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Workday: Workday's Q3 Results Exceed Expectations, Driven by AI Momentum

Workday delivered a strong Q3 performance, with subscription revenue growth of 15% to $2.244 billion, and a non-GAAP operating margin of 28.5%. Earnings per share (EPS) came in at $2.32, beating analyst estimates of $2.17. The company's operating cash flow was $588 million, up 45% year-over-year, and it repurchased $803 million of shares during the quarter. Workday's financial performance was robust, with a P/E Ratio of 96.97 and a P/S Ratio of 6.76, indicating a premium valuation.

WDAY

USD 219.36

1.26%

A-Score: 4.3/10

Publication date: November 25, 2025

Full Report

Author: Analystock.ai

📋 Highlights
  • Subscription Revenue Growth: 15% increase to $2.244 billion, with a 28.5% non-GAAP operating margin, reflecting strong operational efficiency.
  • AI-Driven ARR Growth: AI products added 1.5 points of ARR growth, with 75% of core customers using Workday Illuminate AI.
  • International Expansion: Solid growth in EMEA, APAC, and Japan, supported by new AI centers in Dublin and an office in Dubai.
  • Acquisition Impact: Paradox and Sana contributed over 1 point each to Q4 subscription revenue growth, with Paradox to be sold agnostically.
  • Shareholder Returns: $803 million in share repurchases and 45% increase in operating cash flow to $588 million.

AI-Driven Growth

Workday's AI products added over 1.5 points of ARR growth, with more than 75% of core customers using Workday Illuminate AI. The company's AI solutions are driving significant uplift, with HiredScore selling $2.50 for every dollar of recruiting sold. The acquisition of Sana is expected to add a leading knowledge management and agent orchestrator to create an AI experience layer across Workday. As the company noted, "the AI narrative is changing, with customers coming back to trusted vendors like Workday that have been in their infrastructure for a long time and drive real business outcomes."

International Performance and Partnerships

Workday's international performance was strong, with solid growth across EMEA, APAC, and Japan. The company established a new AI center of excellence in Dublin and announced a new office in Dubai. Partnerships played a critical role in Q3, with over 20% of net new ACV sourced from partners. The company's partnership with Microsoft and acquisition of PipeDream are driving enterprise-wide AI transformation.

Outlook and Valuation

Workday expects subscription revenue of $2.355 billion in Q4, representing 15% growth, and a non-GAAP operating margin of at least 28.5%. The company targets a subscription revenue CAGR of 12-15% through FY '28 and expects FY '27 subscription revenue growth of approximately 13%. Analysts estimate next year's revenue growth at 13.1%. With a P/E Ratio of 96.97 and an EV/EBITDA ratio of 61.58, Workday's valuation appears to be pricing in significant growth expectations. The company's Free Cash Flow Yield is 4.14%, indicating a reasonable return for investors.

Workday's A-Score