Workday 10-Q 2025-07-31

Filed 2025-08-22. 8 sections, 308K characters. Original on sec.gov · Markdown · JSON

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 31, 2025

OR

☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For transition period from to

Commission File Number: 001-35680

WORKDAY, INC.

(Exact name of registrant as specified in its charter)

Delaware20-2480422
(State or other jurisdiction of incorporation or organization)(I.R.S Employer Identification No.)

6110 Stoneridge Mall Road

Pleasanton, California 94588

(Address of principal executive offices, including zip code)

(925) 951-9000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001WDAYThe Nasdaq Stock Market LLC
(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 20, 2025, there were approximately 217 million shares of the registrant’s Class A common stock, net of treasury stock, and 50 million shares of the registrant’s Class B common stock outstanding.

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Workday, Inc.

Page No.
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements (unaudited):
Condensed Consolidated Balance Sheets as of July 31, 2025, and January 31, 20253
Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2025, and 20244
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended July 31, 2025, and 20245
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended July 31, 2025, and 20246
Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2025, and 20247
Notes to Condensed Consolidated Financial Statements9
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations26
Item 3.Quantitative and Qualitative Disclosures About Market Risk39
Item 4.Controls and Procedures39
PART II. OTHER INFORMATION
Item 1.Legal Proceedings41
Item 1A.Risk Factors42
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds64
Item 3.Defaults Upon Senior Securities64
Item 4.Mine Safety Disclosures64
Item 5.Other Information64
Item 6.Exhibits65
Signatures66

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Workday, Inc.

Condensed Consolidated Balance Sheets

(in millions)

(unaudited)

July 31, 2025January 31, 2025
Assets
Current assets:
Cash and cash equivalents$1,264$1,543
Marketable securities6,9226,474
Trade and other receivables, net1,6091,950
Deferred costs278267
Prepaid expenses and other current assets334311
Total current assets10,40710,545
Property and equipment, net1,1211,239
Operating lease right-of-use assets719336
Deferred costs, noncurrent562561
Acquisition-related intangible assets, net320361
Deferred tax assets9591,039
Goodwill3,4783,478
Other assets395418
Total assets$17,961$17,977
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$100$108
Accrued expenses and other current liabilities346296
Accrued compensation537578
Unearned revenue3,8524,467
Operating lease liabilities11099
Total current liabilities4,9455,548
Debt, noncurrent2,9852,984
Unearned revenue, noncurrent6580
Operating lease liabilities, noncurrent681279
Other liabilities11352
Total liabilities8,7898,943
Stockholders’ equity:
Common stock00
Additional paid-in capital12,05511,463
Treasury stock(1,900)(1,308)
Accumulated other comprehensive income (loss)(74)84
Accumulated deficit(909)(1,205)
Total stockholders’ equity9,1729,034
Total liabilities and stockholders’ equity$17,961$17,977

See Notes to Condensed Consolidated Financial Statements

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Workday, Inc.

Condensed Consolidated Statements of Operations

(in millions, except number of shares which are reflected in thousands and per share data)

(unaudited)

Three Months Ended July 31,Six Months Ended July 31,
2025202420252024
Revenues:
Subscription services$2,169$1,903$4,228$3,719
Professional services179182360356
Total revenues2,3482,0854,5884,075
Costs and expenses (1)****:
Costs of subscription services370304720594
Costs of professional services212207399406
Product development6606491,3221,305
Sales and marketing6416111,2641,184
General and administrative216202429403
Restructuring111678
Total costs and expenses2,1001,9744,3013,900
Operating income248111287175
Other income, net5657120116
Income before provision for income taxes304168407291
Provision for income taxes763611152
Net income$228$132$296$239
Net income per share, basic$0.86$0.50$1.11$0.90
Net income per share, diluted$0.84$0.49$1.09$0.89
Weighted-average shares used to compute net income per share, basic266,777265,317266,649264,885
Weighted-average shares used to compute net income per share, diluted270,180267,949270,240269,128
(1) Costs and expenses include share-based compensation expense as follows:
Three Months Ended July 31,Six Months Ended July 31,
2025202420252024
Costs of subscription services$39$35$81$73
Costs of professional services28285859
Product development170163353336
Sales and marketing8477177149
General and administrative7067140138
Restructuring00420
Total share-based compensation expense$391$370$851$755

See Notes to Condensed Consolidated Financial Statements

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Workday, Inc.

Condensed Consolidated Statements of Comprehensive Income

(in millions)

(unaudited)

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this report.

Overview

Workday is the artificial intelligence (“AI”) platform to help organizations manage their people, money, and agents. We deliver cloud-based, AI-powered applications for financial management, human capital management (“HCM”), planning, spend management, and analytics. Our diverse customer base includes emerging, medium-sized, and large global organizations within numerous industries, including professional and business services, financial services, healthcare, education, government, technology, media, retail, and hospitality. Workday helps customers deliver better employee experiences, increase productivity, improve operational efficiencies, and provide insights for faster, data-driven decision-making.

We have achieved significant growth since our inception in 2005, when we pioneered HCM in the cloud. As a result of our innovation and commitment to customer success, today we are a Fortune 500 company with more than 11,000 customers around the world. As we continue to grow, we are focused on driving sustainable, long-term subscription revenue growth by adding new customers and expanding our relationships with existing customers through increased adoption of our suite of solutions. Central to this effort is investing in strategic growth areas including developing innovative AI solutions, expanding internationally, growing our partner ecosystem, deepening our presence in industry verticals and the emerging and medium enterprise market, and exploring strategic acquisitions to complement our organic innovation. Our investments across these targeted growth areas may require additional costs, but we remain committed to optimizing resource allocation and realizing a return on our investments. Over time, we believe these investments will support revenue growth and a more scalable business.

We are focused on expanding our operating margin by driving scale and building efficiencies across the business through investments in people, processes, and systems. As a result of our focus on expanding operating margin, we expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues will decrease over the longer term as we grow our revenues and invest in a disciplined manner to support our long-term growth objectives.

In February 2025, we announced a restructuring plan (“Fiscal 2026 Restructuring Plan”), which was intended to prioritize our investments and continue advancing our ongoing focus on durable growth. The plan resulted in the reduction of approximately 7.5% of our workforce. In connection with this plan, we exited certain owned office space.

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Impact of Current Economic Conditions

Recent macroeconomic events including increased tariffs, elevated inflation, and fluctuating interest rates and foreign currency exchange rates, as well as geopolitical instability, continue to impact the global economy and create uncertainty, volatility, and disruption of financial markets. We remain confident in the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers on their human capital and finance digital transformation journeys. Demand for our products remains strong, we continue to achieve solid new subscription bookings, and our near-term revenues are relatively predictable as a result of our subscription-based business model.

We have experienced, and may continue to experience, a moderation of revenue growth rates due to deal scrutiny and the lengthening of certain sales cycles, particularly within net new opportunities, and reduced growth in headcount level commitments upon renewals of existing customers. Further, we have provided, and may continue to provide, certain customers with more flexible payment terms. If the economic uncertainty continues, we may also experience additional negative impacts on customer renewals, customer collections, sales and marketing efforts, customer deployments, product development, or other financial metrics. Any of these factors could harm our business, financial condition, and operating results. For further discussion of the potential impacts of recent macroeconomic events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.

Financial Results Overview

The following table provides an overview of our key metrics (in millions, except percentages, basis points, and headcount data):

Three Months Ended July 31,Six Months Ended July 31,
20252024Change20252024Change
Total revenues$2,348$2,08513%$4,588$4,07513%
Subscription services revenues$2,169$1,90314%$4,228$3,71914%
GAAP operating income$248$111123%$287$17564%
Non-GAAP operating income (1)$680$51831%$1,358$1,03331%
GAAP operating margin10.6%5.3%524 bps6.3%4.3%198 bps
Non-GAAP operating margin (1)29.0%24.9%412 bps29.6%25.4%424 bps
Operating cash flows$1,073$94314%
Free cash flows (1)$1,009$80725%
As of July 31,
20252024Change
Total subscription revenue backlog$25,375$21,58218%
12-month subscription revenue backlog$7,910$6,79716%
Cash, cash equivalents, and marketable securities$8,186$7,37311%
Headcount19,51719,908(2)%

(1)See “Non-GAAP Financial Measures” below for further information.

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Components of Results of Operations

Revenues

We derive our revenues from subscription services and professional services. Subscription services revenues primarily consist of fees that give our customers access to our cloud applications, which include related customer support. Professional services revenues include fees for deployment services, optimization services, and training.

Subscription services revenues accounted for approximately 92% of our total revenues for the three and six months ended July 31, 2025, and represented 97% of our total unearned revenue as of July 31, 2025. Subscription services revenues are driven primarily by the number of customers, the number of workers at each customer, the specific applications subscribed to by each customer, and the price of our applications.

The mix of applications to which each customer subscribes can affect our financial performance due to price differentials in our applications. Pricing for our applications varies based on many factors, including the complexity and maturity of the application and its acceptance in the marketplace. New products or services offerings by competitors in the future could also impact the mix and pricing of our offerings.

Subscription services revenues are recognized over time as services are delivered, beginning on the date our service is made available to the customer. Our subscription contracts typically have a term of three years or longer and are generally noncancelable. We generally invoice our customers annually in advance for subscription services. We may provide certain customers flexible payment terms and the timing of revenue recognition may differ from the timing of invoicing to our customers.

Our professional services consulting engagements are billed on a time and materials or fixed price basis. We generally invoice our customers in arrears for our professional services. For contracts billed on a time and materials basis, revenues are recognized over time as the professional services are performed. For contracts billed on a fixed price basis, revenues are recognized over time based on the proportion of the professional services performed. In some cases, we supplement our consulting teams by subcontracting resources from our service partners and deploying them on customer engagements. As the Workday-related consulting practices of our partner firms continue to develop, we expect these partners to increasingly contract directly with our subscription customers for services engagements.

Subscription Revenue Backlog

Our subscription revenue backlog, which is also referred to as remaining performance obligations for subscription contracts, represents contracted subscription services revenues that have not yet been recognized and includes billed and unbilled amounts. Subscription revenue backlog may fluctuate from period-to-period due to a number of factors, including the timing of renewals and overall renewal rates, new business growth, average contract duration, business combinations, and seasonality.

Costs and Expenses

Costs of subscription services revenues. Costs of subscription services revenues consist primarily of expenses associated with hosting our applications, providing standard customer support, and delivering enhanced customer support services. These costs include employee-related expenses, expenses related to data center capacity and third-party hosted infrastructure, and depreciation of our data center equipment.

Costs of professional services revenues. Costs of professional services revenues consist primarily of employee-related expenses associated with these services, subcontractor expenses, and travel expenses.

Product development expenses. Product development expenses consist primarily of employee-related expenses associated with our efforts to add new features and applications, increase functionality, and enhance the ease of use of our cloud applications, as well as expenses related to third-party hosted infrastructure.

Sales and marketing expenses. Sales and marketing expenses consist primarily of employee-related expenses, sales commissions, marketing programs, and travel expenses. Marketing programs consist of advertising, events, corporate communications, brand awareness, brand ambassador campaigns, and product marketing activities. Sales commissions are considered incremental costs of obtaining a contract with a customer. Sales commissions for new revenue contracts are capitalized and amortized on a straight-line basis over a period of benefit that we have determined to be five years.

General and administrative expenses. General and administrative expenses consist primarily of employee-related expenses for our finance and accounting, legal, human resources, and information systems personnel, as well as professional services fees and other corporate expenses.

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Restructuring expenses. Restructuring expenses are associated with a formal restructuring program and consist of charges related to workforce reductions, including employee transition, severance payments, employee benefits, and share-based compensation, as well as charges associated with the closure of facilities and other exit and disposal activities.

Results of Operations

Revenues

Our total revenues were as follows (in millions, except percentages):

Three Months Ended July 31,Six Months Ended July 31,
20252024% Change20252024% Change
Subscription services$2,169$1,90314%$4,228$3,71914%
Professional services179182(2)%3603561%
Total revenues$2,348$2,08513%$4,588$4,07513%

Total revenues were $2.3 billion for the three months ended July 31, 2025, compared to $2.1 billion for the prior year period, an increase of $263 million, or 13%. Subscription services revenues were $2.2 billion for the three months ended July 31, 2025, compared to $1.9 billion for the prior year period, an increase of $266 million, or 14%. Approximately 60% of the increase in subscription services revenues was attributable to expansion within our customers that existed as of the beginning of the comparable prior year period, and the remaining 40% was attributable to customers added after the beginning of the comparable prior year period. Professional services revenues were $179 million for the three months ended July 31, 2025, compared to $182 million for the prior year period, a decrease of $3 million, or 2%. Professional services revenues remained relatively flat with the change due to variation in project size and mix of deployment and integration services provided as we continue to expand and leverage our service partners.

Total revenues were $4.6 billion for the six months ended July 31, 2025, compared to $4.1 billion for the prior year period, an increase of $513 million, or 13%. Subscription services revenues were $4.2 billion for the six months ended July 31, 2025, compared to $3.7 billion for the prior year period, an increase of $509 million, or 14%. Approximately 60% of the increase in subscription services revenues was attributable to expansion within our customers that existed as of the beginning of the prior fiscal year, and the remaining 40% was attributable to customers added after the beginning of the prior fiscal year. Professional services revenues were $360 million for the six months ended July 31, 2025, compared to $356 million for the prior year period, an increase of $3 million, or 1%. Professional services revenues remained relatively flat with the change due to variation in project size and mix of deployment and integration services provided as we continue to expand and leverage our service partners.

Gross Revenue Retention Rate

Our growth in subscription services revenues attributable to existing customers is further reflected by our gross revenue retention rate of approximately 97% as of July 31, 2025. Our gross revenue retention rate measures the percentage of recurring revenue retained from existing customers and is calculated by taking total annual recurring revenue (“ARR”) of our customers as of the corresponding prior period-end and comparing that to ARR from that same set of customers as of the current period-end. The metric takes into account recurring revenues lost to product or customer churn but does not account for additional revenue earned from add-ons or net expansions, which include volume and price adjustments. Our high gross revenue retention rate demonstrates our ability to maintain our existing customer base and drive strong overall customer satisfaction.

Our gross revenue retention rate is based on ARR, which represents the annualized value of active subscription contracts as of the end of each period. Each subscription contract is annualized by dividing the total contract value by the number of days in the contract term and then multiplying by 365. We exclude certain subscription contracts from the calculation, including contracts with terms less than one year that are distinct from our core product offering, such as contracts for tenants which are used for implementation and testing. To the extent that we are negotiating a renewal with a customer after the expiration of the subscription, ARR is only adjusted if the customer churns. We calculate ARR on a constant currency basis using exchange rates set at the beginning of each fiscal year. ARR is a non-GAAP financial measure and should be viewed independently of, and not as a substitute for or combined with, revenue and unearned revenue.

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Subscription Revenue Backlog

As of July 31, 2025, our total subscription revenue backlog was $25.4 billion, with $7.9 billion expected to be recognized in revenues over the next 12 months. As of July 31, 2024, our total subscription revenue backlog was $21.6 billion, with $6.8 billion expected to be recognized in revenues over the next 12 months. The increase in subscription revenue backlog was primarily driven by expansion within our existing customer base, sales to new customers, and timing of renewals for existing customers.

Costs and Expenses

Our costs and expenses were as follows (in millions):

Three Months Ended July 31,Six Months Ended July 31,
2025202420252024
Costs of subscription services$370$304$720$594
Costs of professional services212207399406
Product development6606491,3221,305
Sales and marketing6416111,2641,184
General and administrative216202429403
Restructuring111678
Total costs and expenses$2,100$1,974$4,301$3,900

Total costs and expenses were $2.1 billion for the three months ended July 31, 2025, compared to $2.0 billion for the prior year period, an increase of $126 million, or 6%. The increase in total costs and expenses included increases of $52 million in employee-related expenses, net of restructuring-related cost savings, $46 million in third-party hosted infrastructure expenses, $27 million in facilities and IT-related expenses, and $10 million in amortization of deferred sales commissions.

Total costs and expenses were $4.3 billion for the six months ended July 31, 2025, compared to $3.9 billion for the prior year period, an increase of $400 million, or 10%. Included in the increase in total costs and expenses was $159 million in restructuring expenses primarily related to the Fiscal 2026 Restructuring Plan. Additional increases included $88 million in employee-related expenses, net of restructuring-related cost savings, $72 million in third-party hosted infrastructure expenses, $52 million in facilities and IT-related expenses, and $19 million in amortization of deferred sales commissions.

Costs of Subscription Services

Costs of subscription services were $370 million for the three months ended July 31, 2025, compared to $304 million for the prior year period, an increase of $66 million, or 22%. The increase in costs of subscription services included increases of $43 million in third-party hosted infrastructure expenses, $18 million in employee-related expenses primarily due to delivering our enhanced customer support services, net of restructuring-related cost savings, and $7 million in facilities and IT-related expenses.

Costs of subscription services were $720 million for the six months ended July 31, 2025, compared to $594 million for the prior year period, an increase of $126 million, or 21%. The increase in costs of subscription services included increases of $64 million in third-party hosted infrastructure expenses, $37 million in employee-related expenses due to delivering our enhanced customer support services, net of restructuring-related cost savings, and $17 million in facilities and IT-related expenses.

We expect costs of subscription services will continue to increase in absolute dollars as we improve and expand our technical operations infrastructure, including third-party hosted infrastructure, and as we grow our enhanced customer support services.

Costs of Professional Services

Costs of professional services were $212 million for the three months ended July 31, 2025, compared to $207 million for the prior year period, an increase of $5 million, or 2%. Costs of professional services remained relatively flat as a result of restructuring-related cost savings that reduced employee-related expenses.

Costs of professional services were $399 million for the six months ended July 31, 2025, compared to $406 million for the prior year period, a decrease of $7 million, or 2%. Costs of professional services remained relatively flat as a result of restructuring-related cost savings that reduced employee-related expenses.

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We expect costs of professional services as a percentage of total revenues to continue to decline as we expand and leverage our service partners to deploy our applications and focus on growing our subscription revenues.

Product Development

Product development expenses were $660 million for the three months ended July 31, 2025, compared to $649 million for the prior year period, an increase of $10 million, or 2%. Product development expenses remained relatively flat as a result of restructuring-related cost savings that reduced employee-related expenses.

Product development expenses were $1.3 billion for the six months ended July 31, 2025, compared to $1.3 billion for the prior year period, an increase of $17 million, or 1%. Product development expenses remained relatively flat as a result of restructuring-related cost savings that reduced employee-related expenses.

We expect product development expenses will continue to increase in absolute dollars as we improve and extend our applications and develop new technologies, including costs incurred for hardware maintenance, third-party hosted infrastructure, and facilities and IT.

Sales and Marketing

Sales and marketing expenses were $641 million for the three months ended July 31, 2025, compared to $611 million for the prior year period, an increase of $30 million, or 5%. The increase in sales and marketing expenses included increases of $12 million in employee-related expenses, net of restructuring-related cost savings, $10 million in amortization of deferred sales commissions, and $7 million in facilities and IT-related expenses.

Sales and marketing expenses were $1.3 billion for the six months ended July 31, 2025, compared to $1.2 billion for the prior year period, an increase of $80 million, or 7%. The increase in sales and marketing expenses included increases of $37 million in employee-related expenses, net of restructuring-related cost savings, $19 million in amortization of deferred sales commissions, and $13 million in facilities and IT-related expenses.

We expect sales and marketing expenses to increase in absolute dollars as we continue to invest domestically and internationally to expand awareness of our brand and product offerings to attract new and existing customers.

General and Administrative

General and administrative expenses were $216 million for the three months ended July 31, 2025, compared to $202 million for the prior year period, an increase of $14 million, or 7%. The increase in general and administrative expenses was primarily driven by higher employee-related expenses, which were partially offset by restructuring-related cost savings.

General and administrative expenses were $429 million for the six months ended July 31, 2025, compared to $403 million for the prior year period, an increase of $26 million, or 6%. The increase in general and administrative expenses included increases of $10 million in employee-related expenses, net of restructuring-related cost savings, and $8 million in facilities and IT-related expenses.

We expect general and administrative expenses will continue to increase in absolute dollars as we continue to grow our business and invest in our people, processes, and systems to support our global operations.

Restructuring

Restructuring expenses of $167 million for the six months ended July 31, 2025, were related to the Fiscal 2026 Restructuring Plan, and included $133 million for employee transition, severance payments, employee benefits, and share-based compensation, and $34 million for an impairment of office space.

Restructuring expenses of $8 million for the six months ended July 31, 2024, were related to exit charges associated with office space reductions under a separate restructuring plan.

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Share-based Compensation

Costs and expenses include share-based compensation expense as follows (in millions):

Three Months Ended July 31,Six Months Ended July 31,
2025202420252024
Costs of subscription services$39$35$81$73
Costs of professional services28285859
Product development170163353336
Sales and marketing8477177149
General and administrative7067140138
Restructuring00420
Total share-based compensation expense$391$370$851$755
Percentage of total revenues16.7%17.7%18.5%18.5%

Share-based compensation expense increased by $21 million for the three months ended July 31, 2025, compared to the prior year period, primarily due to additional grants to new and existing employees.

Share-based compensation expense increased by $96 million for the six months ended July 31, 2025, compared to the prior year period, primarily due to the Fiscal 2026 Restructuring Plan and additional grants to new and existing employees.

Equity compensation is an important element of our compensation philosophy. While we expect share-based compensation expense to grow in absolute dollars as we expand our global workforce, we expect it to decline as a percentage of total revenues.

Operating Income and Operating Margin

GAAP operating income was $248 million, or 10.6% of revenues, for the three months ended July 31, 2025, compared to the prior year GAAP operating income of $111 million, or 5.3% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth, moderation of operating expenses, including share-based compensation, and restructuring-related cost savings.

GAAP operating income was $287 million, or 6.3% of revenues, for the six months ended July 31, 2025, compared to the prior year GAAP operating income of $175 million, or 4.3% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth, moderation of operating expenses, including share-based compensation, and restructuring-related cost savings, partially offset by the Fiscal 2026 Restructuring Plan expenses recognized in the first quarter.

Non-GAAP operating income was $680 million, or 29.0% of revenues, for the three months ended July 31, 2025, compared to the prior year non-GAAP operating income of $518 million, or 24.9% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth, moderation of operating expenses, and restructuring-related cost savings.

Non-GAAP operating income was $1.4 billion, or 29.6% of revenues, for the six months ended July 31, 2025, compared to the prior year non-GAAP operating income of $1.0 billion, or 25.4% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth, moderation of operating expenses, and restructuring-related cost savings.

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Reconciliations of our GAAP to non-GAAP operating income and operating margin were as follows (in millions, except percentages). See “Non-GAAP Financial Measures” below for further information.

Three Months Ended July 31,Six Months Ended July 31,
2025202420252024
Operating income$248$111$287$175
Share-based compensation expense (1)391370809755
Employer payroll tax-related items on employee stock transactions (1)12103948
Amortization of acquisition-related intangible assets21204237
Acquisition-related costs761410
Restructuring costs111678
Non-GAAP operating income$680$518$1,358$1,033
Operating margin10.6%5.3%6.3%4.3%
Share-based compensation expense (1)16.7%17.7%17.6%18.5%
Employer payroll tax-related items on employee stock transactions (1)0.5%0.6%0.8%1.2%
Amortization of acquisition-related intangible assets0.9%1.0%0.9%1.0%
Acquisition-related costs0.3%0.3%0.3%0.2%
Restructuring costs0.0%0.0%3.7%0.2%
Non-GAAP operating margin29.0%24.9%29.6%25.4%

(1)For the six months ended July 31, 2025, the Share-based compensation expense and Employer payroll tax-related items on employee stock transactions lines in the GAAP to non-GAAP reconciliation tables above exclude $42 million and $2 million, respectively, related to the Fiscal 2026 Restructuring Plan. These expenses are included in the Restructuring costs lines.

Other Income, Net

Other income, net was as follows (in millions):

Three Months Ended July 31,Six Months Ended July 31,
2025202420252024
Total other income, net$56$57$120$116

Other income, net decreased by $1 million for the three months ended July 31, 2025, and increased by $4 million for the six months ended July 31, 2025, compared to the prior year periods.

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Provision For Income Taxes

The provision for income taxes was as follows (in millions):

Three Months Ended July 31,Six Months Ended July 31,
2025202420252024
Provision for income taxes$76$36$111$52

The income tax provision for the six months ended July 31, 2025, was primarily attributable to earnings in the U.S. and profitable foreign jurisdictions.

The income tax provision for the six months ended July 31, 2024, was primarily attributable to earnings in the U.S. and profitable foreign jurisdictions, offset by the excess tax benefit from share-based compensation.

On July 4, 2025, the One Big Beautiful Bill Act (“The 2025 Tax Act”) was signed into law. The 2025 Tax Act makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and modifications to the international tax framework. The 2025 Tax Act did not have a material impact on our annual effective tax rate and is expected to reduce our domestic cash tax outflows for the remainder of fiscal 2026. Due to the complexity and various upcoming effective dates of the 2025 Tax Act, we are still in the process of assessing its impact on our consolidated financial statements. The final impact may differ from our current estimates based on further analysis, regulatory guidance, and any legislative changes.

The Organization for Economic Cooperation and Development (“OECD”) released Pillar Two model rules defining a 15% global minimum tax for large multinational corporations. The OECD continues to release additional guidance and countries are implementing legislation, with widespread adoption of the Pillar Two Framework expected in the near future. Pillar Two rules are at varying stages of adoption across the jurisdictions where we operate. The specific rules and timeline to implement these rules vary by jurisdiction. The adoption of Pillar Two rules may affect our effective tax rate and current tax obligations and liabilities. While we do not currently anticipate Pillar Two rules to have a material impact on our consolidated financial results, we are monitoring developments from the OECD, governmental bodies, such as the EU, and intergovernmental economic organizations, to evaluate the impact of changing global tax laws.

For further information, see Note 16, Income Taxes, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Liquidity and Capital Resources

As of July 31, 2025, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $8.2 billion, which were primarily held for working capital and general corporate purposes. Our cash equivalents and marketable securities are primarily composed of, in order from largest to smallest, corporate bonds, U.S. treasury securities, money market funds, U.S. agency obligations, asset-backed securities, and commercial paper. We have financed our operations primarily through customer payments, issuance of debt, and sales of our common stock.

We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to the remaining term of contracted noncancelable subscription agreements, which are not reflected on the Condensed Consolidated Balance Sheets, and, if necessary, our borrowing capacity under our 2022 Credit Agreement that provides for $1.0 billion of unsecured financing, are sufficient to meet our working capital, capital expenditure, share repurchase, and debt repayment needs over the next 12 months and beyond.

Our long-term future capital requirements depend on many factors, including the effects of macroeconomic trends, customer growth rates, subscription renewal activity, headcount growth, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, infrastructure development, and our investment and acquisition activities. As part of our strategy, we may choose to seek additional debt or equity financing, which may not be available on terms favorable to us or at all. Additionally, our cash provided by operating activities could be affected by various risks and uncertainties, including the “Risk Factors” included in Part II, Item 1A of this report.

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Our cash flows were as follows (in millions):

Six Months Ended July 31,
20252024
Net cash provided by (used in):
Operating activities$1,073$943
Investing activities(510)(603)
Financing activities(850)(715)
Effect of exchange rate changes20
Net decrease in cash, cash equivalents, and restricted cash$(285)$(375)

Operating Activities

Cash provided by operating activities was $1.1 billion and $943 million for the six months ended July 31, 2025, and 2024, respectively. The improvement in cash provided by operating activities was primarily the result of higher cash collections of $427 million due to increased sales, partially offset by increased employee-related payments of $176 million, which include payments made under the Fiscal 2026 Restructuring Plan, and increased supplier payments of $95 million to support our continued growth.

Investing Activities

Cash used in investing activities was $510 million for the six months ended July 31, 2025, which primarily resulted from net cash outflow of $431 million related to marketable debt securities activity, capital expenditures of $64 million mainly for office space projects, and purchases of $15 million for non-marketable equity investments.

Cash used in investing activities was $603 million for the six months ended July 31, 2024, which primarily related to cash consideration of $522 million for the acquisition of HiredScore, net of cash acquired, and capital expenditures of $136 million for data center and office space projects, offset by proceeds of $57 million related to marketable debt securities activity.

We expect capital expenditures will be approximately $200 million in fiscal 2026. This primarily includes investments in our office facilities to support our continued growth.

Financing Activities

Cash used in financing activities was $850 million for the six months ended July 31, 2025, which primarily resulted from repurchases of common stock of $589 million under our share repurchase programs and taxes paid of $372 million related to net share settlement of equity awards, offset by proceeds of $111 million from the issuance of common stock from employee equity plans.

Cash used in financing activities was $715 million for the six months ended July 31, 2024, which was primarily due to repurchases of common stock of $440 million under our share repurchase programs and taxes paid of $381 million related to net share settlement of equity awards, offset by proceeds of $106 million from the issuance of common stock from employee equity plans.

Free Cash Flows

In evaluating our performance internally, we focus on long-term, sustainable growth in free cash flows. We define free cash flows, a non-GAAP financial measure, as net cash provided by operating activities minus capital expenditures. See “Non-GAAP Financial Measures” below for further information.

Free cash flows were $1.0 billion for the six months ended July 31, 2025, compared to $807 million for the prior year period. The improvement was primarily the result of higher cash collections of $427 million due to increased sales and decreased capital expenditures of $72 million, partially offset by increased employee-related payments of $176 million, which include payments made under the Fiscal 2026 Restructuring Plan, and increased supplier payments of $95 million to support our continued growth.

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Reconciliation of our GAAP net cash provided by operating activities to non-GAAP free cash flows is as follows (in millions):

Six Months Ended July 31,
20252024
Net cash provided by operating activities$1,073$943
Less: Capital expenditures(64)(136)
Free cash flows$1,009$807

Share Repurchase Programs

In August 2024, our Board of Directors authorized the repurchase of up to $1.0 billion of our outstanding shares of Class A common stock (“August 2024 Share Repurchase Program”), and in May 2025, our Board of Directors authorized the repurchase of up to an additional $1.0 billion of our outstanding shares of Class A common stock (“May 2025 Share Repurchase Program”).

Prior to the August 2024 and May 2025 Share Repurchase Programs, our Board of Directors authorized a $500 million share repurchase program in February 2024, which we completed in the third quarter of fiscal 2025, and a $500 million share repurchase program in November 2022, which we completed in the first quarter of fiscal 2025.

For further information, see Note 13, Stockholders’ Equity, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Contractual Obligations

Our contractual obligations primarily consist of borrowings under our Senior Notes, agreements for third-party hosted infrastructure platforms for business operations, leases for office space and co-location facilities for data center capacity, and other purchase obligations entered into in the ordinary course of business. Except as discussed in Note 11, Leases, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report, there have been no material changes outside the ordinary course of business to our contractual obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.

Non-GAAP Financial Measures

Regulation S-K Item 10(e), “Use of non-GAAP financial measures in Commission filings,” defines and prescribes the conditions for use of non-GAAP financial information. Our measures of non-GAAP operating income, non-GAAP operating margin, and free cash flows meet the definition of non-GAAP financial measures.

Non-GAAP Operating Income and Non-GAAP Operating Margin

We use the non-GAAP financial measures of non-GAAP operating income and non-GAAP operating margin to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate our financial performance. We believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.

Our non-GAAP operating income and non-GAAP operating margin exclude the components listed below. For the reasons set forth below, we believe that excluding these components provides useful information to investors and others in understanding and evaluating our operating results and prospects in the same manner as management, in comparing financial results across accounting periods and to those of peer companies, and to better understand the long-term performance of our core business.

  • Share-based compensation expense. Share-based compensation primarily consists of non-cash expenses for employee restricted stock units (“RSUs”) and our employee stock purchase plan (“ESPP”). Although share-based compensation is an important aspect of the compensation of our employees and executives, this expense is determined using a number of factors, including our stock price, volatility, and forfeiture rates, that are beyond our control and generally unrelated to operational decisions and performance in any particular period. Further, share-based compensation expense is not reflective of the value ultimately received by the grant recipients.

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  • Employer payroll tax-related items on employee stock transactions. We exclude the employer payroll tax-related items on employee stock transactions in order to show the full effect that excluding share-based compensation expense has on our operating results. Similar to share-based compensation expense, this tax expense is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of our business.

  • Amortization of acquisition-related intangible assets. For business combinations, we generally allocate a portion of the purchase price to intangible assets. The amount of the allocation is based on estimates and assumptions made by management and is subject to amortization. The amount of purchase price allocated to intangible assets and the term of the related amortization can vary significantly and are unique to each acquisition and thus we do not believe this activity is reflective of our ongoing operations. Although we exclude the amortization of acquisition-related intangible assets from these non-GAAP financial measures, we believe that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation.

*•*Acquisition-related costs. Acquisition-related costs include direct transaction costs, such as due diligence and advisory fees, and certain compensation and integration-related expenses. We exclude the effects of acquisition-related costs as we believe these transaction-specific expenses are inconsistent in amount and frequency and do not correlate to the operation of our business.

*•*Restructuring costs. Restructuring costs are associated with a formal restructuring plan and are primarily related to workforce reductions, the closure of facilities, and other exit and disposal activities. We exclude these expenses because they are not reflective of ongoing business and operating results.

Free Cash Flows

We define free cash flows as net cash provided by operating activities minus capital expenditures. We use free cash flows as a measure of financial progress in our business, as it balances operating results, cash management, and capital efficiency. We believe information regarding free cash flows provides investors and others with an enhanced view of cash flow generation from the ongoing operations of our business.

Limitations on the Use of Non-GAAP Financial Measures

A limitation of our non-GAAP financial measures of non-GAAP operating income, non-GAAP operating margin, and free cash flows is that they do not have uniform definitions. Our definitions will likely differ from the definitions used by other companies, including peer companies, and therefore comparability may be limited. Further, these non-GAAP financial measures have certain limitations as they do not reflect all items of expense or cash that affect our operations and are reflected in the corresponding GAAP financial measures. In the case of share-based compensation, if we did not pay out a portion of compensation in the form of share-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position.

We compensate for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to view our non-GAAP financial measures in conjunction with the most comparable GAAP financial measures.

See “Results of Operations—Operating Income and Operating Margin” for reconciliations from the most directly comparable GAAP financial measures of GAAP operating income and GAAP operating margin, to the non-GAAP financial measures of non-GAAP operating income and non-GAAP operating margin, for the three and six months ended July 31, 2025, and 2024.

See “Liquidity and Capital Resources—Free Cash Flows” for a reconciliation from the most comparable GAAP financial measure, net cash provided by operating activities, to the non-GAAP financial measure, free cash flows, for the six months ended July 31, 2025, and 2024.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates, judgments, and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

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We believe that the following critical accounting policies involve a high degree of judgment and complexity, and are the most critical to aid in fully understanding and evaluating our financial condition and operating results:

  • Revenue recognition

  • Deferred commissions

  • Income taxes

  • Business combinations, goodwill, and acquisition-related intangible assets

For a further discussion of our critical accounting policies, refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2025. During the three and six months ended July 31, 2025, there were no significant changes to our critical accounting policies and estimates.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Recent macroeconomic events have resulted in negative impacts on global economies and financial markets, which may increase our foreign currency exchange risk and interest rate risk. For further discussion of the potential impacts of these events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.

Foreign Currency Exchange Risk

We transact business globally in multiple currencies. As a result, our operating results and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. As of July 31, 2025, our most significant currency exposures were the euro, British pound, Canadian dollar, and Australian dollar.

Due to our exposure to market risks that may result from changes in foreign currency exchange rates, we enter into foreign currency derivative hedging transactions to mitigate these risks. For further information, see Note 9, Derivative Instruments, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Interest Rate Risk on our Investments

We had cash, cash equivalents, and marketable securities totaling $8.2 billion and $8.0 billion as of July 31, 2025, and January 31, 2025, respectively. Cash equivalents and marketable securities were invested primarily in U.S. treasury securities, U.S. agency obligations, corporate bonds, commercial paper, money market funds, and asset-backed securities. The cash, cash equivalents, and marketable securities are held primarily for working capital and general corporate purposes. Our investment portfolios are managed to preserve capital and meet liquidity needs. We do not enter into investments for trading or speculative purposes.

Our cash equivalents and our portfolio of debt securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we sell securities that decline in market value due to changes in interest rates. Further, since our debt securities are classified as “available-for-sale,” if the fair value of the security declines below its amortized cost basis, then any portion of that decline attributable to credit losses, to the extent expected to be nonrecoverable before the sale of the impaired security, is recognized on the Condensed Consolidated Statements of Operations.

A hypothetical increase or decrease of 100 basis points in interest rates would have resulted in an approximately $114 million market value reduction or increase in our investment portfolio as of July 31, 2025. A hypothetical increase or decrease of 100 basis points in interest rates would have resulted in an approximately $89 million market value reduction or increase in our investment portfolio as of January 31, 2025. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur.

Interest Rate Risk on our Debt

The Senior Notes have fixed annual interest rates, and therefore we do not have economic interest rate exposure on these debt obligations. However, the fair values of the Senior Notes are exposed to interest rate risk. Generally, the fair values of the Senior Notes will increase as interest rates fall and decrease as interest rates rise.

Borrowings under our 2022 Credit Agreement will bear interest, at our option, at a base rate plus a margin of 0.000% to 0.500% or a secured overnight financing rate (“SOFR”) plus 10 basis points, plus a margin of 0.750% to 1.500%, with such margin being determined based on our consolidated leverage ratio or debt rating. Because the interest rates applicable to borrowings under the 2022 Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of borrowing.

For further information, see Note 10, Debt, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report.

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In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission (“SEC”) rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

(b) Changes in Internal Control Over Financial Reporting

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officer and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are regularly involved with claims, suits, purported class or representative actions, and may be involved in regulatory and government investigations and other proceedings, involving competition, intellectual property, data security and privacy, bankruptcy, tax and related compliance, labor and employment, commercial disputes, and other matters. Such claims, suits, actions, regulatory and government investigations, and other proceedings can impose a significant burden on management and employees, could prevent us from offering one or more of our applications, services, or features to others, could require us to change our technology or business practices, or could result in monetary damages, fines, civil or criminal penalties, reputational harm, or other adverse consequences.

These claims, suits, actions, regulatory and government investigations, and other proceedings may include speculative, substantial, or indeterminate monetary amounts. We record a liability when we believe that it is probable that a liability has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both the likelihood of there being a liability and the estimated amount of a liability related to such matters. With respect to our outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible liability will not, either individually or in aggregate, have a material adverse effect on our business, financial condition, operating results, or cash flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.

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Item 1A. RISK FACTORS

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including the condensed consolidated financial statements and the related notes included elsewhere in this report, before making an investment decision. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that materially and adversely affect our business. If any of the following risks actually occurs, our business operations, financial condition, operating results, and prospects could be materially and adversely affected. The market price of our securities could decline due to the materialization of these or any other risks, and you could lose part or all of your investment.

Summary of Risk Factors

The following summary provides an overview of the material risks we are exposed to in the normal course of our business activities. This risk factor summary does not contain all of the information that may be important to you, and you should read these together with the more detailed discussion of risks set forth following this section, as well as elsewhere in this report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional risks beyond those summarized below, or discussed elsewhere in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may apply to our activities or operations as currently conducted or as we may conduct them in the future, or to the markets in which we currently operate or may in the future operate. Consistent with the foregoing, we are exposed to a variety of risks, including those associated with the following:

  • any compromise of our information technology systems or security measures (including of our critical suppliers and service partners), or the unauthorized access of customer or user data;

  • any slowdown or failure of our technical operations infrastructure, including data centers operated by third parties, or the impact of service outages or delays in the deployment of our applications, or the failure of our applications to perform properly;

  • the impact of continuing global economic and geopolitical volatility;

  • privacy concerns and evolving domestic or foreign laws and regulations;

  • any loss of key employees or the inability to attract, develop, and retain highly skilled employees;

  • our ability to compete effectively in the intensely competitive markets in which we participate;

  • our reliance on our network of partners to drive additional growth of our revenues;

  • exposure to risks inherent to sales to customers outside the United States or with international operations;

  • any dissatisfaction of our users with the deployment, training, and support services provided by us and our partners;

  • the fluctuation of our quarterly results;

  • our ability to realize a return on our current development efforts or offer new features, enhancements, and modifications to our products and services, and our ability to realize a return on the investments we have made toward entering new markets and new lines of business;

  • delays in the reflection of downturns or upturns in new sales in our operating results associated with long sales cycles and our subscription model;

  • our ability to predict the rate of customer subscription renewals or adoptions;

  • our use of new and evolving technologies in our offerings, such as AI;

  • any adverse litigation results;

  • our ability to successfully integrate our applications with third-party technologies;

  • our ability to realize the expected business or financial benefits of company, employee, or technology acquisitions;

  • any failure to protect our intellectual property rights or any lawsuits against us for alleged infringement of third-party proprietary rights;

  • government contracts and related procurement regulations;

  • our existing and future debt obligations; and

  • the limited ability of third parties to influence corporate matters due to our dual class structure and to seek a merger, tender offer, or proxy contest due to Delaware law and provisions in our organizational documents.

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Risks Related to Our Business and Industry

Any slowdown or failure in our technical operations infrastructure or applications may subject us to liabilities and adversely affect our reputation and operating results.

We have experienced significant growth in the number of users, transactions, and data that our operations infrastructure supports. If we do not accurately predict our infrastructure requirements or fail to adapt and scale, we may experience service outages or delays, or significant increases in operating costs, which may adversely affect our business and operating results.

We have experienced, and may in the future experience, defects, system disruptions, outages, and other performance problems, including the failure of our applications to perform properly. These problems may be caused by a variety of factors, including infrastructure and software or code changes, vendor issues, software and system defects, human error, viruses, worms, security attacks (internal and external), fraud, spikes in customer usage, and denial of service issues. For example, in July 2025, we identified an issue impacting reporting from high-volume data sources in the tenants of certain customers that may have yielded incomplete queries without displaying an error message. We have notified impacted customers and remediated the issue. All of these issues may result in increased operational costs, delays in new feature rollouts, customer loss, reputational damage, and legal or regulatory liability, including liability under customer contracts.

Such issues have, and may in the future, result in certain parties having unauthorized access to data, which could increase the scope of our liability. Because of the large amount of data that we collect and process in our systems, and the sensitive nature of such data, it is possible that these issues could result in significant disruption, data loss or corruption, or cause the data to be incomplete or contain inaccuracies that our customers and other users regard as significant.

Furthermore, our applications are essential to many of the business processes for our customers. For example, our financial management application is essential to our and our customers’ financial planning, reporting, and compliance programs. Any interruption in our service may affect the availability, accuracy, or timeliness of such programs and as a result could damage our reputation, cause our customers to terminate their use of our applications, require us to issue refunds for prepaid and unused subscription services, require us to compensate our customers for certain losses, and prevent us from gaining additional business from current or future customers. In addition, because we use Workday’s financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers and negatively impact demand for our applications.

Our insurance policies, including our errors and omissions insurance, may be inadequate or may not be available in the future on acceptable terms, or at all, to protect against claims and other legal actions arising from breaches of our contracts, disruptions in our service, including those caused by cybersecurity incidents, failures or disruptions to our infrastructure, catastrophic events and disasters, or otherwise. In addition, our policy may not cover all

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Item 5. OTHER INFORMATION

Insider Trading Arrangements

During the three months ended July 31, 2025, the following directors and/or officers of Workday adopted or terminated a “Rule 10b5-1 trading arrangement,” as defined in item 408(a) of Regulation S-K intending to satisfy the affirmative defense conditions of Rule 10b5-1(c):

Name and TitleActionTotal Shares of Class A Common Stock to be SoldAdoption DateExpiration Date
Richard Sauer, Chief Legal OfficerAdopt41,656(1)June 12, 2025July 14, 2026
Michael McNamara, DirectorAdopt15,393July 10, 2025April 14, 2026

(1)Includes shares to be withheld by Workday in mandatory transactions to cover withholding taxes in connection with the settlement of equity awards.

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Item 6. EXHIBITS

The Exhibits listed below are filed as part of this Form 10-Q.

Incorporated by ReferenceFiled Herewith
Exhibit No.ExhibitFormFile No.Filing DateExhibit No.
31.1Certification of Periodic Report by Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002X
31.2Certification of Periodic Report by Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002X
32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X
32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002X
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)X
101.SCHInline XBRL Taxonomy Schema Linkbase DocumentX
101.CALInline XBRL Taxonomy Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Labels Linkbase DocumentX
101.PREInline XBRL Taxonomy Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)X

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Workday, Inc.
Dated: August 22, 2025/s/ Zane Rowe
Zane Rowe Chief Financial Officer (Principal Financial Officer)
Dated: August 22, 2025/s/ Mark Garfield
Mark Garfield Chief Accounting Officer (Principal Accounting Officer)