10-Q – 2025-11-26 – wday-20251031.htm

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Table o f Contents

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 October 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 November 24, 2025, there were approximately 213 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 o f Contents

Workday, Inc.

    Page No.
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited):

Condensed Consolidated Balance Sheets as of October 31, 2025, and January 31, 2025
3

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

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

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

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 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
27

Item 3. Quantitative and Qualitative Disclosures About Market Risk
40

Item 4. Controls and Procedures
40

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
42

Item 1A. Risk Factors
43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
65

Item 3. Defaults Upon Senior Securities
65

Item 4. Mine Safety Disclosures
65

Item 5. Other Information
65

Item 6. Exhibits
67

Signatures
68

2

Table o f Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

October 31, 2025 January 31, 2025
Assets
Current assets:
Cash and cash equivalents $ 2,609   $ 1,543  
Marketable securities 4,234   6,474  
Trade and other receivables, net 1,750   1,950  
Deferred costs 286   267  
Prepaid expenses and other current assets 296   311  
Total current assets 9,175   10,545  
Property and equipment, net 1,132   1,239  
Operating lease right-of-use assets 721   336  
Deferred costs, noncurrent 573   561  
Acquisition-related intangible assets, net 549   361  
Deferred tax assets 905   1,039  
Goodwill 4,263   3,478  
Other assets 433   418  
Total assets $ 17,751   $ 17,977  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 103   $ 108  
Accrued expenses and other current liabilities 352   296  
Accrued compensation 574   578  
Unearned revenue 3,871   4,467  
Operating lease liabilities 117   99  

Total current liabilities 5,017   5,548  
Debt, noncurrent 2,986   2,984  
Unearned revenue, noncurrent 70   80  
Operating lease liabilities, noncurrent 690   279  
Other liabilities 109   52  
Total liabilities 8,872   8,943  
Stockholders’ equity:
Common stock 0   0  
Additional paid-in capital 12,311   11,463  
Treasury stock ( 2,706 ) ( 1,308 )
Accumulated other comprehensive income (loss) ( 69 ) 84  
Accumulated deficit ( 657 ) ( 1,205 )
Total stockholders’ equity 8,879   9,034  
Total liabilities and stockholders’ equity $ 17,751   $ 17,977  

See Notes to Condensed Consolidated Financial Statements
3

Table o f Contents

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 October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Revenues:
Subscription services $ 2,244   $ 1,959   $ 6,473   $ 5,678  
Professional services 188   201   547   557  
Total revenues 2,432   2,160   7,020   6,235  
Costs and expenses (1) :

Costs of subscription services 395   329   1,115   924  
Costs of professional services 196   201   595   606  
Product development 666   647   1,988   1,952  
Sales and marketing 677   620   1,941   1,804  
General and administrative 234   198   662   600  
Restructuring 5   0   172   9  
Total costs and expenses 2,173   1,995   6,473   5,895  
Operating income 259   165   547   340  
Other income, net 79   62   198   178  
Income before provision for income taxes 338   227   745   518  
Provision for income taxes 86   34   197   86  
Net income $ 252   $ 193   $ 548   $ 432  
Net income per share, basic $ 0.95   $ 0.73   $ 2.06   $ 1.63  
Net income per share, diluted $ 0.94   $ 0.72   $ 2.03   $ 1.61  
Weighted-average shares used to compute net income per share, basic 265,870   265,411   266,387   265,062  
Weighted-average shares used to compute net income per share, diluted 268,629   268,549   269,700   268,936  

(1) Costs and expenses include share-based compensation expense as follows:
Three Months Ended October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Costs of subscription services $ 39   $ 35   $ 120   $ 108  
Costs of professional services 27   28   84   86  
Product development 162   162   515   498  
Sales and marketing 83   78   261   226  
General and administrative 65   65   205   204  
Restructuring 0   0   42   0  
Total share-based compensation expense $ 376   $ 368   $ 1,227   $ 1,122  

See Notes to Condensed Consolidated Financial Statements
4

Table o f Contents

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

Three Months Ended October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Net income $ 252   $ 193   $ 548   $ 432  
Other comprehensive income (loss), net of tax:
Net change in foreign currency translation adjustment 0   1   3   ( 2 )
Net change in unrealized gains on available-for-sale debt securities, net of tax provision of $ 2 , $ 2 , $ 7 , and $ 2 , respectively
6   5   20   7  
Net change in unrealized losses on cash flow hedges, net of tax benefit of $( 1 ), $( 1 ), $( 6 ), and $ 0 , respectively
( 1 ) ( 9 ) ( 176 ) ( 10 )
Other comprehensive income (loss), net of tax 5   ( 3 ) ( 153 ) ( 5 )
Comprehensive income $ 257   $ 190   $ 395   $ 427  

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 October 31, Nine Months Ended October 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 12,055   10,869   11,463   10,400  
Issuance of common stock under employee equity plans 0   0   111   106  
Shares withheld related to net share settlement of equity awards ( 122 ) ( 123 ) ( 496 ) ( 518 )
Share-based compensation 378   369   1,233   1,127  

Balance, end of period 12,311   11,115   12,311   11,115  
Treasury stock:
Balance, beginning of period ( 1,900 ) ( 1,051 ) ( 1,308 ) ( 608 )

Common stock repurchases under share repurchase programs ( 806 ) ( 157 ) ( 1,398 ) ( 600 )
Balance, end of period ( 2,706 ) ( 1,208 ) ( 2,706 ) ( 1,208 )
Accumulated other comprehensive income (loss):
Balance, beginning of period ( 74 ) 19   84   21  
Other comprehensive income (loss) 5   ( 3 ) ( 153 ) ( 5 )
Balance, end of period ( 69 ) 16   ( 69 ) 16  
Accumulated deficit:
Balance, beginning of period ( 909 ) ( 1,492 ) ( 1,205 ) ( 1,731 )
Net income 252   193   548   432  

Balance, end of period ( 657 ) ( 1,299 ) ( 657 ) ( 1,299 )
Total stockholders’ equity $ 8,879   $ 8,624   $ 8,879   $ 8,624  

Three Months Ended October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Common stock shares:
Balance, beginning of period 266,904   265,260   266,352   263,862  
Issuance of common stock under employee equity plans 1,348   1,340   6,027   6,179  

Shares withheld related to net share settlement of equity awards ( 519 ) ( 506 ) ( 2,140 ) ( 2,058 )
Common stock repurchased ( 3,367 ) ( 649 ) ( 5,873 ) ( 2,538 )
Other share issuances 45   24   45   24  
Balance, end of period 264,411   265,469   264,411   265,469  

See Notes to Condensed Consolidated Financial Statements
6

Table o f Contents

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

Nine Months Ended October 31,
2025 2024
Cash flows from operating activities:
Net income $ 548   $ 432  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 250   235  
Share-based compensation expense 1,227   1,122  
Amortization of deferred costs 215   185  
Non-cash lease expense 84   77  
Net (gains) losses on investments ( 24 ) 6  
Accretion of discounts on marketable debt securities, net ( 52 ) ( 90 )
Deferred income taxes 145   38  
Other 52   4  
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net 211   238  
Deferred costs ( 247 ) ( 178 )
Prepaid expenses and other assets 42   57  
Accounts payable ( 7 ) ( 3 )
Accrued expenses and other liabilities ( 124 ) ( 136 )
Unearned revenue ( 659 ) ( 638 )
Net cash provided by operating activities 1,661   1,349  
Cash flows from investing activities:
Purchases of marketable securities ( 2,450 ) ( 3,134 )
Maturities of marketable securities 2,062   2,980  
Sales of marketable securities 2,653   115  
Capital expenditures ( 102 ) ( 183 )
Business combinations, net of cash acquired ( 974 ) ( 824 )
Purchases of other intangible assets 0   ( 3 )
Purchases of non-marketable equity and other investments ( 17 ) ( 10 )
Sales of non-marketable equity and other investments 5   5  

Net cash provided by (used in) investing activities 1,177   ( 1,054 )
Cash flows from financing activities:

Repurchases of common stock ( 1,391 ) ( 597 )
Proceeds from issuance of common stock from employee equity plans 111   106  
Taxes paid related to net share settlement of equity awards ( 495 ) ( 505 )

Net cash used in financing activities ( 1,775 ) ( 996 )
Effect of exchange rate changes 1   0  
Net increase (decrease) in cash, cash equivalents, and restricted cash 1,064   ( 701 )
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 $ 2,618   $ 1,323  

See Notes to Condensed Consolidated Financial Statements
7

Table o f Contents

Nine Months Ended October 31,
2025 2024
Supplemental cash flow data:
Cash paid for interest
$ 110   $ 110  
Cash paid for income taxes, net of refunds 72   48  
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid 35   66  
Taxes related to net share settlement of equity awards, accrued but not paid
14   13  

As of October 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 $ 2,609   $ 1,311  
Restricted cash included in Prepaid expenses and other current assets 9   12  

Total cash, cash equivalents, and restricted cash $ 2,618   $ 1,323  

See Notes to Condensed Consolidated Financial Statements
8

Table o f Contents

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 nine months ended October 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 Condensed 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 Condensed Consolidated Balance Sheets, and Capital expenditures, as reported on the Condensed Consolidated Statements of Cash Flows. Significant segment expenses include the costs and expenses presented on the Condensed Consolidated Statements of Operations. Other segment items include Other income, net and Provision for income taxes.
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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 October 31, 2025, or January 31, 2025. No customer individually accounted for more than 10% of total revenues during the three and nine months ended October 31, 2025, or 2024.
Other than the United States, no country individually accounted for more than 10% of total revenues during the three and nine months ended October 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 effect the updated standard will have on our financial statements and related disclosures.
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.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40), Targeted Improvements to the Accounting for Internal-Use Software , which modernizes the internal-use software costs capitalization model by eliminating stage-based rules and replacing them with a principles-based framework to be more aligned with modern software development practices. This ASU is effective for interim and annual reporting periods beginning in the first quarter of our fiscal 2029, with early adoption permitted as of the beginning of an annual reporting period. Entities may adopt the guidance using prospective application, retrospective application, or a modified transition approach. We are currently evaluating the effect the updated standard will have on our financial statements and related disclosures.
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Note 3. Investments
Debt Securities
As of October 31, 2025, debt securities consisted of the following (in millions):

Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value
U.S. treasury securities $ 1,559   $ 12   $ 0   $ 1,571  
U.S. agency obligations 352   1   0   353  
Corporate bonds 2,095   25   0   2,120  
Commercial paper 26   0   0   26  
Asset-backed securities 156   2   0   158  
Supranational securities 27   0   0   27  
Total debt securities $ 4,215   $ 40   $ 0   $ 4,255  
Included in Cash and cash equivalents $ 21   $ 0   $ 0   $ 21  
Included in Marketable securities $ 4,194   $ 40   $ 0   $ 4,234  

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  
Supranational 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 October 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 $ 1,049  
Due 1 year through 5 years 3,129  
Due 5 years through 10 years
47  
Due after 10 years
30  
Total debt securities $ 4,255  

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 $ 39  million and $ 53  million was included in Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets as of October 31, 2025, and January 31, 2025, respectively.
As of October 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.
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We sold $ 2.7  billion of debt securities during the nine months ended October 31, 2025, with a corresponding realized gain of $ 24  million. We sold $ 115 million of debt securities during the nine months ended October 31, 2024, with an immaterial corresponding realized gain.

Equity Investments
Equity investments consisted of the following (in millions):

Condensed Consolidated Balance Sheets Location October 31, 2025 January 31, 2025
Money market funds Cash and cash equivalents $ 2,301   $ 988  

Non-marketable equity investments measured using the measurement alternative Other assets 236   244  

Total equity investments $ 2,537   $ 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):

October 31, 2025 January 31, 2025
Total initial cost $ 205   $ 217  
Cumulative net unrealized gains
31   27  
Carrying value $ 236   $ 244  

During the three and nine months ended October 31, 2025, and 2024, there were no material gains or losses recorded on our non-marketable equity investments.

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.
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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 October 31, 2025 (in millions):

Level 1 Level 2 Level 3 Total
U.S. treasury securities $ 1,571   $ 0   $ 0   $ 1,571  
U.S. agency obligations 0   353   0   353  
Corporate bonds 0   2,120   0   2,120  
Commercial paper 0   26   0   26  
Asset-backed securities 0   158   0   158  
Supranational securities 0   27   0   27  
Money market funds 2,301   0   0   2,301  
Foreign currency derivative assets 0   33   0   33  
Total assets $ 3,872   $ 2,717   $ 0   $ 6,589  
Foreign currency derivative liabilities $ 0   $ 111   $ 0   $ 111  
Total liabilities $ 0   $ 111   $ 0   $ 111  

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  
Supranational 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 11, Debt .

Note 5. Deferred Costs
Deferred costs, which consist of deferred sales commissions, were $ 859 million and $ 828 million as of October 31, 2025, and January 31, 2025, respectively. Amortization expense for the deferred costs was $ 75 million and $ 64 million for the three months ended October 31, 2025, and 2024, respectively, and $ 215 million and $ 185 million for the nine months ended October 31, 2025, and 2024, respectively. There was no impairment loss in relation to the costs capitalized for the periods presented.
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Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following (in millions):

October 31, 2025 January 31, 2025
Computers, equipment, and software $ 1,317   $ 1,370  
Buildings 702   752  
Leasehold improvements 282   252  
Furniture, fixtures, and transportation equipment 110   108  
Land and land improvements 77   81  
Property and equipment, gross 2,488   2,563  
Less accumulated depreciation and amortization ( 1,356 ) ( 1,324 )
Property and equipment, net $ 1,132   $ 1,239  

Depreciation expense totaled $ 59 million and $ 60 million for the three months ended October 31, 2025, and 2024, respectively, and $ 180 million and $ 174 million for the nine months ended October 31, 2025, and 2024, respectively.

Note 7. Business Combinations
Paradox Acquisition
In September 2025, we acquired all outstanding stock of Paradox, Inc. (“Paradox”), a candidate experience agent that uses conversational AI to simplify the job application journey. We have included the financial results of Paradox in our condensed consolidated financial statements from the date of acquisition.
The total acquisition-date fair value of the purchase consideration was $ 1.1  billion, attributable to cash consideration of $ 1.0  billion and the fair value of a previously held equity interest of $ 20  million. The purchase consideration was preliminarily allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded to goodwill. The fair values of assets acquired and liabilities assumed may be subject to change over the measurement period as additional information is received and certain tax matters are finalized. The measurement period will end no later than one year from the acquisition date. The preliminary fair values of the assets acquired and liabilities assumed as of the date of acquisition were as follows (in millions):

Cash
$ 75  
Acquisition-related intangible assets
253  
Goodwill
781  
Other assets
49  
Other liabilities
( 95 )
Total purchase consideration, inclusive of previously held equity interest
$ 1,063  

The fair values and weighted-average useful lives of the acquired intangible assets by category were as follows (in millions, except years):

Estimated Fair Values
Weighted-Average Useful Lives (in Years)
Developed technology
$ 133   5
Customer relationships
116   9
Backlog
2   3
Trade name
2   1
Total acquisition-related intangible assets
$ 253   7

The goodwill recognized was primarily attributable to the assembled workforce and the expected synergies from integrating Paradox’s technology into our product portfolio. The goodwill is not deductible for income tax purposes.
Separate operating results and pro forma results of operations for Paradox have not been presented as the effect of this acquisition was not material to our financial results.
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Other Acquisitions
In August 2025, we completed an acquisition for total purchase consideration of $ 6  million, resulting in an increase of $ 1  million and $ 4  million in acquired developed technology and goodwill, respectively.

Note 8. Acquisition-Related Intangible Assets, Net
Acquisition-related intangible assets, net consisted of the following as of October 31, 2025 (in millions):

Gross Carrying Amount Accumulated Amortization Net Book Value
Developed technology $ 606   $ ( 342 ) $ 264  
Customer relationships 478   ( 197 ) 281  
Backlog 17   ( 15 ) 2  
Trade name 16   ( 14 ) 2  
Total
$ 1,117   $ ( 568 ) $ 549  

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 $ 25 million and $ 20 million for the three months ended October 31, 2025, and 2024, respectively, and $ 67 million and $ 58 million for the nine months ended October 31, 2025, and 2024, respectively.
As of October 31, 2025, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in millions):

Fiscal Period:
Remainder of 2026 $ 30  
2027 99  
2028 93  
2029 83  
2030 75  
Thereafter 169  
Total $ 549  

Note 9.  Other Assets
Other assets consisted of the following (in millions):

October 31, 2025 January 31, 2025
Non-marketable equity and other investments $ 239   $ 247  
Contract assets 54   44  
Prepayments for goods and services 31   16  
Technology patents and other intangible assets, net 24   25  
Deposits 13   10  
Derivative assets 12   52  

Other 60   24  
Total other assets $ 433   $ 418  

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

Fiscal Period:
Remainder of 2026 $ 3  
2027 3  
2028 3  
2029 3  
2030 2  
Thereafter 10  
Total $ 24  

Note 10.  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 October 31, 2025, we estimate that $ 26 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 October 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 $ 433  million and $ 420  million, respectively. All contracts had maturities of less than 51 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 October 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 $ 229  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 $ 535  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 October 31, 2025 January 31, 2025
Derivative assets:
Cash flow hedges Prepaid expenses and other current assets $ 17   $ 59  
Cash flow hedges Other assets 12   52  
Non-designated hedges Prepaid expenses and other current assets 4   1  

Total derivative assets $ 33   $ 112  
Derivative liabilities:
Cash flow hedges Accrued expenses and other current liabilities $ 49   $ 22  
Cash flow hedges Other liabilities 49   3  
Non-designated hedges Accrued expenses and other current liabilities 12   1  
Non-designated hedges Other liabilities 1   0  
Total derivative liabilities $ 111   $ 26  

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

Three Months Ended October 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 $ 2,432   $ 3   $ 2,160   $ 7  
Costs and expenses 2,173   5   1,995   3  

Nine Months Ended October 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 $ 7,020   $ 19   $ 6,235   $ 23  
Costs and expenses 6,473   5   5,895   ( 2 )

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 October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Gains (losses) recognized in OCI Net change in unrealized gains (losses) on cash flow hedges $ 6   $ 0   $ ( 158 ) $ 11  
Gains (losses) reclassified from AOCI into income (effective portion) Revenues 3   7   19   23  
Gains (losses) reclassified from AOCI into income (effective portion) Costs and expenses 5   3   5   ( 2 )

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

Condensed Consolidated Statements of Operations Location Three Months Ended October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Gains (losses) related to non-designated hedges Other income, net
$ 3   $ 0   $ ( 10 ) $ ( 2 )

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We manage our exposure to counterparty risk by entering into foreign currency forward contracts with a diversified group of nine 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 $ 4  million and a liability position of $ 82  million as of October 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 11.  Debt
Outstanding debt consisted of the following (in millions):

October 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 ( 14 ) ( 16 )

Debt, noncurrent $ 2,986   $ 2,984  

As of October 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 October 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 October 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 October 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 October 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 October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Contractual interest expense $ 28   $ 28   $ 83   $ 83  
Interest cost related to amortization of debt discount and issuance costs 1   1   3   3  
Total interest expense $ 29   $ 29   $ 86   $ 86  

Note 12. 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 $ 721 million and $ 336 million as of October 31, 2025, and January 31, 2025, respectively, and operating lease liabilities were $ 807 million and $ 378 million as of October 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 October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Operating lease cost $ 40   $ 30   $ 105   $ 88  
Short-term lease cost 0   0   1   1  
Variable lease cost 14   15   38   39  
Total operating lease cost $ 54   $ 45   $ 144   $ 128  

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

Nine Months Ended October 31,
2025 2024
Cash paid for operating lease liabilities $ 97 $ 80
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities 467 123

Other information related to our operating leases was as follows:

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

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

Fiscal Period:
Remainder of 2026 $ 36  
2027 137  
2028 143  
2029 114  
2030 78  
Thereafter 527  
Total lease payments 1,035  
Less imputed interest ( 228 )
Total operating lease liabilities $ 807  

As of October 31, 2025, we had operating leases for office space that had not yet commenced with total undiscounted lease payments of $ 36 million. These operating leases will commence in fiscal 2026 and fiscal 2027, with lease terms ranging from approximately five to ten years .

Note 13. 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 nine months ended October 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 October 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 14. Stockholders’ Equity
Common Stock
As of October 31, 2025, there were 214 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
We repurchase shares of our Class A common stock under share repurchase programs authorized by our Board of Directors. Under these 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. The share repurchase 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.
Share repurchase programs authorized by our Board of Directors that were in effect during the three and nine months ended October 31, 2025, and 2024, were as follows (in millions):

Authorization Date
Amount Authorized
Authorization Completion Date

November 2022
$ 500   Q1 fiscal 2025

February 2024
500   Q3 fiscal 2025

August 2024
1,000   Q3 fiscal 2026

May 2025
1,000  
September 2025 4,000  

The table below sets forth information regarding repurchase of shares under our share repurchase programs (in millions, except number of shares which are reflected in thousands, and per share data):

Three Months Ended October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Total number of shares repurchased 3,367   649   5,873   2,538  
Average price paid per share (1)
$ 238.40   $ 242.42   $ 237.42   $ 236.73  
Amount repurchased (1)
$ 803   $ 157   $ 1,394   $ 600  

(1) Amounts exclude excise tax and commissions.
All repurchases were made in open market transactions. As of October 31, 2025, we were authorized to repurchase a remaining $ 4.4  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 October 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 October 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 nine months ended October 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 7,281   219.30  
Granted- performance-based restricted stock units (1)
84   215.98  
Vested ( 3,322 ) 227.69  
Forfeited and canceled (2)
( 3,672 ) 224.06  
Outstanding balance as of October 31, 2025 14,732   223.24  

(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 October 31, 2025, there was a total of $ 2.7  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 October 31, 2025, there was a total of $ 4  million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over approximately two years .

Note 15. Contract Balances and Performance Obligations
Contract Balances
Contract assets and unearned revenue balances were as follows (in millions):

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

Contract assets, current
Trade and other receivables, net $ 512   $ 373  
Contract assets, noncurrent
Other assets 54   44  
Total contract assets
$ 566   $ 417  
Unearned revenue (1) :

Unearned revenue, current
Unearned revenue $ 3,871   $ 4,467  
Unearned revenue, noncurrent
Unearned revenue, noncurrent 70   80  
Total unearned revenue
$ 3,941   $ 4,547  

(1) Included in this balance are amounts related to professional services that are subject to cancellation and pro-rated refund rights of $ 79 million and $ 83 million as of October 31, 2025, and January 31, 2025, respectively.
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Revenues of $ 1.8 billion and $ 1.6 billion were recognized during the three months ended October 31, 2025, and 2024, respectively, that were included in the unearned revenue balances as of July 31, 2025, and 2024, respectively. Revenues of $ 3.9 billion and $ 3.6 billion were recognized during the nine months ended October 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 October 31, 2025, approximately $ 26.0  billion of revenues are expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize revenues on approximately $ 8.2  billion and $ 14.6  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 October 31, 2025, were not material.

Note 16. Other Income, Net
Other income, net consisted of the following (in millions):

Three Months Ended October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Interest income $ 84   $ 86   $ 263   $ 267  
Interest expense (1)
( 29 ) ( 29 ) ( 86 ) ( 86 )
Other (2)
24   5   21   ( 3 )
Total other income, net
$ 79   $ 62   $ 198   $ 178  

(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 11, Debt .
(2) Other primarily includes the realized gains (losses) from sales of debt securities and net gains (losses) from our equity investments. For further information, see Note 3, Investments .

Note 17. Income Taxes
We reported an income tax provision of $ 197 million and $ 86 million for the nine months ended October 31, 2025, and 2024, respectively. The income tax provision for the nine months ended October 31, 2025, was primarily attributable to earnings in the U.S. and profitable foreign jurisdictions. The income tax provision for the nine months ended October 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 and increase in research and development credits.
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 October 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 condensed consolidated financial statements. The final impact may differ from our current estimates based on further analysis, regulatory guidance, and any legislative changes.

Note 18. 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 October 31, Nine Months Ended October 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 $ 205   $ 47   $ 155   $ 38   $ 444   $ 104   $ 346   $ 86  
Denominator:
Weighted-average shares outstanding, basic 215,620   50,250   213,047   52,364   215,736   50,651   212,350   52,712  
Net income per share, basic $ 0.95   $ 0.95   $ 0.73   $ 0.73   $ 2.06   $ 2.06   $ 1.63   $ 1.63  
Net income per share, diluted:
Numerator:
Net income $ 205   $ 47   $ 155   $ 38   $ 444   $ 104   $ 346   $ 86  
Reallocation of net income as a result of conversion of Class B to Class A common stock 47   0   38   0   104   0   86   0  
Reallocation of net income to Class B common stock 0   0   0   0   0   ( 1 ) 0   ( 1 )
Net income for diluted calculation $ 252   $ 47   $ 193   $ 38   $ 548   $ 103   $ 432   $ 85  
Denominator:
Weighted-average shares outstanding, basic 215,620   50,250   213,047   52,364   215,736   50,651   212,350   52,712  
Conversion of Class B to Class A common stock 50,250   0   52,364   0   50,651   0   52,712   0  
Dilutive effect of share-based awards 2,759   0   3,138   0   3,313   0   3,874   0  
Weighted-average shares outstanding, diluted 268,629   50,250   268,549   52,364   269,700   50,651   268,936   52,712  
Net income per share, diluted $ 0.94   $ 0.94   $ 0.72   $ 0.72   $ 2.03   $ 2.03   $ 1.61   $ 1.61  

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 October 31, Nine Months Ended October 31,
  2025 2024 2025 2024
Total weighted-average shares related to outstanding share-based awards
3,487   258   1,305   2,217  

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Note 19. 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 October 31, Nine Months Ended October 31,
  2025 2024 2025 2024
United States $ 1,825   $ 1,623   $ 5,270   $ 4,676  
Other countries 607   537   1,750   1,559  
Total revenues $ 2,432   $ 2,160   $ 7,020   $ 6,235  

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):

  October 31, 2025 January 31, 2025
United States $ 1,161   $ 1,197  
Ireland 516   215  
Other countries 176   163  
Total long-lived assets $ 1,853   $ 1,575  

Note 20. 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 $ 237  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 the remainder was recognized thereafter. The total charges consisted of $ 198  million related to employee transition, severance payments, employee benefits, and share-based compensation, and $ 39  million related to an impairment of office space.
Fiscal 2026 Restructuring Plan activity was as follows (in millions):

Three Months Ended October 31, 2025 Nine Months Ended October 31, 2025
Workforce Reduction
Office Space Reduction Total Workforce Reduction
Office Space Reduction Total
Restructuring liability, beginning of the period $ 6   $ 0   $ 6   $ 57   $ 0   $ 57  
Charges
0   5   5   133   39   172  
Payments ( 1 ) 0   ( 1 ) ( 145 ) 0   ( 145 )
Non-cash items
0   ( 5 ) ( 5 ) ( 40 ) ( 39 ) ( 79 )
Restructuring liability, end of the period $ 5   $ 0   $ 5   $ 5   $ 0   $ 5  

We recorded $ 9  million in exit charges associated with office space reductions under a separate restructuring plan during the nine months ended October 31, 2024.
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Note 21. Subsequent Events
In November 2025, we completed our acquisition of Sana Labs AB (“Sana”), an AI company building the next generation of enterprise knowledge tools, for approximately $ 1.0  billion in cash. The acquisition will be accounted for as a business combination and, accordingly, the purchase consideration will be allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. We are in the process of finalizing the preliminary purchase price allocation for the transaction and will provide the preliminary purchase price allocation within our Annual Report on Form 10-K for the fiscal year ending January 31, 2026.
In November 2025, we entered into a definitive agreement to acquire Pipedream, Inc. (“Pipedream”), an integration platform for AI agents with pre-built connectors to common business applications. The acquisition is expected to close during the fourth quarter of fiscal 2026, subject to the satisfaction of closing conditions.
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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 enterprise artificial intelligence (“AI”) platform for managing 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 October 31, Nine Months Ended October 31,
  2025 2024 Change 2025 2024 Change
Total revenues $ 2,432  $ 2,160  13  % $ 7,020  $ 6,235  13  %
Subscription services revenues $ 2,244  $ 1,959  15  % $ 6,473  $ 5,678  14  %

GAAP operating income $ 259  $ 165  57  % $ 547  $ 340  61  %
Non-GAAP operating income (1)
$ 692  $ 569  22  % $ 2,050  $ 1,602  28  %

GAAP operating margin 10.7  % 7.6  % 301 bps 7.8  % 5.5  % 233 bps
Non-GAAP operating margin (1)
28.5  % 26.3  % 215 bps 29.2  % 25.7  % 352 bps

Operating cash flows $ 1,661  $ 1,349  23  %
Free cash flows (1)
$ 1,559  $ 1,166  34  %

As of October 31,
2025 2024 Change
Total subscription revenue backlog $ 25,963  $ 22,191  17  %
12-month subscription revenue backlog $ 8,206  $ 6,975  18  %

Cash, cash equivalents, and marketable securities $ 6,843  $ 7,157  (4) %

Headcount 20,588  20,493  0  %

(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 nine months ended October 31, 2025, and represented 97% of our total unearned revenue as of October 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 October 31,   Nine Months Ended October 31,  
  2025 2024 % Change 2025 2024 % Change
Subscription services $ 2,244  $ 1,959  15  % $ 6,473  $ 5,678  14  %
Professional services 188  201  (7) % 547  557  (2) %
Total revenues $ 2,432  $ 2,160  13  % $ 7,020  $ 6,235  13  %

Total revenues were $2.4 billion for the three months ended October 31, 2025, compared to $2.2 billion for the prior year period, an increase of $272 million, or 13%. Subscription services revenues were $2.2 billion for the three months ended October 31, 2025, compared to $2.0 billion for the prior year period, an increase of $286 million, or 15%. 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 $188 million for the three months ended October 31, 2025, compared to $201 million for the prior year period, a decrease of $14 million, or 7%. Professional services revenues decreased 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 $7.0 billion for the nine months ended October 31, 2025, compared to $6.2 billion for the prior year period, an increase of $785 million, or 13%. Subscription services revenues were $6.5 billion for the nine months ended October 31, 2025, compared to $5.7 billion for the prior year period, an increase of $795 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 $547 million for the nine months ended October 31, 2025, compared to $557 million for the prior year period, a decrease of $10 million, or 2%. Professional services revenues decreased 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 October 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 October 31, 2025, our total subscription revenue backlog was $26.0 billion, with $8.2 billion expected to be recognized in revenues over the next 12 months. As of October 31, 2024, our total subscription revenue backlog was $22.2 billion, with $7.0 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 October 31, Nine Months Ended October 31,
  2025 2024 2025 2024
Costs of subscription services $ 395  $ 329  $ 1,115  $ 924 
Costs of professional services 196  201  595  606 
Product development 666  647  1,988  1,952 
Sales and marketing 677  620  1,941  1,804 
General and administrative 234  198  662  600 
Restructuring
5  0  172  9 
Total costs and expenses $ 2,173  $ 1,995  $ 6,473  $ 5,895 

Total costs and expenses were $2.2 billion for the three months ended October 31, 2025, compared to $2.0 billion for the prior year period, an increase of $178 million, or 9%. The increase in total costs and expenses included increases of $44 million in facilities and IT-related expenses, $44 million in employee-related expenses, net of restructuring-related cost savings, $37 million in third-party hosted infrastructure expenses, $17 million related to marketing programs, $11 million in amortization of deferred sales commissions, and $9 million related to professional services.

Total costs and expenses were $6.5 billion for the nine months ended October 31, 2025, compared to $5.9 billion for the prior year period, an increase of $578 million, or 10%. Included in the increase in total costs and expenses was $163 million in restructuring expenses primarily related to the Fiscal 2026 Restructuring Plan. Additional increases included $131 million in employee-related expenses, net of restructuring-related cost savings, $108 million in third-party hosted infrastructure expenses, $96 million in facilities and IT-related expenses, $30 million in amortization of deferred sales commissions, $18 million related to marketing programs, and $17 million related to professional services.

Costs of Subscription Services
Costs of subscription services were $395 million for the three months ended October 31, 2025, compared to $329 million for the prior year period, an increase of $65 million, or 20%. The increase in costs of subscription services included increases of $32 million in third-party hosted infrastructure expenses, $20 million in employee-related expenses primarily due to delivering our enhanced customer support services, net of restructuring-related cost savings, and $10 million in facilities and IT-related expenses.

Costs of subscription services were $1.1 billion for the nine months ended October 31, 2025, compared to $924 million for the prior year period, an increase of $191 million, or 21%. The increase in costs of subscription services included increases of $96 million in third-party hosted infrastructure expenses, $57 million in employee-related expenses primarily due to delivering our enhanced customer support services, net of restructuring-related cost savings, and $27 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 $196 million for the three months ended October 31, 2025, compared to $201 million for the prior year period, a decrease of $4 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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Costs of professional services were $595 million for the nine months ended October 31, 2025, compared to $606 million for the prior year period, a decrease of $11 million, or 2%. The decrease in costs of professional services included a reduction of $15 million in subcontractor expenses. Employee-related expenses remained relatively flat as a result of restructuring-related cost savings.

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 $666 million for the three months ended October 31, 2025, compared to $647 million for the prior year period, an increase of $19 million, or 3%. The increase in product development expenses included increases of $12 million in facilities and IT-related expenses and $10 million in employee-related expenses, net of restructuring-related cost savings.

Product development expenses were $2.0 billion for the nine months ended October 31, 2025, compared to $2.0 billion for the prior year period, an increase of $36 million, or 2%. The increase in product development expenses included increases of $20 million in facilities and IT-related expenses and $20 million in employee-related expenses, net of restructuring-related cost savings.

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 $677 million for the three months ended October 31, 2025, compared to $620 million for the prior year period, an increase of $57 million, or 9%. The increase in sales and marketing expenses included increases of $21 million related to marketing programs, $11 million in amortization of deferred sales commissions, and $9 million in facilities and IT-related expenses. Employee-related expenses remained relatively flat as a result of restructuring-related cost savings.

Sales and marketing expenses were $1.9 billion for the nine months ended October 31, 2025, compared to $1.8 billion for the prior year period, an increase of $137 million, or 8%. The increase in sales and marketing expenses included increases of $42 million in employee-related expenses, net of restructuring-related cost savings, $30 million in amortization of deferred sales commissions, $23 million in facilities and IT-related expenses, and $21 million related to marketing programs.

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 $234 million for the three months ended October 31, 2025, compared to $198 million for the prior year period, an increase of $36 million, or 18%. The increase in general and administrative expenses included increases of $13 million related to professional services, $9 million in employee-related expenses, net of restructuring-related cost savings, and $8 million in facilities and IT-related expenses.

General and administrative expenses were $662 million for the nine months ended October 31, 2025, compared to $600 million for the prior year period, an increase of $62 million, or 10%. The increase in general and administrative expenses included increases of $20 million in employee-related expenses, net of restructuring-related cost savings, $19 million related to professional services, and $15 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 $172 million for the nine months ended October 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 $39 million for an impairment of office space.
Restructuring expenses of $9 million for the nine months ended October 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 October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Costs of subscription services $ 39  $ 35  $ 120  $ 108 
Costs of professional services 27  28  84  86 
Product development 162  162  515  498 
Sales and marketing 83  78  261  226 
General and administrative 65  65  205  204 
Restructuring
0  0  42  0 
Total share-based compensation expense $ 376  $ 368  $ 1,227  $ 1,122 
Percentage of total revenues
15.5  % 17.0  % 17.5  % 18.0  %

Share-based compensation expense increased by $8 million for the three months ended October 31, 2025, compared to the prior year period, primarily due to additional grants to new and existing employees.
Share-based compensation expense increased by $105 million for the nine months ended October 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 $259 million, or 10.7% of revenues, for the three months ended October 31, 2025, compared to the prior year GAAP operating income of $165 million, or 7.6% 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 $547 million, or 7.8% of revenues, for the nine months ended October 31, 2025, compared to the prior year GAAP operating income of $340 million, or 5.5% 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 $692 million, or 28.5% of revenues, for the three months ended October 31, 2025, compared to the prior year non-GAAP operating income of $569 million, or 26.3% 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 $2.1 billion, or 29.2% of revenues, for the nine months ended October 31, 2025, compared to the prior year non-GAAP operating income of $1.6 billion, or 25.7% 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 October 31, Nine Months Ended October 31,
  2025 2024 2025 2024
Operating income $ 259  $ 165  $ 547  $ 340 
Share-based compensation expense (1)
376  368  1,185  1,122 
Employer payroll tax-related items on employee stock transactions (1)
9  9  47  57 
Amortization of acquisition-related intangible assets 25  20  67  58 
Acquisition-related costs
18  7  32  16 
Restructuring costs
5  0  172  9 
Non-GAAP operating income $ 692  $ 569  $ 2,050  $ 1,602 

Operating margin 10.7  % 7.6  % 7.8  % 5.5  %
Share-based compensation expense (1)
15.5  % 17.0  % 16.9  % 18.0  %
Employer payroll tax-related items on employee stock transactions (1)
0.3  % 0.4  % 0.7  % 0.9  %
Amortization of acquisition-related intangible assets 1.0  % 1.0  % 1.0  % 0.9  %
Acquisition-related costs
0.7  % 0.3  % 0.5  % 0.3  %
Restructuring costs
0.3  % 0.0  % 2.3  % 0.1  %
Non-GAAP operating margin 28.5  % 26.3  % 29.2  % 25.7  %

(1) For the nine months ended October 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 October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Total other income, net
$ 79  $ 62  $ 198  $ 178 

Other income, net increased by $17 million and $20 million for the three and nine months ended October 31, 2025, respectively, compared to the prior year periods. The increase was primarily due to realized gains from debt securities sold in the current quarter to fund acquisition activities and share repurchases.

Provision For Income Taxes
The provision for income taxes was as follows (in millions):

Three Months Ended October 31, Nine Months Ended October 31,
2025 2024 2025 2024
Provision for income taxes
$ 86  $ 34  $ 197  $ 86 

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The income tax provision for the nine months ended October 31, 2025, was primarily attributable to earnings in the U.S. and profitable foreign jurisdictions.
The income tax provision for the nine months ended October 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 and increase in research and development credits.
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 condensed 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 17, 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 October 31, 2025, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $6.8 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, money market funds, corporate bonds, U.S. treasury securities, U.S. agency obligations, asset-backed securities, supranational 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, planned acquisition, 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.
Our cash flows were as follows (in millions):

  Nine Months Ended October 31,
  2025 2024
Net cash provided by (used in):
Operating activities $ 1,661  $ 1,349 
Investing activities 1,177  (1,054)
Financing activities (1,775) (996)
Effect of exchange rate changes 1  0 
Net increase (decrease) in cash, cash equivalents, and restricted cash $ 1,064  $ (701)

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Operating Activities
Cash provided by operating activities was $1.7 billion and $1.3 billion for the nine months ended October 31, 2025, and 2024, respectively. The improvement in cash provided by operating activities was primarily the result of higher cash collections of $767 million mainly due to increased sales, partially offset by increased supplier payments of $249 million to support our continued growth and increased employee-related payments of $211 million, which include payments made under the Fiscal 2026 Restructuring Plan.

Investing Activities
Cash provided by investing activities was $1.2 billion for the nine months ended October 31, 2025, which primarily resulted from net inflows of $2.3 billion as we converted marketable debt securities into cash to fund acquisition activities and share repurchases, offset by net outflows of $974 million for acquisitions, and capital expenditures of $102 million mainly for office space projects.
Cash used in investing activities was $1.1 billion for the nine months ended October 31, 2024, which primarily resulted from net outflows of $824 million for acquisitions, capital expenditures of $183 million for data center and office space projects, and net outflows of $39 million related to marketable debt securities.

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 $1.8 billion for the nine months ended October 31, 2025, which primarily resulted from repurchases of common stock of $1.4 billion under our share repurchase programs and taxes paid of $495 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 $996 million for the nine months ended October 31, 2024, which was primarily due to repurchases of common stock of $597 million under our share repurchase programs and taxes paid of $505 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 $1.6 billion for the nine months ended October 31, 2025, compared to $1.2 billion for the prior year period. The improvement was primarily the result of higher cash collections of $767 million mainly due to increased sales and decreased capital expenditures of $81 million, partially offset by increased supplier payments of $249 million to support our continued growth and increased employee-related payments of $211 million, which include payments made under the Fiscal 2026 Restructuring Plan.

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

  Nine Months Ended October 31,
  2025 2024
Net cash provided by operating activities $ 1,661  $ 1,349 
Less: Capital expenditures (102) (183)
Free cash flows $ 1,559  $ 1,166 

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Share Repurchase Programs
We repurchase shares of our Class A common stock under share repurchase programs authorized by our Board of Directors. Under these 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. The share repurchase 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.
Share repurchase programs authorized by our Board of Directors that were active during the three and nine months ended October 31, 2025, and 2024, were as follows (in millions):

Authorization Date
Amount Authorized
Authorization Completion Date

November 2022
$ 500  Q1 fiscal 2025

February 2024
500  Q3 fiscal 2025

August 2024
1,000  Q3 fiscal 2026

May 2025
1,000 
September 2025 4,000 

As of October 31, 2025, we were authorized to repurchase a remaining $4.4 billion of our outstanding shares of Class A common stock under our share repurchase programs.
For further information, see Note 14, 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. 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, except as discussed below.
In July 2025, a 20-year lease for our new European headquarters in Dublin, Ireland, commenced, resulting in an operating lease liability of $333 million. For further information, see Note 1 2, Leases , of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
In November 2025, we completed our acquisition of Sana Labs AB (“Sana”) for approximately $1.0 billion in cash. For further information, see Note 21, Subsequent Events , of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

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.
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• 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.
• 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 nine months ended October 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 nine months ended October 31, 2025, and 2024.
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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.
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 nine months ended October 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 October 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 10, 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 $6.8 billion and $8.0 billion as of October 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, asset-backed securities, and supranational 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 $68 million market value reduction or increase in our investment portfolio as of October 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 11, 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 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, our ability to maintain market differentiation may affect our competitive position.
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, including generative and agentic AI capabilities, 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 or resonate more with the market 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.