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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)  

Delaware 20-2480422
(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 class Trading Symbol(s) Name of each exchange on which registered
Class A Common Stock, par value $0.001 WDAY The 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.

Table of Contents

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, 2025
3

Condensed Consolidated Statements of Operations for the Three and Six Months Ended July 31, 2025, and 2024
4

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended July 31, 2025, and 2024
5

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended July 31 , 2025, and 2024
6

Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2025, and 2024
7

Notes to Condensed Consolidated Financial Statements
9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
26

Item 3. Quantitative and Qualitative Disclosures About Market Risk
39

Item 4. Controls and Procedures
39

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
41

Item 1A. Risk Factors
42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
64

Item 3. Defaults Upon Senior Securities
64

Item 4. Mine Safety Disclosures
64

Item 5. Other Information
64

Item 6. Exhibits
65

Signatures
66

2

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Workday, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(unaudited)

July 31, 2025 January 31, 2025
Assets
Current assets:
Cash and cash equivalents $ 1,264   $ 1,543  
Marketable securities 6,922   6,474  
Trade and other receivables, net 1,609   1,950  
Deferred costs 278   267  
Prepaid expenses and other current assets 334   311  
Total current assets 10,407   10,545  
Property and equipment, net 1,121   1,239  
Operating lease right-of-use assets 719   336  
Deferred costs, noncurrent 562   561  
Acquisition-related intangible assets, net 320   361  
Deferred tax assets 959   1,039  
Goodwill 3,478   3,478  
Other assets 395   418  
Total assets $ 17,961   $ 17,977  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 100   $ 108  
Accrued expenses and other current liabilities 346   296  
Accrued compensation 537   578  
Unearned revenue 3,852   4,467  
Operating lease liabilities 110   99  

Total current liabilities 4,945   5,548  
Debt, noncurrent 2,985   2,984  
Unearned revenue, noncurrent 65   80  
Operating lease liabilities, noncurrent 681   279  
Other liabilities 113   52  
Total liabilities 8,789   8,943  
Stockholders’ equity:
Common stock 0   0  
Additional paid-in capital 12,055   11,463  
Treasury stock ( 1,900 ) ( 1,308 )
Accumulated other comprehensive income (loss) ( 74 ) 84  
Accumulated deficit ( 909 ) ( 1,205 )
Total stockholders’ equity 9,172   9,034  
Total liabilities and stockholders’ equity $ 17,961   $ 17,977  

See Notes to Condensed Consolidated Financial Statements
3

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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,
2025 2024 2025 2024
Revenues:
Subscription services $ 2,169   $ 1,903   $ 4,228   $ 3,719  
Professional services 179   182   360   356  
Total revenues 2,348   2,085   4,588   4,075  
Costs and expenses (1) :

Costs of subscription services 370   304   720   594  
Costs of professional services 212   207   399   406  
Product development 660   649   1,322   1,305  
Sales and marketing 641   611   1,264   1,184  
General and administrative 216   202   429   403  
Restructuring 1   1   167   8  
Total costs and expenses 2,100   1,974   4,301   3,900  
Operating income 248   111   287   175  
Other income, net 56   57   120   116  
Income before provision for income taxes 304   168   407   291  
Provision for income taxes 76   36   111   52  
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, basic 266,777   265,317   266,649   264,885  
Weighted-average shares used to compute net income per share, diluted 270,180   267,949   270,240   269,128  

(1) Costs and expenses include share-based compensation expense as follows:
Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Costs of subscription services $ 39   $ 35   $ 81   $ 73  
Costs of professional services 28   28   58   59  
Product development 170   163   353   336  
Sales and marketing 84   77   177   149  
General and administrative 70   67   140   138  
Restructuring 0   0   42   0  
Total share-based compensation expense $ 391   $ 370   $ 851   $ 755  

See Notes to Condensed Consolidated Financial Statements
4

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Workday, Inc.
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)

Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Net income $ 228   $ 132   $ 296   $ 239  
Other comprehensive income (loss), net of tax:
Net change in foreign currency translation adjustment 1   ( 1 ) 3   ( 3 )
Net change in unrealized gains (losses) on available-for-sale debt securities, net of tax provision (benefit) of $( 5 ), $ 10 , $ 5 , and $ 1 , respectively
( 16 ) 27   14   2  
Net change in unrealized losses on cash flow hedges, net of tax provision (benefit) of $( 1 ), $( 1 ), $( 5 ), and $ 0 , respectively
( 15 ) ( 24 ) ( 175 ) ( 1 )
Other comprehensive income (loss), net of tax ( 30 ) 2   ( 158 ) ( 2 )
Comprehensive income $ 198   $ 134   $ 138   $ 237  

See Notes to Condensed Consolidated Financial Statements
5

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Workday, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in millions, except number of shares which are reflected in thousands)
(unaudited)

Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Common stock:
Balance, beginning of period $ 0   $ 0   $ 0   $ 0  
Issuance of common stock under employee equity plans 0   0   0   0  
Shares withheld related to net share settlement of equity awards 0   0   0   0  

Balance, end of period 0   0   0   0  
Additional paid-in capital:
Balance, beginning of period 11,701   10,512   11,463   10,400  
Issuance of common stock under employee equity plans 111   106   111   106  
Shares withheld related to net share settlement of equity awards ( 151 ) ( 121 ) ( 374 ) ( 395 )
Share-based compensation 394   372   855   758  

Balance, end of period 12,055   10,869   12,055   10,869  
Treasury stock:
Balance, beginning of period ( 1,601 ) ( 742 ) ( 1,308 ) ( 608 )

Common stock repurchases under share repurchase programs ( 299 ) ( 309 ) ( 592 ) ( 443 )
Balance, end of period ( 1,900 ) ( 1,051 ) ( 1,900 ) ( 1,051 )
Accumulated other comprehensive income (loss):
Balance, beginning of period ( 44 ) 17   84   21  
Other comprehensive income (loss) ( 30 ) 2   ( 158 ) ( 2 )
Balance, end of period ( 74 ) 19   ( 74 ) 19  
Accumulated deficit:
Balance, beginning of period ( 1,137 ) ( 1,624 ) ( 1,205 ) ( 1,731 )
Net income 228   132   296   239  

Balance, end of period ( 909 ) ( 1,492 ) ( 909 ) ( 1,492 )
Total stockholders’ equity $ 9,172   $ 8,345   $ 9,172   $ 8,345  

Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Common stock shares:
Balance, beginning of period 266,596   265,218   266,352   263,862  
Issuance of common stock under employee equity plans 2,142   1,959   4,679   4,835  

Shares withheld related to net share settlement of equity awards ( 618 ) ( 530 ) ( 1,621 ) ( 1,548 )
Common stock repurchased ( 1,216 ) ( 1,387 ) ( 2,506 ) ( 1,889 )
Balance, end of period 266,904   265,260   266,904   265,260  

See Notes to Condensed Consolidated Financial Statements
6

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Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)

Six Months Ended July 31,
2025 2024
Cash flows from operating activities:
Net income $ 296   $ 239  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 165   154  
Share-based compensation expense 851   755  
Amortization of deferred costs 140   121  
Non-cash lease expense 54   51  
Losses on investments, net 2   10  
Accretion of discounts on marketable debt securities, net ( 38 ) ( 62 )
Deferred income taxes 84   33  
Other 47   11  
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net 337   351  
Deferred costs ( 152 ) ( 104 )
Prepaid expenses and other assets 15   24  
Accounts payable 0   12  
Accrued expenses and other liabilities ( 99 ) ( 124 )
Unearned revenue ( 629 ) ( 528 )
Net cash provided by operating activities 1,073   943  
Cash flows from investing activities:
Purchases of marketable securities ( 2,211 ) ( 2,143 )
Maturities of marketable securities 1,515   2,132  
Sales of marketable securities 265   68  
Capital expenditures ( 64 ) ( 136 )
Business combinations, net of cash acquired 0   ( 522 )

Purchases of non-marketable equity and other investments ( 15 ) ( 7 )
Sales of non-marketable equity and other investments 0   5  

Net cash used in investing activities ( 510 ) ( 603 )
Cash flows from financing activities:

Repurchases of common stock ( 589 ) ( 440 )
Proceeds from issuance of common stock from employee equity plans 111   106  
Taxes paid related to net share settlement of equity awards ( 372 ) ( 381 )

Net cash used in financing activities ( 850 ) ( 715 )
Effect of exchange rate changes 2   0  
Net decrease in cash, cash equivalents, and restricted cash ( 285 ) ( 375 )
Cash, cash equivalents, and restricted cash at the beginning of period 1,554   2,024  
Cash, cash equivalents, and restricted cash at the end of period $ 1,269   $ 1,649  

See Notes to Condensed Consolidated Financial Statements
7

Table of Contents

Six Months Ended July 31,
2025 2024
Supplemental cash flow data:
Cash paid for interest
$ 55   $ 55  
Cash paid for income taxes, net of refunds 58   35  
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid 18   56  
Taxes related to net share settlement of equity awards, accrued but not paid
15   14  

As of July 31,
2025 2024
Reconciliation of cash, cash equivalents, and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows:
Cash and cash equivalents $ 1,264   $ 1,635  
Restricted cash included in Prepaid expenses and other current assets 5   14  

Total cash, cash equivalents, and restricted cash $ 1,269   $ 1,649  

See Notes to Condensed Consolidated Financial Statements
8

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Workday, Inc.
Notes to Condensed Consolidated Financial Statements

As used in this report, the terms “Workday,” “registrant,” “we,” “us,” and “our” mean Workday, Inc. and its subsidiaries unless the context indicates otherwise.
Amounts in this report may not recalculate due to rounding. Year-over-year comparisons, operating margin, and net income per share are calculated using unrounded data.
Note 1. Overview and Basis of Presentation
Description of the Business
Workday is a leading enterprise platform that provides organizations with solutions for financial management, human capital management (“HCM”), planning, spend management, and analytics. With Workday, our customers have an artificial intelligence (“AI”)-powered cloud platform to help manage their people, money, and agents.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the results of Workday, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of our management, the information contained herein reflects all adjustments necessary for a fair presentation of Workday’s financial position, results of operations, stockholders’ equity, and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the three and six months ended July 31, 2025, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2026. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025, filed with the SEC on March 11, 2025.
Certain prior period amounts reported in our unaudited condensed consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.

Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, judgments, and assumptions include, but are not limited to, the identification of distinct performance obligations for revenue recognition, the determination of the period of benefit for deferred commissions, the realizability of deferred tax assets, the measurement of uncertain tax positions, the fair value and useful lives of assets acquired and liabilities assumed through business combinations, and the valuation of non-marketable equity investments. Actual results could differ from those estimates, judgments, and assumptions, and such differences could be material to our condensed consolidated financial statements.

Segment Information
We operate as a single operating and reportable segment: cloud applications. Although we offer a variety of enterprise cloud solutions to a diverse global customer base, we operate in one operating segment because our business activities are managed on a consolidated basis, our service offerings all operate on the Workday platform and are deployed in a similar manner, and our Chief Operating Decision Maker (“CODM”), who is our Chief Executive Officer, allocates resources and assesses performance based upon discrete financial information at the consolidated level.
Our CODM assesses performance and decides how to allocate resources based on Net income, as reported on the Consolidated Statements of Operations. Net income is used to evaluate the overall profitability of the business and to guide decisions on how to invest in and grow the business. Our CODM also reviews Total assets, as reported on the Consolidated Balance Sheets, and Capital expenditures, as reported on the Consolidated Statements of Cash Flows. Significant segment expenses include the costs and expenses presented on the Consolidated Statements of Operations. Other segment items include Other income, net and Provision for income taxes.
9

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Note 2. Significant Accounting Policies and Accounting Standards
Significant Accounting Policies
There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025 .

Concentrations of Risk and Significant Customers
Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, debt securities, derivative instruments, and trade and other receivables. Our deposits exceed federally insured limits.

No customer individually accounted for more than 10% of trade and other receivables, net as of July 31, 2025, or January 31, 2025. No customer individually accounted for more than 10% of total revenues during the three and six months ended July 31, 2025, or 2024.
Other than the United States, no country individually accounted for more than 10% of total revenues during the three and six months ended July 31, 2025, or 2024.

In order to reduce the risk of disruption of our cloud applications, we host our applications in data centers operated by third parties located in the United States, Europe, Canada, and the Asia-Pacific region. These data centers include third-party hosted infrastructure, including Amazon Web Services and Google Cloud, and co-location data centers. Procedures are in place to restore services in the event of disruption at one of these data center facilities. Even with these procedures for disaster recovery in place, our cloud applications could be significantly interrupted during the implementation of the procedures to restore services.

Recently Issued Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Disclosures , which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. This ASU is effective for annual periods beginning in our fiscal 2026. The updated standard allows for adoption on a prospective basis, with a retrospective option. We are currently evaluating the effect the updated standard will have on our financial statement disclosures.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets , which introduces a practical expedient for the application of the current expected credit loss model to current accounts receivable and contract assets. This ASU is effective for interim and annual reporting periods beginning in the first quarter of our fiscal 2027, with early adoption permitted. The updated standard provides for adoption on a prospective basis. We are currently evaluating the impacts of the updated standard.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires the disclosure of additional information about specific expense categories in the notes to the financial statements. This ASU is effective for annual periods beginning in our fiscal 2028, and interim periods beginning in the first quarter of our fiscal 2029, with early adoption permitted. The updated standard allows for adoption on a prospective or retrospective basis. We are currently evaluating the effect the updated standard will have on our financial statement disclosures.
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Note 3. Investments
Debt Securities
As of July 31, 2025, debt securities consisted of the following (in millions):

Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value
U.S. treasury securities $ 2,050   $ 6   $ 0   $ 2,056  
U.S. agency obligations 537   1   0   538  
Corporate bonds 3,943   25   ( 1 ) 3,967  
Commercial paper 215   0   0   215  
Asset-backed securities 305   1   0   306  
Other debt securities
42   0   0   42  
Total debt securities $ 7,092   $ 33   $ ( 1 ) $ 7,124  
Included in Cash and cash equivalents $ 202   $ 0   $ 0   $ 202  
Included in Marketable securities $ 6,890   $ 33   $ ( 1 ) $ 6,922  

As of January 31, 2025, debt securities consisted of the following (in millions):

Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value
U.S. treasury securities $ 2,069   $ 4   $ ( 1 ) $ 2,072  
U.S. agency obligations 634   2   0   636  
Corporate bonds 3,532   11   ( 3 ) 3,540  
Commercial paper 294   0   0   294  
Asset-backed securities 104   0   0   104  
Other debt securities
5   0   0   5  
Total debt securities $ 6,638   $ 17   $ ( 4 ) $ 6,651  
Included in Cash and cash equivalents $ 177   $ 0   $ 0   $ 177  
Included in Marketable securities $ 6,461   $ 17   $ ( 4 ) $ 6,474  

The following table presents the fair values of debt securities as of July 31, 2025, by remaining contractual maturity (in millions). Actual maturities may differ from contractual maturities because borrowers may have certain prepayment conditions.

Due within 1 year $ 2,313  
Due 1 year through 5 years 4,650  
Due 5 years through 10 years
91  
Due after 10 years
70  
Total debt securities $ 7,124  

We classify our debt securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We consider all debt securities as funds available for use in current operations, including those with maturity dates beyond one year, and therefore classify these securities as current assets on the Condensed Consolidated Balance Sheets. Debt securities included in Marketable securities on the Condensed Consolidated Balance Sheets consist of securities with original maturities at the time of purchase greater than three months, and the remaining securities are included in Cash and cash equivalents.
Interest receivable of $ 62  million and $ 53  million was included in Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets as of July 31, 2025, and January 31, 2025, respectively.
As of July 31, 2025, and January 31, 2025, unrealized losses on our debt securities were not material. We did not recognize any credit losses related to our debt securities during the periods presented.

We sold $ 265 million and $ 68 million of debt securities during the six months ended July 31, 2025, and 2024, respectively. The realized gains and losses from the sales were not material for the periods presented.
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Equity Investments
Equity investments consisted of the following (in millions):

Condensed Consolidated Balance Sheets Location July 31, 2025 January 31, 2025
Money market funds Cash and cash equivalents $ 802   $ 988  

Non-marketable equity investments measured using the measurement alternative Other assets 251   244  

Total equity investments $ 1,053   $ 1,232  

Non-Marketable Equity Investments Measured Using the Measurement Alternative
Non-marketable equity investments measured using the measurement alternative include investments in privately held companies without readily determinable fair values in which we do not own a controlling interest or exercise significant influence. These investments are recorded at cost and are adjusted for observable transactions for same or similar securities of the same issuer or impairment events. The carrying values for our non-marketable equity investments are summarized below (in millions):

July 31, 2025 January 31, 2025
Total initial cost $ 223   $ 217  
Cumulative net unrealized gains (losses) 28   27  
Carrying value $ 251   $ 244  

We recognized net losses on non-marketable equity investments of $ 2  million and $ 3  million for the three months ended July 31, 2025, and 2024, respectively, and $ 3  million and $ 10  million for the six months ended July 31, 2025, and 2024, respectively.

Note 4. Fair Value Measurements
We use a fair value hierarchy that requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Other inputs that are directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs that are supported by little or no market activity.

Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of July 31, 2025 (in millions):

Level 1 Level 2 Level 3 Total
U.S. treasury securities $ 2,056   $ 0   $ 0   $ 2,056  
U.S. agency obligations 0   538   0   538  
Corporate bonds 0   3,967   0   3,967  
Commercial paper 0   215   0   215  
Asset-backed securities 0   306   0   306  
Other debt securities
0   42   0   42  
Money market funds 802   0   0   802  
Foreign currency derivative assets 0   30   0   30  
Total assets $ 2,858   $ 5,098   $ 0   $ 7,956  
Foreign currency derivative liabilities $ 0   $ 121   $ 0   $ 121  
Total liabilities $ 0   $ 121   $ 0   $ 121  

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The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of January 31, 2025 (in millions):

Level 1 Level 2 Level 3 Total
U.S. treasury securities $ 2,072   $ 0   $ 0   $ 2,072  
U.S. agency obligations 0   636   0   636  
Corporate bonds 0   3,540   0   3,540  
Commercial paper 0   294   0   294  
Asset-backed securities 0   104   0   104  
Other debt securities
0   5   0   5  
Money market funds 988   0   0   988  
Foreign currency derivative assets 0   112   0   112  
Total assets $ 3,060   $ 4,691   $ 0   $ 7,751  
Foreign currency derivative liabilities $ 0   $ 26   $ 0   $ 26  
Total liabilities $ 0   $ 26   $ 0   $ 26  

Non-Marketable Equity Investments Measured at Fair Value on a Non-Recurring Basis
Non-marketable equity investments that have been remeasured due to an observable event or impairment are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold. For further information, see Note 3, Investments .

Fair Value Measurements of Other Financial Instruments
We carry our debt at face value less unamortized debt discount and issuance costs on our Condensed Consolidated Balance Sheets and present the fair value for disclosure purposes only. The fair values of all of our debt obligations are categorized as Level 2 financial instruments. For further information on the fair values of our debt and the inputs used in the calculations, see Note 10, Debt .

Note 5. Deferred Costs
Deferred costs, which consist of deferred sales commissions, were $ 840 million and $ 828 million as of July 31, 2025, and January 31, 2025, respectively. Amortization expense for the deferred costs was $ 72 million and $ 62 million for the three months ended July 31, 2025, and 2024, respectively, and $ 140 million and $ 121 million for the six months ended July 31, 2025, and 2024, respectively. There was no impairment loss in relation to the costs capitalized for the periods presented.

Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following (in millions):

July 31, 2025 January 31, 2025
Computers, equipment, and software $ 1,298   $ 1,370  
Buildings 685   752  
Leasehold improvements 259   252  
Furniture, fixtures, and transportation equipment 109   108  
Land and land improvements 77   81  
Property and equipment, gross 2,428   2,563  
Less accumulated depreciation and amortization ( 1,307 ) ( 1,324 )
Property and equipment, net $ 1,121   $ 1,239  

Depreciation expense totaled $ 59 million and $ 58 million for the three months ended July 31, 2025, and 2024, respectively, and $ 121 million and $ 115 million for the six months ended July 31, 2025, and 2024, respectively.
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Note 7. Acquisition-Related Intangible Assets, Net
Acquisition-related intangible assets, net consisted of the following as of July 31, 2025 (in millions):

Gross Carrying Amount Accumulated Amortization Net Book Value
Developed technology $ 473   $ ( 327 ) $ 146  
Customer relationships 362   ( 188 ) 174  
Backlog 15   ( 15 ) 0  
Trade name 14   ( 14 ) 0  
Total
$ 864   $ ( 544 ) $ 320  

Acquisition-related intangible assets, net consisted of the following as of January 31, 2025 (in millions):

Gross Carrying Amount Accumulated Amortization Net Book Value
Developed technology $ 473   $ ( 303 ) $ 170  
Customer relationships 362   ( 171 ) 191  
Backlog 15   ( 15 ) 0  
Trade name 14   ( 14 ) 0  
Total
$ 864   $ ( 503 ) $ 361  

Amortization expense related to acquisition-related intangible assets was $ 21 million and $ 20 million for the three months ended July 31, 2025, and 2024, respectively, and $ 42 million and $ 37 million for the six months ended July 31, 2025, and 2024, respectively.
As of July 31, 2025, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in millions):

Fiscal Period:
Remainder of 2026 $ 41  
2027 57  
2028 53  
2029 43  
2030 35  
Thereafter 91  
Total $ 320  

Note 8.  Other Assets
Other assets consisted of the following (in millions):

July 31, 2025 January 31, 2025
Non-marketable equity and other investments $ 254   $ 247  
Contract assets 45   44  
Technology patents and other intangible assets, net 23   25  
Prepayments for goods and services 12   16  
Deposits 11   10  
Derivative assets 6   52  

Other 44   24  
Total other assets $ 395   $ 418  

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Technology patents and other intangible assets with estimable useful lives are amortized on a straight-line basis. As of July 31, 2025, our future estimated amortization expense was as follows (in millions):

Fiscal Period:
Remainder of 2026 $ 2  
2027 3  
2028 3  
2029 3  
2030 2  
Thereafter 10  
Total $ 23  

Note 9.  Derivative Instruments
We conduct business on a global basis in multiple foreign currencies, subjecting Workday to foreign currency exchange risk. To mitigate this risk, we utilize derivative hedging contracts as described below. We do not enter into any derivatives for trading or speculative purposes.
Our foreign currency contracts are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.
Cash Flow Hedges
We enter into foreign currency forward contracts to hedge a portion of our forecasted revenue and expense transactions (“cash flow hedges”). We designate these forward contracts as cash flow hedging instruments since the accounting criteria for such designation has been met.
Cash flow hedges are recorded on the Condensed Consolidated Balance Sheets at fair value. Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows. Gains or losses resulting from changes in the fair value of these hedges are recorded in Accumulated other comprehensive income (loss) (“AOCI”) on the Condensed Consolidated Balance Sheets and are subsequently reclassified to the same line item as the hedged transaction on the Condensed Consolidated Statements of Operations in the same period that the hedged transaction affects earnings. As of July 31, 2025, we estimate that $ 6 million of net losses recorded in AOCI related to our cash flow hedges will be reclassified into earnings within the next 12 months.
As of July 31, 2025, and January 31, 2025, the notional values of the cash flow hedges that we held to buy U.S. dollars in exchange for other currencies were $ 3.0  billion and $ 2.8 billion, respectively, and the notional values of the cash flow hedges that we held to sell U.S. dollars in exchange for other currencies were $ 428  million and $ 420  million, respectively. All contracts had maturities of less than 55 months.
Non-Designated Hedges
We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities (“non-designated hedges”). These forward contracts are intended to offset foreign currency gains or losses associated with the underlying monetary assets and liabilities and are recorded on the Condensed Consolidated Balance Sheets at fair value. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair value of these forward contracts are recorded in Other income, net on the Condensed Consolidated Statements of Operations. Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows.
As of July 31, 2025, and January 31, 2025, the notional values of the non-designated hedges that we held to buy U.S. dollars in exchange for other currencies were $ 212  million and $ 242  million, respectively, and the notional values of the non-designated hedges that we held to sell U.S. dollars in exchange for other currencies were $ 538  million and $ 91  million, respectively.
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The fair values of outstanding derivative instruments were as follows (in millions):

Condensed Consolidated Balance Sheets Location July 31, 2025 January 31, 2025
Derivative assets:
Cash flow hedges Prepaid expenses and other current assets $ 19   $ 59  
Cash flow hedges Other assets 6   52  
Non-designated hedges Prepaid expenses and other current assets 5   1  

Total derivative assets $ 30   $ 112  
Derivative liabilities:
Cash flow hedges Accrued expenses and other current liabilities $ 48   $ 22  
Cash flow hedges Other liabilities 58   3  
Non-designated hedges Accrued expenses and other current liabilities 14   1  
Non-designated hedges Other liabilities 1   0  
Total derivative liabilities $ 121   $ 26  

The effect of cash flow hedges on the Condensed Consolidated Statements of Operations was as follows (in millions):

Three Months Ended July 31,
Condensed Consolidated Statements of Operations Location 2025 2024
Total Gains (losses) related to cash flow hedges Total Gains (losses) related to cash flow hedges
Revenues $ 2,348   $ 8   $ 2,085   $ 8  
Costs and expenses 2,100   6   1,974   ( 3 )

Six Months Ended July 31,
Condensed Consolidated Statements of Operations Location 2025 2024
Total Gains (losses) related to cash flow hedges Total Gains (losses) related to cash flow hedges
Revenues $ 4,588   $ 16   $ 4,075   $ 16  
Costs and expenses 4,301   0   3,900   ( 4 )

Pre-tax gains (losses) associated with cash flow hedges were as follows (in millions):

Condensed Consolidated Statements of Operations and Statements of Comprehensive Income Locations
Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Gains (losses) recognized in OCI Net change in unrealized gains (losses) on cash flow hedges $ ( 2 ) $ ( 20 ) $ ( 164 ) $ 11  
Gains (losses) reclassified from AOCI into income (effective portion) Revenues 8   8   16   16  
Gains (losses) reclassified from AOCI into income (effective portion) Costs and expenses 6   ( 3 ) 0   ( 4 )

Gains (losses) associated with non-designated hedges were as follows (in millions):

Condensed Consolidated Statements of Operations Location Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Gains (losses) related to non-designated hedges Other income, net
$ ( 12 ) $ ( 3 ) $ ( 12 ) $ ( 1 )

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We manage our exposure to counterparty risk by entering into foreign currency forward contracts with a diversified group of eight major financial institutions and by actively monitoring outstanding positions. We are subject to netting agreements with all of these counterparties, under which we are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. After consideration of these netting arrangements, the total net settlement amount related to our foreign currency forward contracts is an asset position of $ 1  million and a liability position of $ 92  million as of July 31, 2025, and an asset position of $ 86  million as of January 31, 2025.
Although legally enforceable master netting arrangements exist between Workday and each counterparty, it is our policy to present the derivatives gross on the Condensed Consolidated Balance Sheets. Our foreign currency forward contracts are not subject to any credit contingent features or collateral requirements.

Note 10.  Debt
Outstanding debt consisted of the following (in millions):

July 31, 2025 January 31, 2025
2027 Notes $ 1,000   $ 1,000  
2029 Notes 750   750  
2032 Notes 1,250   1,250  

Total principal amount 3,000   3,000  
Less: unamortized debt discount and issuance costs ( 15 ) ( 16 )

Debt, noncurrent $ 2,985   $ 2,984  

As of July 31, 2025, our future principal payments for the outstanding debt were as follows (in millions):

Fiscal Period:
Remainder of 2026 $ 0  
2027 0  
2028 1,000  
2029 0  
2030 750  
Thereafter 1,250  
Total principal amount $ 3,000  

Senior Notes
In fiscal 2023, we issued $ 3.0  billion aggregate principal amount of senior notes, consisting of $ 1.0  billion aggregate principal amount of 3.500 % notes due April 1, 2027 (“2027 Notes”), $ 750  million aggregate principal amount of 3.700 % notes due April 1, 2029 (“2029 Notes”), and $ 1.25  billion aggregate principal amount of 3.800 % notes due April 1, 2032 (“2032 Notes,” and together with the 2027 Notes and the 2029 Notes, “Senior Notes”). Interest is payable semi-annually in arrears on April 1 and October 1 of each year.
The Senior Notes are unsecured obligations and rank equally with all existing and future unsecured and unsubordinated indebtedness of Workday. We may redeem the Senior Notes in whole or in part at any time or from time to time, at specified redemption dates and prices. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Senior Notes under specified terms. The indenture governing the Senior Notes also includes covenants (including certain limited covenants restricting our ability to incur certain liens and enter into certain sale and leaseback transactions), events of default, and other customary provisions. As of July 31, 2025, and January 31, 2025, we were in compliance with all covenants associated with the Senior Notes.
We incurred debt discount and issuance costs of approximately $ 27  million in connection with the Senior Notes offering, which were allocated on a pro rata basis to the 2027 Notes, 2029 Notes, and 2032 Notes. The debt discount and issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the contractual term of each arrangement. The effective interest rates on the 2027 Notes, 2029 Notes, and 2032 Notes, which are calculated as the contractual interest rates adjusted for the debt discount and issuance costs, are 3.67 %, 3.82 %, and 3.90 %, respectively.
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As of July 31, 2025, and January 31, 2025, the total estimated fair value of the Senior Notes was $ 2.9  billion and $ 2.8  billion, respectively. The estimated fair values of the Senior Notes, which we have classified as Level 2 financial instruments, were determined based on quoted bid prices in an over-the-counter market on the last trading day of the reporting period.
Credit Agreement
In fiscal 2023, we entered into a credit agreement (“2022 Credit Agreement”) which provides for a revolving credit facility in an aggregate principal amount of $ 1.0  billion. As of July 31, 2025, and January 31, 2025 we had no outstanding revolving loans under the 2022 Credit Agreement. The revolving loans under the 2022 Credit Agreement may be borrowed, repaid, and reborrowed until April 6, 2027, at which time all amounts borrowed must be repaid. The revolving loans under the 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. We are also obligated to pay an ongoing commitment fee on undrawn amounts.
The 2022 Credit Agreement contains customary representations, warranties, and affirmative and negative covenants, including a financial covenant, events of default, and indemnification provisions in favor of the lenders. The negative covenants include restrictions on the incurrence of liens and indebtedness, certain merger transactions, and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires that we do not exceed a maximum leverage ratio of 3.50 :1.00, subject to a step-up to 4.50 :1.00 at our election for a certain period following an acquisition. As of July 31, 2025, and January 31, 2025, we were in compliance with all covenants included in the 2022 Credit Agreement.
Interest Expense on Debt
The following table sets forth total interest expense recognized related to our debt (in millions):

Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Contractual interest expense $ 28   $ 28   $ 55   $ 55  
Interest cost related to amortization of debt discount and issuance costs 1   1   2   2  
Total interest expense $ 29   $ 29   $ 57   $ 57  

Note 11. Leases
We have entered into operating lease agreements for our office space, data centers, and other property and equipment. Operating lease right-of-use assets were $ 719 million and $ 336 million as of July 31, 2025, and January 31, 2025, respectively, and operating lease liabilities were $ 791 million and $ 378 million as of July 31, 2025, and January 31, 2025, respectively.
In July 2025, the 20 -year lease for our new European headquarters in Dublin, Ireland commenced, following its execution in the first quarter of fiscal 2026. This resulted in the recognition of an operating lease right-of-use asset of $ 313  million, and a corresponding operating lease liability of $ 333  million.
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The components of operating lease expense were as follows (in millions):

Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Operating lease cost $ 34   $ 29   $ 65   $ 58  
Short-term lease cost 0   0   1   1  
Variable lease cost 13   15   24   24  
Total operating lease cost $ 47   $ 44   $ 90   $ 83  

Supplemental cash flow information related to our operating leases was as follows (in millions):

Six Months Ended July 31,
2025 2024
Cash paid for operating lease liabilities $ 64 $ 51
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities 434 101

Other information related to our operating leases was as follows:

July 31, 2025 January 31, 2025
Weighted average remaining lease term (in years) 11 5
Weighted average discount rate 4.16   % 4.20   %

As of July 31, 2025, maturities of operating lease liabilities were as follows (in millions):

Fiscal Period:
Remainder of 2026 $ 65  
2027 125  
2028 133  
2029 106  
2030 75  
Thereafter 518  
Total lease payments 1,022  
Less imputed interest ( 231 )
Total operating lease liabilities $ 791  

As of July 31, 2025, we had operating leases for office space and data centers that had not yet commenced with total undiscounted lease payments of $ 35 million. These operating leases will commence in fiscal 2026, with lease terms ranging from approximately five to ten years .

Note 12. Commitments and Contingencies
Purchase Obligations
Our purchase obligations are primarily related to agreements for third-party hosted infrastructure platforms, data center equipment and software, business technology software and support, and sales and marketing activities. During the six months ended July 31, 2025, there were no material changes outside the ordinary course of business to our non-cancelable purchase obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.

Legal Matters
We are a party to various legal proceedings and claims that arise in the ordinary course of business. We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. In our opinion, as of July 31, 2025, there was not at least a reasonable possibility that we had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.
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Note 13. Stockholders’ Equity
Common Stock
As of July 31, 2025, there were 217 million shares of Class A common stock, net of treasury stock, and 50 million shares of Class B common stock outstanding. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 10 votes per share. Each share of Class B common stock can be converted into a share of Class A common stock at any time at the option of the holder.

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”). Under both programs, in accordance with applicable securities laws and other restrictions, we may repurchase shares of our Class A common stock through open market purchases, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, or by other means. The timing and total amount of share repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. Both programs have no expiration date, may be suspended or discontinued at any time, and do not obligate us to acquire any amount of Class A common stock.
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.
The table below sets forth information regarding our share repurchase programs (in millions, except number of shares which are reflected in thousands, and per share data):

Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Total number of shares repurchased 1,216   1,387   2,506   1,889  
Average price paid per share $ 245.57   $ 223.10   $ 236.11   $ 234.78  
Amount repurchased
$ 299   $ 309   $ 592   $ 443  

All repurchases were made in open market transactions. As of July 31, 2025, we were authorized to repurchase a remaining $ 1.2  billion of our outstanding shares of Class A common stock under our share repurchase programs.

Employee Equity Plans
In fiscal 2023, our stockholders approved the 2022 Equity Incentive Plan (“2022 Plan”), with a reserve of 30  million shares for issuance. The 2022 Plan serves as the successor to our 2012 Equity Incentive Plan (“2012 Plan” and, together with the 2022 Plan, “Stock Plans”). Awards that are granted on or after the effective date of the 2022 Plan will be granted pursuant to and subject to the terms and provisions of the 2022 Plan. Prior awards granted under the 2012 Plan continue to be subject to the terms and provisions of the 2012 Plan. Shares that are forfeited or withheld in connection with the net share settlement of restricted stock units (“RSUs”) are added to the reserves of the 2022 Plan. As of July 31, 2025, 13 million shares of Class A common stock were available for future grants under the 2022 Plan.
In fiscal 2023, our stockholders approved the Amended and Restated 2012 Employee Stock Purchase Plan (“2012 ESPP”). Under the 2012 ESPP, eligible employees are granted options to purchase shares at the lower of 85 % of the fair market value of the stock at the time of grant or 85 % of the fair market value at the time of exercise. Options to purchase shares are granted twice yearly on or about June 1 and December 1, and are exercisable on or about the succeeding November 30 and May 31, respectively. As of July 31, 2025, 2 million shares of Class A common stock were available for issuance under the 2012 ESPP.
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Restricted Stock Units and Performance-Based Restricted Stock Units
The Stock Plans provide for the issuance of RSUs and performance-based restricted stock units (“PSUs”) to employees and non-employees. RSUs generally vest over four years . Activity during the six months ended July 31, 2025, was as follows (in thousands, except per share data): 

Number of Shares Weighted-Average Grant Date Fair Value
Outstanding balance as of January 31, 2025 14,361   $ 226.52  
Granted- restricted stock units 6,408   217.57  
Granted- performance-based restricted stock units (1)
72   214.10  
Vested ( 2,504 ) 230.02  
Forfeited and canceled (2)
( 2,832 ) 224.77  
Outstanding balance as of July 31, 2025 15,505   222.52  

(1) Includes approximately 42  thousand PSUs granted to executives in April 2025. The PSUs are subject to vesting based on the achievement of annual performance-based conditions determined at the beginning of each fiscal year and a three -year service-based condition. The PSUs will vest at the end of the three -year service period, with the number of shares vesting ranging from 0 % to 150 % of the target, based on the average attainment of the annual performance conditions.
(2) Includes shares withheld in connection with the net share settlement of RSUs.
As of July 31, 2025, there was a total of $ 2.9  billion in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs and PSUs, which is expected to be recognized over a weighted-average period of approximately three years .
Market-Based Restricted Stock Units
In fiscal 2023, 0.3  million shares of market-based RSUs were granted to Mr. Eschenbach in connection with his appointment as Co-CEO that vest based on appreciation of the price of our Class A common stock over a multi-year period and upon continued service (“PVU Award”). We estimated the fair value of the PVU Award on the grant date using the Monte Carlo simulation model with the following assumptions: (i) expected volatility of 40 %, (ii) risk-free interest rate of 4 %, and (iii) total performance period of six years . The weighted-average grant date fair value of the PVU Award was $ 124.80 per share. We recognize expense for the PVU Award over the requisite service period of five years using the accelerated attribution method. Provided that the requisite service is rendered, the total fair value of the PVU Award at the date of grant is recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the achievement of the specified market criteria.
As of July 31, 2025, there was a total of $ 5  million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately two years .

Note 14. Contract Balances and Performance Obligations
Contract Balances
Contract assets and unearned revenue balances were as follows (in millions):

Condensed Consolidated Balance Sheets Location
July 31, 2025 January 31, 2025
Contract assets:

Contract assets, current
Trade and other receivables, net $ 460   $ 373  
Contract assets, noncurrent
Other assets 45   44  
Total contract assets
$ 505   $ 417  
Unearned revenue (1) :

Unearned revenue, current
Unearned revenue $ 3,852   $ 4,467  
Unearned revenue, noncurrent
Unearned revenue, noncurrent 65   80  
Total unearned revenue
$ 3,917   $ 4,547  

(1) Included in this balance are amounts related to professional services that are subject to cancellation and pro-rated refund rights of $ 73 million and $ 83 million as of July 31, 2025, and January 31, 2025, respectively.
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Revenues of $ 1.7 billion and $ 1.6 billion were recognized during the three months ended July 31, 2025, and 2024, respectively, that were included in the unearned revenue balances as of April 30, 2025, and 2024, respectively. Revenues of $ 3.1 billion and $ 2.8 billion were recognized during the six months ended July 31, 2025, and 2024, respectively, that were included in the unearned revenue balances as of January 31, 2025, and 2024, respectively.
Transaction Price Allocated to the Remaining Performance Obligations
As of July 31, 2025, approximately $ 25.4  billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize revenues on approximately $ 7.9  billion and $ 14.1  billion of these remaining performance obligations over the next 12 and 24 months, respectively, with the balance recognized thereafter. Revenues from remaining performance obligations for professional services contracts as of July 31, 2025, were not material.

Note 15. Other Income, Net
Other income, net consisted of the following (in millions):

Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Interest income $ 88   $ 88   $ 180   $ 181  
Interest expense (1)
( 29 ) ( 28 ) ( 57 ) ( 57 )
Other (2)
( 3 ) ( 3 ) ( 3 ) ( 8 )
Total other income, net
$ 56   $ 57   $ 120   $ 116  

(1) Interest expense primarily includes the contractual interest expense of our debt obligations, and the related non-cash interest expense attributable to amortization of the debt discount and issuance costs. For further information, see Note 10, Debt .
(2) Other primarily includes the net gains (losses) from our equity investments. For further information, see Note 3, Investments .

Note 16. Income Taxes
We reported an income tax provision of $ 111 million and $ 52 million for the six months ended July 31, 2025, and 2024, respectively. 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.
We are subject to income tax audits in the U.S. and foreign jurisdictions. We record liabilities related to uncertain tax positions and believe that we have provided adequate reserves for income tax uncertainties in all open tax years. Due to our history of tax losses, all years remain open to tax audit.
We periodically evaluate the realizability of our deferred tax assets based on all available evidence, both positive and negative, such as historic results, future reversals of existing deferred tax liabilities, and projected future taxable income, as well as prudent and feasible tax-planning strategies. The assessment requires significant judgment and is performed in each of the applicable jurisdictions. As of July 31, 2025, we continue to maintain valuation allowances related to tax credits in certain state jurisdictions and net operating loss in certain foreign jurisdictions. We will continue to evaluate the need for valuation allowances for our deferred tax assets.
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.

Note 17. Net Income Per Share
Basic net income per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, net of treasury stock. Diluted net income per share is computed by giving effect to all potentially dilutive shares of common stock, including outstanding share-based awards consisting primarily of unvested RSUs and ESPP obligations. We determine the dilutive effect of outstanding share-based awards using the treasury stock method.
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The net income per share is allocated based on the contractual participation rights of the Class A common shares and Class B common shares as if the income for the period had been distributed. As the liquidation and dividend rights are identical, the net income is allocated on a proportionate basis. The computation of the diluted net income per share of Class A common stock assumes the conversion of our Class B common stock to Class A common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares.
The following table presents the calculation of basic and diluted net income per share (in millions, except number of shares, which are reflected in thousands, and per share data):

Three Months Ended July 31, Six Months Ended July 31,
2025 2024 2025 2024
Class A Class B Class A Class B Class A Class B Class A Class B
Net income per share, basic:
Numerator:
Net income $ 185   $ 43   $ 106   $ 26   $ 239   $ 57   $ 191   $ 48  
Denominator:
Weighted-average shares outstanding, basic 216,167   50,610   212,612   52,705   215,794   50,855   211,998   52,887  
Net income per share, basic $ 0.86   $ 0.86   $ 0.50   $ 0.50   $ 1.11   $ 1.11   $ 0.90   $ 0.90  
Net income per share, diluted:
Numerator:
Net income $ 185   $ 43   $ 106   $ 26   $ 239   $ 57   $ 191   $ 48  
Reallocation of net income as a result of conversion of Class B to Class A common stock 43   0   26   0   57   0   48   0  
Reallocation of net income to Class B common stock 0   0   0   0   0   ( 1 ) 0   ( 1 )
Net income for diluted calculation $ 228   $ 43   $ 132   $ 26   $ 296   $ 56   $ 239   $ 47  
Denominator:
Weighted-average shares outstanding, basic 216,167   50,610   212,612   52,705   215,794   50,855   211,998   52,887  
Conversion of Class B to Class A common stock 50,610   0   52,705   0   50,855   0   52,887   0  
Dilutive effect of share-based awards 3,403   0   2,632   0   3,591   0   4,243   0  
Weighted-average shares outstanding, diluted 270,180   50,610   267,949   52,705   270,240   50,855   269,128   52,887  
Net income per share, diluted $ 0.84   $ 0.84   $ 0.49   $ 0.49   $ 1.09   $ 1.09   $ 0.89   $ 0.89  

The computation of diluted net income per share does not include the effect of the following potentially outstanding weighted-average shares of common stock because their effect would have been anti-dilutive (in thousands):

  Three Months Ended July 31, Six Months Ended July 31,
  2025 2024 2025 2024
Total weighted-average shares related to outstanding share-based awards
227   6,321   214   3,196  

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Note 18. Geographic Information
Revenues
We sell our subscription contracts and related services in two primary geographical markets: to customers located in the United States and to customers located outside of the United States. Revenues by geography are generally based on the address of the customer as specified in our customer subscription agreement. The following table sets forth revenues by geographic area (in millions):

  Three Months Ended July 31, Six Months Ended July 31,
  2025 2024 2025 2024
United States $ 1,764   $ 1,561   $ 3,445   $ 3,054  
Other countries 584   524   1,143   1,021  
Total revenues $ 2,348   $ 2,085   $ 4,588   $ 4,075  

Long-Lived Assets
Our long-lived assets are attributed to a country based on the physical location of the assets. We define long-lived assets as property and equipment and operating lease right-of-use assets because many of these assets cannot be readily moved and are relatively illiquid, subjecting them to geographic risk. None of our other assets are subject to significant geographic risk. Aggregate Property and equipment, net and Operating lease right-of-use assets by geographic area was as follows (in millions):

  July 31, 2025 January 31, 2025
United States $ 1,144   $ 1,197  
Ireland 517   215  
Other countries 179   163  
Total long-lived assets $ 1,840   $ 1,575  

Note 19. Restructuring
In February 2025, we announced a restructuring plan (“Fiscal 2026 Restructuring Plan”) intended to prioritize our investments and continue advancing our ongoing focus on durable growth. This plan resulted in the elimination of approximately 7.5 % of our workforce. In connection with this plan, we have exited certain owned office space. The activities associated with this plan were substantially completed in the second quarter of fiscal 2026.
We incurred $ 232  million in charges in connection with this plan, of which $ 65  million was recognized in the fourth quarter of fiscal 2025, $ 166  million was recognized in the first quarter of fiscal 2026, and $ 1  million was recognized in the second quarter of fiscal 2026. The total charges consisted of $ 198  million related to employee transition, severance payments, employee benefits, and share-based compensation, and $ 34  million related to an impairment of office space.
Fiscal 2026 Restructuring Plan activity was as follows (in millions):

Three Months Ended July 31, 2025 Six Months Ended July 31, 2025
Workforce Reduction
Office Space Reduction Total Workforce Reduction
Office Space Reduction Total
Restructuring liability, beginning of the period $ 86   $ 0   $ 86   $ 57   $ 0   $ 57  
Charges
1   0   1   133   34   167  
Payments ( 81 ) 0   ( 81 ) ( 144 ) 0   ( 144 )
Non-cash items
0   0   0   ( 40 ) ( 34 ) ( 74 )
Restructuring liability, end of the period $ 6   $ 0   $ 6   $ 6   $ 0   $ 6  

Additionally, we recorded exit charges of $ 1  million and $ 8  million associated with office space reductions under a separate restructuring plan during the three and six months ended July 31, 2024.
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Note 20. Subsequent Event
In August 2025, we entered into a definitive agreement to acquire Paradox, Inc., a candidate experience agent that uses conversational AI to simplify the job application journey, for approximately $ 1.0  billion in cash, subject to customary purchase price adjustments. The acquisition is expected to close during the third quarter of fiscal 2026, subject to the satisfaction of closing conditions, including required regulatory approvals.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, which are subject to safe harbor protection under the Private Securities Litigation Reform Act of 1995. All statements contained in this report other than statements of historical fact, including statements regarding our future financial condition and operating results, business strategy and plans, and objectives for future operations, are forward-looking statements. The words “ believe, ” “ may, ” “ will, ” “ estimate, ” “ continue, ” “ anticipate, ” “ intend, ” “ expect, ” “ seek, ” “ plan, ” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations, beliefs, and projections about future events, conditions, and trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, assumptions, and changes in circumstances that are difficult to predict and many of which are outside of our control, such as those arising from the impact of recent macroeconomic events, including geopolitical instability, increased tariffs, elevated inflation, and fluctuating interest rates and foreign currency exchange rates, as well as those described in the “ Risk Factors ” section, which we encourage you to read carefully. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
In light of these risks, uncertainties, assumptions, and potential changes in circumstances, the future events, conditions, and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied by the forward-looking statements. Accordingly, you should not rely upon any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activities, performance, or achievements. We are under no duty to update any of these forward-looking statements after the date of this report or to conform these statements to actual results or revised expectations, except as required by applicable law. If we do update any forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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,
  2025 2024 Change 2025 2024 Change
Total revenues $ 2,348  $ 2,085  13  % $ 4,588  $ 4,075  13  %
Subscription services revenues $ 2,169  $ 1,903  14  % $ 4,228  $ 3,719  14  %

GAAP operating income $ 248  $ 111  123  % $ 287  $ 175  64  %
Non-GAAP operating income (1)
$ 680  $ 518  31  % $ 1,358  $ 1,033  31  %

GAAP operating margin 10.6  % 5.3  % 524 bps 6.3  % 4.3  % 198 bps

Non-GAAP operating margin (1)
29.0  % 24.9  % 412 bps 29.6  % 25.4  % 424 bps

Operating cash flows $ 1,073  $ 943  14  %
Free cash flows (1)
$ 1,009  $ 807  25  %

As of July 31,
2025 2024 Change
Total subscription revenue backlog $ 25,375  $ 21,582  18  %
12-month subscription revenue backlog $ 7,910  $ 6,797  16  %

Cash, cash equivalents, and marketable securities $ 8,186  $ 7,373  11  %

Headcount 19,517  19,908  (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,  
  2025 2024 % Change 2025 2024 % Change
Subscription services $ 2,169  $ 1,903  14  % $ 4,228  $ 3,719  14  %
Professional services 179  182  (2) % 360  356  1  %
Total revenues $ 2,348  $ 2,085  13  % $ 4,588  $ 4,075  13  %

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,
  2025 2024 2025 2024
Costs of subscription services $ 370  $ 304  $ 720  $ 594 
Costs of professional services 212  207  399  406 
Product development 660  649  1,322  1,305 
Sales and marketing 641  611  1,264  1,184 
General and administrative 216  202  429  403 
Restructuring
1  1  167  8 
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,
2025 2024 2025 2024
Costs of subscription services $ 39  $ 35  $ 81  $ 73 
Costs of professional services 28  28  58  59 
Product development 170  163  353  336 
Sales and marketing 84  77  177  149 
General and administrative 70  67  140  138 
Restructuring
0  0  42  0 
Total share-based compensation expense $ 391  $ 370  $ 851  $ 755 
Percentage of total revenues
16.7  % 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,
  2025 2024 2025 2024
Operating income $ 248  $ 111  $ 287  $ 175 
Share-based compensation expense (1)
391  370  809  755 
Employer payroll tax-related items on employee stock transactions (1)
12  10  39  48 
Amortization of acquisition-related intangible assets 21  20  42  37 
Acquisition-related costs
7  6  14  10 
Restructuring costs
1  1  167  8 
Non-GAAP operating income $ 680  $ 518  $ 1,358  $ 1,033 

Operating margin 10.6  % 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 assets 0.9  % 1.0  % 0.9  % 1.0  %
Acquisition-related costs
0.3  % 0.3  % 0.3  % 0.2  %
Restructuring costs
0.0  % 0.0  % 3.7  % 0.2  %
Non-GAAP operating margin 29.0  % 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,
2025 2024 2025 2024
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,
2025 2024 2025 2024
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,
  2025 2024
Net cash provided by (used in):
Operating activities $ 1,073  $ 943 
Investing activities (510) (603)
Financing activities (850) (715)
Effect of exchange rate changes 2  0 
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,
  2025 2024
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 claims made against us and defending a suit, regardless of its merit, could be costly.

We depend on data centers and other infrastructure operated by third parties, as well as internet availability, and any disruption in these operations could adversely affect our business and operating results.
We host our applications and serve our customers and users globally from data centers operated by third parties and rely upon third-party vendors to operate certain aspects of our services. We control our applications and data, but we do not control the facilities, operations, and physical security of these locations. Disruption of or interference at these locations has and could in the future impact our operations and our business could be adversely impacted. For example, we have experienced disruptions at certain of our co-location data centers in the U.S. due to high temperatures and power outages that resulted in a brief temporary outage of our services for a subset of our customers. These facilities may also be subject to cybersecurity breaches, capacity constraints, financial difficulties, break-ins, sabotage, intentional acts of vandalism and similar misconduct, natural catastrophic events, as well as local administrative actions, changes to legal or permitting requirements, and litigation to stop, limit, or delay operations, and our disaster recovery planning may not account for all eventualities.
Furthermore, our customers and other users access our applications through their internet service providers. If a service provider fails to provide sufficient capacity to support our applications or otherwise experiences service outages, such failure could interrupt our customers’ and other users’ access to our applications, which could adversely affect their perception of our applications’ reliability and our revenues. In addition, certain countries have implemented or may implement legislative and technological actions that either do or can effectively regulate access to the internet, including the ability of internet service providers to limit access to specific websites or content.
Any changes in service levels with our infrastructure providers, or any errors, defects, disruptions, or other performance problems with our applications or the infrastructure on which they run, including internet infrastructure, could adversely affect our reputation and may damage our customers’ or other users’ data or result in lengthy interruptions in our services. Interruptions in our services might adversely affect our reputation and operating results, cause us to issue refunds or service credits to customers, subject us to potential liabilities, result in contract terminations, or adversely affect our renewal rates.
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The extent to which the continuing global economic and geopolitical volatility, and any resulting effect on customer spending, will continue to impact our business, financial condition, and operating results will depend on future developments, which are highly uncertain and difficult to predict.
We operate on a global scale, and as a result, our business and revenues are impacted by global economic and geopolitical conditions. Global economic developments, including new or increased tariffs, geopolitical volatilities, downturns or recessions, political instability, and global health crises may negatively affect us or our ability to accurately forecast and plan our future business activity. In addition, volatile economic and geopolitical situations have led and could lead to further economic disruption. Any sustained adverse impacts from these and other recent macroeconomic events could materially and adversely affect our business, financial condition, operating results, and earnings guidance that we may issue from time to time, which could have a material effect on the value of our Class A common stock.
Our future revenues rely on continued demand by existing customers and the acquisition of new customers who may be subject to economic hardship due to recent macroeconomic events, including concerns about the impact of potential or imposed tariffs, inflation or the interest rate environment, and may delay or reduce their enterprise software spending to preserve capital and liquidity. In connection with recent macroeconomic events, we have experienced and may continue to experience delays in purchasing decisions from existing and prospective customers, increased demand for price concessions and delayed payment terms, and a reduction in customer demand. Our business, financial condition, and operating results may be negatively impacted in future periods due to the prolonged impacts of recent macroeconomic events, which may not be fully reflected in our operating results and overall financial performance until future periods.
To the extent recent macroeconomic events adversely affect our business, financial condition, and operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

We may lose key employees or be unable to attract, enable, and retain highly skilled employees.
Our success and future growth depend largely upon the continued services of our executive officers, other members of senior management, and other key employees. We do not have employment agreements with our executive officers or other key employees that require them to continue to work for us for any specified period, and they could terminate their employment with us at any time. We have and may continue to execute our growth plan through strategic investments to attract and retain executive officers, senior management, or other key employees that may not be offset by increased performance or revenues. Key employee and executive leadership changes have the potential to disrupt our business, impact our ability to preserve our culture, negatively affect our ability to attract and retain talent, or otherwise have a serious adverse effect on our business and operating results.
To execute our growth plan, we must attract, enable, develop, and retain highly qualified talent. Our ability to compete and succeed in a highly competitive environment is directly correlated to our ability to recruit and retain highly skilled and experienced employees, especially in the areas of product development, cybersecurity, senior sales executives, and engineers with significant experience in designing and developing software and internet-related services, especially in AI. The expansion of our sales infrastructure, both domestically and internationally, is necessary to grow our customer base and business. Our business may be adversely affected if our efforts to attract and enable new members of our direct sales force do not generate a corresponding increase in revenues. We have experienced, and we expect to continue to experience, significant competition in hiring and retaining employees with appropriate qualifications.
In February 2025, we announced the 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 and could negatively impact our ability to attract, retain, and motivate employees.
We must also continue to retain, develop, and motivate existing employees through our compensation practices, company culture, and career development opportunities. Further, our current and future office environments and our current hybrid work policy may not meet the expectations of our employees or prospective employees, and may amplify challenges in recruiting and retention. We believe that a critical component of our success has been our corporate culture and our core values. As we continue to grow and change, we may find it difficult to maintain our corporate culture among a larger number of employees who are dispersed throughout various geographic regions, including difficulties due to managing the complexities of communicating with all employees. Efforts to restructure our workforce, such as the Fiscal 2026 Restructuring Plan, may be disruptive and adversely impact employee morale or our corporate culture. Failure to maintain or adapt our culture could negatively affect our ability to attract new employees or to retain our current employees and our business and future growth prospects could be adversely affected.
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The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.
The markets for enterprise cloud applications, including AI-powered solutions, are highly competitive, with relatively low barriers to entry for some applications or services. Some of our competitors are larger and have greater name recognition, significantly longer operating histories, access to larger customer bases, larger marketing budgets, and significantly greater resources to devote to the development, promotion, and sale of their products and services than we do. This may allow our competitors to respond more effectively than us to new or emerging technologies and changes in market conditions.
Our primary competitors are Oracle and SAP, well-established providers of financial management and HCM applications, which have long-standing relationships with customers and partners. Some customers may be hesitant to switch vendors or to adopt cloud applications such as ours and may prefer to maintain their existing relationships with competitors. We also face competition from other enterprise software vendors, from regional competitors that only operate in certain geographic markets, and from vendors of specific applications that address only one or a portion of our applications, some of which offer cloud-based or AI-powered solutions. These vendors include, without limitation: Anaplan, Inc., Automatic Data Processing, Inc., Coupa Software Inc., Dayforce, Inc., Infor, Inc., Microsoft Corporation, ServiceNow, Inc., and UKG Inc. In order to take advantage of customer demand for cloud and AI-powered applications, legacy vendors are expanding their cloud or AI-powered applications through acquisitions, strategic alliances, and organic development. In addition, other cloud or AI platform companies that provide services in different target markets or industries may develop applications or acquire companies that operate in our target markets or industries, and some potential customers may elect to develop their own internal applications. As the market evolves and as existing and new market participants introduce new types of technologies, such as generative and agentic AI, and different approaches that enable organizations to address their HCM and financial needs, we expect this competition to intensify in the future.
Furthermore, our current or potential competitors may be acquired by, or merge with, third parties with greater available resources and the ability to initiate or withstand substantial price competition. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their offerings or resources. Many of our competitors also have major distribution agreements with consultants, system integrators, and resellers and such partners may prefer to maintain their existing relationships with competitors. With the introduction of new technologies, such as generative AI, we expect competition to intensify in the future. If our competitors’ products, services, or technologies become more accepted than our products, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, then our revenues could be adversely affected. In addition, our competitors may offer their products and services at a lower price, or may offer price concessions, delayed payment terms, financing terms, or other terms and conditions that are more enticing to potential customers. Due to the complex nature of implementing financial management solutions, the lifecycle of the contracts for such solutions tends to be long. Therefore, if we lose a current customer to a competitor or fail to secure a prospective customer for financials management solutions, there is a long duration before we will be able to approach that customer again with our sales efforts for such solutions. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses, or a failure to maintain or improve our competitive market position, any of which could adversely affect our business and operating results.

We rely on our network of partners to drive additional growth of our revenues, and if these partners fail to perform, our ability to sell and distribute our products may be impacted, and our operating results and growth rate may be harmed.
Our strategy for additional growth depends, in part, on sales generated through our network of partners and professional services provided by our partners. If the operations of these partners are disrupted, including as a direct or indirect result of recent macroeconomic conditions, our own operations may suffer, which could adversely impact our operating results. Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources, and we cannot ensure that these partnerships will result in increased customer adoption or usage of our applications or increased revenue. We may be at a disadvantage if our competitors are effective in providing incentives to our current or potential partners to favor their products or services or to prevent or reduce subscriptions to our services, or in negotiating better rates or terms with such partners, particularly in international markets where our potential partners may have existing relationships with our competitors. In addition, acquisitions of our partners by our competitors could end our strategic relationship with such acquired partner and result in a decrease in the number of our current and potential customers.
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Our partner training and educational programs may not be effective or utilized consistently by partners. New partners may require extensive training and/or may require significant time and resources to achieve productivity, and such requirements may deter potential partners due to the significant time and financial investment required. Changes to our direct go-to-market models may cause friction with our partners and may increase the risk in our partner ecosystem. The actions of our partners may subject us to lawsuits, potential liability, and reputational harm if, for example, any of our partners misrepresent the functionality of our products to customers, fail to perform services to our customers’ expectations, or violate laws or our corporate policies, such as laws and policies around privacy and cybersecurity. In addition, our partners may utilize our platform to develop products and services that could potentially compete with products and services that we offer currently or in the future. Concerns over competitive matters or intellectual property ownership could constrain these partnerships. If we fail to effectively manage and grow our network of partners, maintain good relationships with our partners, or properly monitor the quality and efficacy of their service delivery, or if our partners do not effectively market and sell our subscription services, use greater efforts to market and sell their own products or services or those of our competitors, or fail to meet the needs or expectations of our customers, our ability to sell our products and efficiently provide our services may be impacted, and our operating results and growth rate may be harmed.

Sales to customers outside the United States or with international operations expose us to risks inherent in global operations.
The growth of our business and future prospects depends on our ability to increase our sales outside of the United States as a percentage of our total revenues. Operating globally requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States. Our investments and efforts to further expand internationally may not be successful in creating additional demand for our applications outside of the United States or in effectively selling subscriptions to our applications in all of the markets we enter. Risks associated with doing business on a global scale that could adversely affect our business, include:
• the need to develop, localize, and adapt our applications and customer support for specific countries;
• the need to successfully develop and execute on a localized go-to-market strategy;
• the need to adhere to local laws and regulations, including those related to data localization, privacy, and anti-corruption;
• difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation for local markets;
• difficulties in leveraging executive presence and maintaining company culture globally;
• different pricing environments, longer sales cycles, and longer trade receivables payment cycles, and collections issues;
• new and different sources of competition;
• potentially weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights;
• laws, customs, and business practices favoring local competitors;
• restrictive governmental actions focused on cross-border trade, such as import and export restrictions, duties, quotas, potential or imposed tariffs, trade disputes, and barriers or sanctions, as well as any retaliatory actions, that may prevent us from offering certain portions of our products or services to a particular market, may increase our operating costs, or may subject us to monetary fines or penalties;
• compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, privacy, intellectual property, financial services, AI, and data protection laws and regulations;
• increased compliance costs related to government regulatory reviews or audits, including those related to international cybersecurity and sustainability requirements;
• increased financial accounting and reporting burdens and complexities;
• the effects of currency fluctuations on our revenues and expenses and customer demand for our services;
• restrictions on the transfer of funds;
• adverse tax consequences and tax rulings; and
• unstable economic and political conditions.
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Certain of the above factors have and may continue to negatively impact our ability to sell our applications and offer services globally, reduce our competitive position in foreign markets, increase our costs of global operations, reduce demand for our applications and services from global customers, or subject us to legal or regulatory liability. Additionally, the majority of our international costs are denominated in local currencies and we anticipate that over time an increasing portion of our sales contracts may be outside the U.S. and will therefore be denominated in local currencies. Fluctuations in the value of foreign currencies, which may be amplified by macroeconomic events, may impact our operating results when translated into U.S. dollars. Such fluctuations may also impact our ability to predict our future results accurately. If we are not able to successfully hedge against the risks associated with foreign currency fluctuations, our financial condition and operating results could be adversely affected.