Workday WDAY 2026Q1 Earnings Preview Upside Potential on Revenue Growth

Forward-Looking Analysis
Workday is set to report its Q1 2026 earnings on May 22, 2025. Wall Street analysts forecast a quarterly earnings per share (EPS) of $1.99, reflecting a year-over-year increase of 14.4%. This expectation aligns with Workday's forecast to grow earnings by 27.2% and revenue by 11.5% annually. Analysts project the company's EPS to grow by 25.4% per annum, with a return on equity forecast of 20.6%. Last quarter's revenue was reported at $2.21 billion, surpassing estimates, despite missing EPS expectations. The subscription revenue increased by 15.9%, indicating strong demand. With macroeconomic uncertainties and lengthening sales cycles affecting growth, the company faces potential headwinds. However, Workday's solid revenue forecasts and strong subscription growth suggest positive momentum for the upcoming quarter. The consensus remains optimistic about Workday's capacity to maintain robust growth amid these challenges.

Historical Performance Review
In Q4 2025, Workday reported revenue of $2.21 billion, with net income reaching $94 million and an EPS of $0.35. The gross profit stood at $1.67 billion. Despite achieving higher-than-expected revenue, EPS fell short of estimates, reflecting challenges in profitability. Subscription revenue grew by 15.9%, showcasing the company's strength in its core business offerings. This performance highlights Workday's ability to generate substantial revenue, although profitability remains an area for improvement.

Additional News
Recently, Workday recorded expenses of $65 million related to employee transitions, severance payments, and benefits for the three and twelve months ending January 31, 2025. These expenses reflect ongoing strategic adjustments within the company. Additionally, Workday's fiscal year 2025 earnings showed a moderation in revenue growth, which slowed to 16% due to macroeconomic uncertainties and prolonged sales cycles. The company reported full-year total revenue of $84.46 billion, indicating strong overall performance despite external pressures. These developments underscore Workday's efforts to navigate a challenging environment while maintaining growth.

Summary & Outlook
Workday's financial health appears robust, with strong revenue growth and subscription revenue increases driving positive expectations. However, profitability challenges persist, as evidenced by last quarter's EPS miss. The company's strategic adjustments, including managing employee-related expenses, indicate efforts to enhance efficiency and adapt to market conditions. Despite external uncertainties, Workday's consistent revenue growth and optimistic analyst projections suggest a bullish outlook. Key growth catalysts include maintaining subscription revenue momentum and addressing profitability concerns. Overall, Workday is well-positioned to capitalize on its growth potential in the coming quarters, provided it effectively navigates existing challenges.