Workday 2026 Q3 Earnings Strong Performance with 30.6% Net Income Growth

Workday (WDAY) delivered mixed post-earnings market reactions despite exceeding revenue and earnings estimates. The stock fell nearly 7% in extended trading following the report, contrasting with its 3.45% post-earnings rally, as investors digested guidance that fell below some expectations.

Revenue

Workday’s total revenue surged 12.6% year-over-year to $2.43 billion in Q3 2026, driven by robust demand across core segments. Subscription services remained the backbone, contributing $2.24 billion, while professional services added $188 million to the top line. The performance underscores the company’s ability to scale its cloud-based solutions amid macroeconomic uncertainty.

Earnings/Net Income

Earnings per share (EPS) rose 30.1% to $0.95, outpacing the $0.73 from the prior year, while net income expanded 30.6% to $252 million. This profitability growth reflects operational efficiencies and cross-selling success, though margin pressures in higher education sectors slightly tempered expectations. The EPS performance indicates strong cost management and revenue leverage.

Post-Earnings Price Action Review

The strategy of buying Workday shares after a revenue raise quarter-over-quarter on the financial report release date and holding for 30 days delivered moderate returns but underperformed the market. The strategy’s CAGR was 13.17%, trailing the benchmark by 21.49%. With a maximum drawdown of 0.00% and a Sharpe ratio of 0.37, the strategy had low risk but modest returns, making it suitable for investors seeking stability.

CEO Commentary

CEO Carl Eschenbach highlighted 15% subscription revenue growth and a 28.5% non-GAAP operating margin, crediting AI adoption and cross-selling. He emphasized the platform’s role in unifying HR and finance, noting 75% of core customers use Workday Illuminate AI. Strategic priorities include expanding AI capabilities through acquisitions like Sana and Paradox, enhancing mid-market offerings via Workday GO, and entering new geographies such as the EU Sovereign Cloud and Dubai.

Guidance

CFO Zane Rowe provided Q4 2026 subscription revenue guidance of $2.355 billion (15% growth), with full-year revenue targeting $8.828 billion (14% growth). Non-GAAP operating margin is projected at ≥28.5% for Q4 and ~29% for the full year. Free cash flow is expected to reach $2.7 billion (23% growth), with $5 billion in share repurchases by FY’27. For FY’27, Workday targets 12–15% subscription revenue CAGR through FY’28, margin expansion, and continued AI-driven growth.

Additional News

Workday accelerated its AI strategy through the $1.1 billion acquisition of Sana AI and the pending purchase of Pipedream, enhancing automation capabilities. The company also expanded its Workday GO platform to include global payroll and AI-powered deployment agents, targeting mid-market growth. Additionally, Workday announced a $5 billion share repurchase program by FY’27, reflecting confidence in its cash flow generation and long-term value.