Workday's Q4 Results Show AI Growth Boosting Stock Outlook

Workday's recent Q4 results indicate healthy growth, with revenue up 15% and adjusted EPS soaring 22%. Investors may find this an opportune time to buy as the company forecasts improved operating margins fueled by AI advancements.

Date: 02-03-2025

AI Rating: 7

Positive Indicators in Workday's Q4 Results

In its fiscal Q4 2025 results, Workday reported a strong performance, with revenue growth reaching 15% year over year, hitting $2.21 billion, and subscription revenue spiking by 16% to $2.04 billion. This surpassed the forecast of $2.025 billion, indicating effective management and customer acquisition strategies.

The adjusted Earnings Per Share (EPS) also rose impressively by 22% to $1.92, exceeding the consensus estimate of $1.78. This trend demonstrates solid operational performance and investor confidence in the company's future.

Workday's operating cash flow of $2.46 billion and free cash flow (FCF) of $2.19 billion further highlight its strong financial health and efficiency in generating capital. Additionally, the company has a considerable backlog in subscription revenue, with a 15% increase to $7.63 billion and total subscription revenue backlog up 20% to $25.06 billion, indicative of potential revenue growth prospects.

The guidance shared for fiscal year 2026 suggests subscription revenue growth of 14% to $8.8 billion, coupled with a forecasted adjusted operating margin of about 28%, which is an increase from the previous year’s 25.9%. This reflects positively on the company's ability to manage costs while increasing revenues.

Overall, the strong performance metrics, significant EPS growth, cash flow generation, and the promising forward guidance are encouraging factors. Given these aspects, Workday appears to be positioned well for potential stock price appreciation in the near future.

Stocks: WDAY