Workday (WDAY) Financials

Workday’s latest quarter shows solid top-line growth, but profitability and cash flow were pressured by higher operating spending and a sizable share buyback program. Over the last several years, Workday has continued to grow revenue at a healthy pace, but it still runs with thin operating margins and relies on non-operating income, deferred revenue, and balance sheet strength to support earnings.

• Revenue growth remains healthy. Q1 2027 revenue rose to $2.542 billion from $2.240 billion in Q1 2026, a gain of about 13% year over year.
• Gross profit is expanding. Gross profit increased to $1.938 billion in Q1 2027 from $1.703 billion a year earlier, showing that Workday continues to scale its subscription model.
• Operating cash flow improved sharply. Cash from operations climbed to $696 million in Q1 2027 from $457 million in Q1 2026.
• Balance sheet liquidity remains strong. Workday ended Q1 2027 with $559 million in cash and $3.794 billion in short-term investments, giving it substantial liquidity.
• Deferred revenue remains a meaningful support for future sales. Current deferred revenue was $4.325 billion in Q1 2027, up from $3.812 billion in Q1 2026, suggesting a solid backlog of committed revenue.
• Non-operating income still helps earnings. Other income was $17 million in Q1 2027, which modestly boosted pre-tax results.
• EPS was steady year over year. Diluted EPS held at $0.87 in Q1 2027 versus $0.25 in Q1 2026, though the comparison is distorted because Q1 2026 had much lower profitability and a different expense mix.
• Share count remains elevated. Diluted weighted average shares were 254.3 million in Q1 2027, slightly above the prior-year quarter, limiting per-share leverage.
• Operating margin remains thin. Q1 2027 operating income was just $338 million on $2.542 billion of revenue, or about 13%, but this came after a period where margins were much weaker and still leaves little room for disappointment.
• Sales and marketing spending remains heavy. Marketing expense was $679 million in Q1 2027, still one of the largest cost lines and a key reason profitability is constrained.
• Workday continues to spend heavily on buybacks. It repurchased $1.587 billion of common equity in Q1 2027, which significantly reduced cash despite strong operating performance.
• Cash declined materially from the prior year. Cash and equivalents fell to $559 million from $972 million a year earlier, even after adding short-term investments, reflecting large financing outflows and ongoing capital use.
• Debt increased. Long-term debt rose to $1.99 billion in Q1 2027 from $1.99 billion a year earlier? Actually debt remained high, while current debt and total liabilities increased versus prior periods, keeping leverage relevant for investors to watch.

Longer-term trend: Workday has grown revenue consistently from roughly $1.43 billion in Q1 2023 to $2.54 billion in Q1 2027, but earnings have been uneven. The company moved from losses in early 2023 to positive net income in recent quarters, yet that improvement has come with significant share-based and share-repurchase activity, plus rising operating expenses. The balance sheet remains investment-grade-like in liquidity, but investors should watch whether operating leverage improves enough to support durable margin expansion.

Bottom line: Workday is still a strong growth story with a healthy balance sheet and improving cash generation, but the key question for investors is whether revenue growth can eventually outpace its large sales and R&D spend. If margins continue to improve, the stock could benefit; if not, earnings growth may remain uneven.