included expanding AI solutions (e.g., Sana, Paradox) and enhancing international markets, with 75% of core customers adopting Workday Illuminate AI.

Guidance

Zane Rowe outlined Q4 subscription revenue of $2.355 billion and full-year 2026 subscription revenue of $8.828 billion. The company remains confident in maintaining a 29% non-GAAP operating margin.

Additional News

Workday’s recent $1.1 billion acquisition of Sana AI and the Paradox integration underscore its AI expansion strategy. The company also launched Workday GO for mid-market clients, incorporating global payroll and AI-powered deployment tools. Despite a Bernstein upgrade to “Outperform” with a $298 price target, shares dipped post-earnings amid concerns over M&A-driven growth sustainability.

Key Financial Highlights

• Revenue: $2.43 billion (+12.6% YoY)

• Subscription Revenue: $2.24 billion (+15% YoY)

• EPS: $2.32 (beating estimates of $2.17)

• Non-GAAP Operating Margin: 28.5%

• Q4 Guidance: Subscription revenue of $2.355 billion (+16% YoY)

Market Reaction

Workday’s stock rose 3.45% post-earnings but fell 7% in extended trading due to mixed guidance. Analysts remain cautiously optimistic, balancing strong AI adoption with concerns over organic growth and integration risks.

Strategic Focus

Workday aims to accelerate AI innovation, expand Workday GO, and leverage acquisitions to enhance platform capabilities. The EU Sovereign Cloud launch and DIA contract wins highlight international expansion efforts.

Risks and Outlook

While AI adoption and cross-selling drive growth, challenges include federal budget constraints and integration complexities. Carl Eschenbach expressed confidence in long-term durability, emphasizing 75% core customer AI adoption and strategic M&A discipline.