Workday beats forecasts on increasing AI demand from consumers and government

Workday, a leading provider of cloud-based human resources and finance software, has exceeded market expectations in its fiscal fourth quarter of 2025, reporting revenue of $2.21 billion. The company’s strong performance comes amid increased customer demand for AI-enabled enterprise solutions and expansion into government sectors.

Financial Performance: Workday demonstrated robust growth with quarterly revenue increasing 15% year over year and earnings per share of $1.92, surpassing analyst estimates.

• Revenue reached $2.21 billion, exceeding the expected $2.18 billion
• Adjusted earnings per share came in at $1.92, well above the anticipated $1.78
• Net income decreased to $94 million from $1.19 billion in the previous year, primarily due to a one-time tax benefit in the prior period

AI Integration and Customer Adoption: The company is experiencing strong traction with its artificial intelligence offerings across its customer base.

• Approximately 30% of customer expansions included at least one AI product
• CEO Carl Eschenbach noted that AI is a central topic in all customer conversations
• Additional AI capabilities are planned for release throughout the coming year
• The company has integrated AI functionality into its Peakon product to analyze employee feedback

Strategic Leadership Changes: Workday has made significant executive appointments to strengthen its product and commercial operations.

• Google Cloud executive Gerrit Kazmaier has been appointed as president of products and technology
• Former UiPath CEO Rob Enslin has joined as president and chief commercial officer
• Current product and technology president Sayan Chakraborty will retire after a decade with the company

Government Sector Expansion: The company is capitalizing on opportunities in the federal market through the Department of Government Efficiency (DOGE).

• Workday has increased focus on federal sales over the past 18 months
• Many government agencies are still using outdated, on-premises systems
• The company sees significant potential for modernization and efficiency improvements in government IT infrastructure

Forward Guidance: Management has provided optimistic projections for the upcoming fiscal year.

• First quarter subscription revenue target of $2.05 billion
• Adjusted operating margin forecast of 28% for fiscal 2026
• Full-year subscription revenue projected at $8.8 billion, representing 14% growth
• Guidance slightly improved from previous forecasts in November

Market Impact and Analysis: Despite strong financial performance and strategic initiatives, broader market dynamics suggest potential challenges ahead for enterprise software companies like Workday as they navigate the evolving technology landscape and increased competition in AI-enabled solutions.