Q4 2026 Workday Inc Earnings Call

Speaker #1: Ladies and gentlemen, welcome to Workday's fourth quarter, fiscal year 26 earnings call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the call.

Operator: Ladies and gentlemen, welcome to Workday's Q4 fiscal year 2026 Earnings Call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the call. During Q&A, please limit your questions to 1. I will now hand the call over to Justin Furby, Vice President of Investor Relations. Please go ahead.

Speaker #1: During Q&A, please limit your questions to one. I will now hand the call over to Justin Furby, Vice President of Investor Relations. Please go ahead.

Speaker #2: Thank you, Operator. Welcome to Workday's fourth quarter, fiscal 2026 earnings conference call. On the call, we have Anil Bushri, our CEO, Garrett Katzmeyer, our President, Product and Technology, Rob Enslin, our President, Chief Commercial Officer, and Zane Row, our CFO.

Justin Furby: Thank you, operator. Welcome to Workday's Q4 fiscal 2026 Earnings Conference Call. On the call, we have Aneel Bhusri, our CEO, Sayan Chakraborty, our President, Product and Technology, Rob Enslin, our President, Chief Commercial Officer, and Zane Rowe, our CFO. Following prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website, where this call is being simultaneously webcast. Before we get started, we want to emphasize that some of our statements on this call, particularly our guidance, are based on the information we have as of today and include forward-looking statements regarding our financial results, applications, customer demand, operations, and other matters. These statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially.

Speaker #2: Following prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website, where this call is being simultaneously webcast.

Speaker #2: Before we get started, we want to emphasize that some of our statements on this call, particularly our guidance, are based on the information we have as of today and include forward-looking statements regarding our financial results, applications, customer demand, operations, and other matters.

Speaker #2: These statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. Please refer to the press release and the risk factors in documents we file with the Securities and Exchange Commission, including our fiscal 2025 annual report on Form 10-K and our most recent quarterly report on Form 10-Q, for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements.

Justin Furby: Please refer to the press release and the risk factors in documents we file with the Securities and Exchange Commission, including our fiscal 2025 annual report on Form 10-K and our most recent quarterly report on Form 10-Q for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Workday's performance. These non-GAAP measures should be considered in addition to, and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results in our earnings press release, in our investor presentation, and on the investor relations page of our website.

Speaker #2: In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Workday's performance. These non-GAAP measures should be considered in addition to, and not as a substitute for or in isolation from, GAAP results.

Speaker #2: You can find additional disclosures regarding these non-gap measures including reconciliations with comparable gap results, in our earnings press release, in our investor presentation, and on the investor relations page of our website.

Speaker #2: The webcast replay of this call will be available for the next 90 days on our company website, under the investor relations link. Additionally, the prepared remarks of this call and our quarterly investor presentation will be posted on our investor relations website following this call.

Justin Furby: The webcast replay of this call will be available for the next 90 days on our company website under the Investor Relations link. Additionally, the prepared remarks of this call and our quarterly investor presentation will be posted on our investor relations website following this call. Our Q1 fiscal 2027 quiet period begins on 15 April 2026. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2025. With that, I'll hand the call over to Aneel.

Speaker #2: Our first quarter, fiscal 2027 quiet period begins on April 15, 2026. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2025.

Speaker #2: With that, I'll hand the call over to Anil.

Speaker #3: Thank you, Justin, and thanks to everyone for joining us today. It's really nice to be back with all of you. Before I get into my remarks, I wanted to thank Carl for his service to Workday over the past three years.

Aneel Bhusri: Thank you, Justin. Thanks to everyone for joining us today. It's really nice to be back with all of you. Before I get into my remarks, I wanted to thank Carl for his service to Workday over the past three years. He brought the operational rigor and discipline that we needed at the time to make Workday a larger and more global company. That work helped us set the foundation for this next chapter for Workday, and we're all grateful to him. In terms of chapters, we talk internally about this next chapter of Workday as chapter four. First was the founding of the company by Dave and myself back in 2005, based on a new idea of HR and finance in the cloud and built on a set of core values around employees, customers, innovation, integrity, and fun.

Speaker #3: He brought the operational rigor and discipline that we needed at the time to make Workday a larger and more global company. That work helped us set the foundation for this next chapter for Workday, and we're all grateful to him.

Speaker #3: In terms of chapters, we talk internally about this next chapter of Workday as chapter four. First was the founding of the company by Dave and myself back in 2005.

Speaker #3: Based on a new idea of HR and finance in the cloud, and built on a set of core values around employees, customers, innovation, integrity, and fun.

Speaker #3: The second chapter was a period of hypergrowth that led to our success with many organizations around the world, and product and technology leadership in HR and finance.

Aneel Bhusri: The second chapter was a period of hypergrowth that led to our success with many organizations around the world and product and technology leadership in HR and finance. The third and most recent chapter, which started in 2023, was all about operational excellence and efficiency as we grew into a Fortune 500 global company. Well, chapter 4 is now upon us, and it's a return to focusing on innovation. When we founded Workday, we transformed the enterprise by reimagining HR and finance in the cloud. Now we have the opportunity to transform it again by reimagining HR and finance with AI and taking advantage of this new vector of growth. You've all heard the narrative out there that HR and ERP will be replaced or relegated to the background by AI. I personally just don't see that happening. Our application domains are really, really hard to build.

Speaker #3: The third and most recent chapter, which started in 2023, was all about operational excellence and efficiency as we grew into a Fortune 500 global company.

Speaker #3: While chapter four is now upon us, and it's a return to focusing on innovation, when we founded Workday, we transformed the enterprise by reimagining HR and finance in the cloud.

Speaker #3: Now we have the opportunity to transform it again by reimagining HR and finance with AI and taking advantage of this new vector of growth.

Speaker #3: You've all heard the narrative out there that HR and ERP will be replaced or relegated to the background by AI. I personally just don't see that happening.

Speaker #3: Our application domains are really, really hard to build. I've been working in the HR and ERP space for over 30 years. These are true systems of record that must process transactions with absolute accuracy and speed, enforce complex security models, and comply with statutory and regulatory requirements all over the world.

Aneel Bhusri: I've been working in the HR and ERP space for over 30 years. These are true systems of record that must process transactions with absolute accuracy and speed, enforce complex security models, and comply with statutory and regulatory requirements all over the world. That kind of complexity is very hard to replicate. No amount of vibe coding is going to produce an HR or an ERP system. Importantly, our underlying business processes are deterministic by nature. There is a start and end to a business process. Its goal is to deliver consistent, auditable outcomes. AI, for all of its incredible capabilities, is probabilistic by nature. It reasons, predicts, and recommends based on patterns and likelihoods. Maybe it'll eventually become a state machine, a system that follows the same steps and gets the same result every time, but it is not there today.

Speaker #3: That kind of complexity is very hard to replicate. No amount of vibe coding is going to produce an HR or an ERP system. And, importantly, our underlying business processes are deterministic by nature.

Speaker #3: There is a start and end to a business process. Its goal is to deliver consistent, auditable outcomes. AI, for all of its incredible capabilities, is probabilistic by nature.

Speaker #3: It reasons, predicts, and recommends based on patterns and likelihoods. Maybe it'll eventually become a state machine, a system that follows the same steps and gets the same result every time, but it is not there today.

Speaker #3: You can't have probabilistic outcomes in running a payroll. It needs to be 100% accurate and completed 100% of the time. So what is the future?

Aneel Bhusri: You can't have probabilistic outcomes in running a payroll. It needs to be 100% accurate and completed 100% of the time. What is the future? It's the marriage of deterministic enterprise apps with probabilistic AI that leads to three things: A redefined user experience that is prompt-based, a greatly improved business process automation execution platform with work done by agents and humans, and lastly, much deeper AI-generated insights. Taken together, these changes will lead to much better business outcomes and deliver far higher ROI for our customers. As you'll hear from Gerrit, this hybrid world and architecture is exactly what Workday is building today, marrying the best system of record for HR and finance with the reasoning capabilities of domain-specific LLMs. That's the future. It's like peanut butter and jelly.

Speaker #3: It's the marriage of deterministic enterprise apps with probabilistic AI that leads to three things: a redefined user experience that is prompt-based; a greatly improved business process automation execution platform, with work done by agents and humans; and lastly, much deeper AI-generated insights.

Speaker #3: Taken together, these changes will lead to much better business outcomes and deliver far higher ROI for our customers. As you'll hear from Garrett, this hybrid world and architecture is exactly what Workday is building today.

Speaker #3: Marrying the best system of record for HR and finance with the reasoning capabilities of domain-specific LLMs, that's the future. It's like peanut butter and jelly.

Speaker #3: They just go together. And it's all rooted in the trust we've built with our customers over the past 20 years from managing their systems and their most critical data.

Aneel Bhusri: They just go together, it's all rooted in the trust we've built with our customers over the past 20 years from managing their systems and their most critical data. All you have to do is look back at the past year to know that this hybrid world is coming to fruition. We experienced accelerating agentic AI adoption across the solutions we acquired, HiredScore, Evisort, Paradox, and most recently, Sana. They all had great Q4s, I'm pleased to say that Sana is now seamlessly integrated into the Workday stack. It's very cool. As we move into fiscal year 2027, what should you expect from us? Our core enterprise apps in HR, finance, and student will continue to thrive, recognizing that in some areas like HR, we have high levels of market share, so the growth will come from new apps sold to the customer base.

Speaker #3: All you have to do is look back at the past year to know that this hybrid world is coming to fruition. We experienced accelerating agentic AI adoption across the solutions we acquired: Hired Score, Evisort, Paradox, and most recently, Sana.

Speaker #3: They all had great Q4s and I'm pleased to say that Sana is now seamlessly integrated into the Workday stack. It's very cool. So as we move into fiscal year 27, what should you expect from us?

Speaker #3: Our core enterprise apps and HR, finance, and student will continue to thrive, recognizing that in some areas, like HR, we have high levels of market share, so the growth will come from new apps sold to the customer base.

Speaker #3: The accelerating growth will come from the agents we built on top of Workday, both inorganic and organic. If FY26 proved that customers trusted Workday to buy our acquired agents, we believe that FY27 and beyond will prove that customers will buy our organically built agents that are in early access today.

Aneel Bhusri: The accelerating growth will come from the agents we built on top of Workday, both inorganic and organic. If FY 2026 proved that customers trusted Workday to buy our acquired agents, we believe that FY 2027 and beyond will prove that customers will buy our organically built agents that are in early access today. Across the board, these new agents are deeply embedded into the Workday core, are meaningful in their scope, and have significant ROI attached to each and every one of them. Those of you who know me, know that I'm an unabashed optimist. I truly believe that our investments in agentic AI will enable Workday to re-accelerate growth, increase customer satisfaction, and set us up for long-term leadership. I will end by saying that I'm excited to be back.

Speaker #3: Across the board, these new agents are deeply embedded into the Workday core, are meaningful in their scope, and have significant ROI attached to each and every one of them.

Speaker #3: Those of you who know me know that I'm an unabashed optimist. I truly believe that our investments in agentic AI will enable Workday to re-accelerate growth, increase customer satisfaction, and set us up for long-term leadership.

Speaker #3: I will end by saying that I'm excited to be back. This is a fun time to be a product person, and now I'll turn it over to my friend and leader of all things ERP and AI, Garrett.

Aneel Bhusri: This is a fun time to be a product person, and now I'll turn it over to my friend and leader of all things ERP and AI, Gerrit.

Speaker #2: Thanks, Anil, and hello, everyone. Anil described the opportunity really well. AI is changing how work gets done, and we are unlocking its transformative power for HR and finance.

[Company Representative] (Workday): Thanks, Anil, and hello, everyone. Anil described the opportunity really well. AI is changing how work gets done, and we are unlocking its transformative power for HR and finance. The foundation for enterprise AI is taking the right action inside a governed business process with the right permissions, oversight, and policy configuration, whether that is hiring and onboarding, payroll, or the financial close. Simply connecting powerful language models directly to enterprise data, well, that risks creating lawless agents that may have vast capability, but they have zero guardrails. We are building Workday as a context and tools engine for AI with deep HR and finance data, a business process framework, and a strong security model to deliver enterprise-grade accuracy and business outcomes. Based on this, we leverage AI for entirely new business processes.

Speaker #2: The foundation for enterprise AI is taking the right action inside a governed business process with the right permissions, oversight, and policy configuration. Whether that's hiring and onboarding, payroll, or the financial growth.

Speaker #2: Simply connecting powerful language models directly to enterprise data? Well, that risks creating lawless agents that may have vast capability. But they have zero guardrails.

Speaker #2: We are building Workday as a context and tools engine for AI with deep HR and finance data, a business process framework, and a strong security model to deliver enterprise-grade accuracy and business outcomes.

Speaker #2: Based on this, we leverage AI for entirely new business processes. We build for enterprise AI transformation. Where, for instance, every employee can have a career coach who develops them along their journey.

[Company Representative] (Workday): We built for enterprise AI transformation, where, for instance, every employee can have a career coach who develops them along their journey. Every sales team can have an AI contracts agent specialized in every engagement. Every candidate can have an AI personal job search agent, every finance professional, their personal AI analyst, and every employee, their own AI HR business partner agent. Now let's look at some real customer AI usage in Workday. We measure every time an AI model produces a result in Workday as an AI action. In full year 2026, we delivered $1.7 billion AI actions across the Workday platform, and this is all organically developed AI in Workday. You can also see this incredible momentum commercially. In Q4, we generated over $100 million in new ACV from emerging AI products.

Speaker #2: Every sales team can have an AI contracts agent specialized in every engagement. Every candidate can have an AI personal job search agent. Every finance professional, their personal AI analyst, and every employee, their own AI HR business partner agent.

Speaker #2: So now let's look at some real customer AI usage in Workday. We measure every time an AI model produces a result in Workday as an AI action.

Speaker #2: In full year 26, we delivered 1.7 billion AI actions across the Workday platform. And this is all organically developed AI in Workday. You can also see this incredible momentum commercially in Q4.

Speaker #2: We generated over 100 million dollars in new ACV from emerging AI products. That's growing over 100% year over year. And our overall ARR from these solutions is now over 400 million dollars.

[Company Representative] (Workday): That's growing over 100% year-over-year, our overall ARR from these solutions is now over $400 million. We expect AI usage and business impact to continue to expand meaningfully in FY 2027. Today, we have 12 new organically developed role-based agents that are now starting to move into general availability for all our customers, and more than 400 customers are already using them and get real ROI. With our self-service agent, early access customers have reduced HR case volume by 25% and increased their employee productivity by 20%. With our R1 release in March, in addition to our self-service agent, planning agent, deployment agent, payroll agent, and business process optimize agent, are all entering into general availability for all our customers. Here is another real highlight for us, the release of Sana Core and Sana Enterprise into general availability.

Speaker #2: We expect AI usage and business impact to continue to expand meaningfully in FY27. Today, we have 12 new organically developed role-based agents that are now starting to move into general availability for all our customers.

Speaker #2: And more than 400 customers are already using them and getting real ROI. With our self-service agent, early access customers have reduced HR chaos volume by 25% and increased their employee productivity by 20%.

Speaker #2: And with our R1 release in March, in addition to our self-service agent, planning agent, deployment agent, payroll agent, and business process optimize agent are all entering into general availability for all our customers.

Speaker #2: And here is another real highlight for us. The release of Sana Core and Sana Enterprise into general availability. Sana Core brings conversational AI directly into Workday.

[Company Representative] (Workday): Sana Core brings conversational AI directly into Workday, employees can get answers and complete tasks using Workday agents. Sana Enterprise extends the same experience beyond Workday by connecting enterprise tools like Outlook and Google Drive, and so many more, employees can find information, create agents, and automate workflows all in one place. That will create an entirely new way for our 75 million users to engage with Workday. Sana Core and Sana Enterprise went into GA on 15 February, which we executed with world-class speed from project start to finish in just 3 months. We used AI to dramatically accelerate our product innovation cycle time. We accelerated key API development by roughly 30x on Workday's core platform using AI. More than 75% of our software engineers are using AI coding assistants, more than 50% of the committed code is AI-generated.

Speaker #2: So employees can get answers and complete tasks using Workday agents. Sana Enterprise extends the same experience beyond Workday by connecting enterprise tools like Outlook and Google Drive and so many more.

Speaker #2: So employees can find information, create agents, and automate workflows all in one place. That will create an entirely new way for our 75 million users to engage with Workday.

Speaker #2: Sana Core and Sana Enterprise went into GA on February 15th. Which we executed with world-class speed from project start to finish in just three months.

Speaker #2: We used AI to dramatically accelerate our product innovation cycle time. We accelerated key API development by roughly 30x on Workday's core platform using AI.

Speaker #2: More than 75% of our software engineers are using AI coding assistants. And more than 50% of the committed code is AI generated. We have seen an incredible 22% growth in engineering output over the last six months, measured by the number of code updates we delivered.

[Company Representative] (Workday): We have seen an incredible 22% growth in engineering output over the last six months, measured by the number of code updates we delivered. Our strategy is to build new business processes designed around virtually unlimited AI reasoning, to automate entire business processes into the background with AI agents, and to deliver a beautiful AI-first user experience that brings super intelligence to work. With that, I'll turn it over to Rob.

Speaker #2: Our strategy is to build new business processes designed around virtually unlimited AI reasoning, to automate entire business processes into the background with AI agents.

Speaker #2: And to deliver a beautiful AI-first user experience that brings superintelligence to work. And with that, I'll turn it over to Rob.

Speaker #3: Thanks, Garrett. And hello, everyone. It's great to be on the call today. As we look back at Q4, one thing is very clear. Our customers trust Workday with the parts of their business that have to run flawlessly.

Rob Enslin: Thanks, Garrett. Hello, everyone. It's great to be on the call today. As we look back at Q4, one thing is very clear: our customers trust Workday with the parts of their business that have to run flawlessly, from payroll to closing the books. That trust continues to show up in our high retention rates and in customers expanding the use of the platform year after year. With over 11,500 global customers, expansions remain our largest growth engine. In the quarter, we expanded with customers like Anthropic, Ally Financial, and Otis Elevator. In Q4, AI played an increasingly meaningful role. It was involved in roughly half of our customer-based transactions, and expansion deals that included AI were nearly 50% larger on average. While it's still early days, we've seen great initial traction with Sana since the acquisition closed in November.

Speaker #3: From payroll to closing the books, that trust continues to show up in a high retention rate, and in customers expanding the use of the platform year after year.

Speaker #3: With over 11,500 global customers, expansions remain our largest growth engine. In the quarter, we expanded with customers like Anthropic, Ally Financial, and Otis Elevator.

Speaker #3: In Q4, AI played an increasingly meaningful role. It was involved in roughly half of our customer-based transactions, and expansion deals that included AI were nearly 50% larger on average.

Speaker #3: While it's still early days, we're seeing great initial traction with Sana. Since the acquisition closed in November. We're starting to see customers go all in on agents and agentic workflows.

Rob Enslin: We're starting to see customers go all in on agents and agentic workflows. Accenture is a great example. They're reinventing HR and recruiting at scale, using our AI solutions to elevate the employee and candidate experience while driving improvements in productivity, speed, and agility. Accenture has also been a key design partner for us, helping to develop our agent system of record. With our Flex Credits pricing model, customers can better align their spend with the value they're getting. Accenture, Nike, and Merck are among the first of nearly 50 customers signing on to use our new model. We expect Flex Credits adoption to continue to grow as we expand our AI roadmap and mature the model. We're also investing in our customer base motion, including forward-deployed engineers to activate agents faster and with less friction for our customers.

Speaker #3: And Accenture is a great example. They reinventing HR and recruiting at scale. Using our AI solutions to elevate the employee and candidate experience. While driving improvements in productivity, speed, and agility.

Speaker #3: Accenture has also been a key design partner for us, helping to develop our agent system of record. And with our flex credits pricing model, customers can better align their spend with the value they're getting.

Speaker #3: Accenture, Nike, and Merck are among the first of nearly 50 customers signing on to use our new model. We expect Flex Credits adoption to continue to grow as we expand our AI roadmap and mature the model.

Speaker #3: We are also investing in our customer-based motion, including forward-deployed engineers to activate agents faster and with less friction for our customers. Turning to net new, we formed several strategic relationships in the quarter, including Boston Children's Hospital, the State of New York Unified Court System, and Sargent & Lundy.

Rob Enslin: Turning to net new, we formed several strategic relationships in the quarter, including Boston Children's Hospital, the New York State Unified Court System, and Sargent & Lundy. We're seeing particularly strong momentum in net new medium enterprise deals. ME customers drove roughly 60% of net new ACV in FY 26. To accelerate time to value in this segment, we're expanding Workday GO globally, helping customers get up and running faster in a more standardized way. At the same time, some net new large enterprise deals are taking longer to close, particularly in Fed, SLED, and healthcare, and across parts of the commercial market. While this impacted the volume of net new deals that closed in Q4, most opportunities remain active in our pipeline, and a few have already closed in Q1. As we look at our international business, we see significant opportunities ahead.

Speaker #3: We're seeing particularly strong momentum in net new medium enterprise deals. ME customers drove roughly 60% of net new ACV in FY26. To accelerate time-to-value in the segment, we're expanding Workday Go globally.

Speaker #3: Helping customers get up and running faster. In a more standardized way. At the same time, some net new large enterprise deals are taking longer to close.

Speaker #3: Particularly in Fed, SLED, and healthcare. And across parts of the commercial market. While this impacted the volume of net new deals they're closing Q4, most opportunities remain active in our pipeline and a few have already closed in Q1.

Speaker #3: As we look at our international business, we see significant opportunities ahead. We're making good progress in Canada, EMEA, ASEAN, and Japan. We've been investing in local talent, partners, product localization, and new routes to customers.

Rob Enslin: We're making good progress in Canada, EMEA, ASEAN, and Japan. We've been investing in local talent, partners, product localization, and new routes to customers with Workday resellers. While there's still work to do, we believe international will become a much bigger part of our growth story over time, and partners play an important role in scaling. In Q4, about 25% of our net new ACV was sourced through our partner ecosystem. They're helping customers go live faster, expand more efficiently on Workday, and enhance the value of our platform. Workday Wellness is a great example of how we're expanding employee services while creating new revenue streams with partners. In Q4, we welcomed Lyra Health, Empathy, and Airvet to the program. As we move into FY 2027, the team and I are focused on turning all of the innovation Garrett talked about into tangible outcomes for our customers.

Speaker #3: With Workday resellers. While they're still work to do, we believe international will become a much bigger part of our growth story over time. And partners play an important role in scaling.

Speaker #3: In Q4, about 25% of our net new ACV was sourced through our partner ecosystem. They're helping customers go live faster, expand more efficiently on Workday, and enhance the value of our platform.

Speaker #3: Workday Wellness is a great example of how we're expanding employee services, while creating new revenue streams with partners. In Q4, we welcomed Lyra Health, Empathy, and Evet to the program.

Speaker #3: As we move into FY27, the team and I are focused on turning all of the innovation Garrett talked about into tangible outcomes for our customers.

Speaker #3: Faster time-to-value, broader adoption, and deeper platform commitments. We're well positioned to build on this momentum and play an even more important role as customers modernize their HR and finance operations.

Rob Enslin: Faster time to value, broader adoption, and deeper platform commitments. We are well positioned to build on this momentum and play an even more important role as customers modernize their HR and finance operations. With that, I'll hand it over to Zane to share more details on our results.

Speaker #3: And with that, I'll hand it over to Zane to share more details on our results.

Speaker #2: Thanks, Rob. And thank you to everyone for joining today's call. As Rob mentioned, our results this quarter reflect the deep trust customers place in Workday to manage their most critical assets.

Zane Rowe: Thanks, Rob, and thank you to everyone for joining today's call. As Rob mentioned, our results this quarter reflect the deep trust customers place in Workday to manage their most critical assets. This is creating a durable expansion opportunity, particularly as adoption of our AI solutions accelerate. Turning to results, subscription revenue in Q4 was $2.360 billion, up 16%, and full-year FY26 subscription revenue was $8.833 billion, growth of 14%. Revenue in the quarter benefited from the successful delivery of the DIA contract, which added nearly a point to Q4 subscription revenue growth. Total revenue in Q4 was $2.532 billion, growth of 15%, and for the full year was $9.552 billion, up 13%.

Speaker #2: This has created a durable expansion opportunity, particularly as adoption of our AI solutions accelerates. Turning to results, subscription revenue in Q4 was $2.36 billion.

Speaker #2: Up 16%. And full year FY26 subscription revenue was $8.833 billion. Growth of 14%. Revenue in the quarter benefited from the successful delivery of the DIA contract, which added nearly a point to Q4 subscription revenue growth.

Speaker #2: Total revenue in Q4 was $2.532 billion. Growth of 15%. And for the full year was $9.552 billion. Up 13%. US revenue in Q4 totaled $1.91 billion.

Zane Rowe: US revenue in Q4 totaled $1.91 billion, up 15%. International revenue in Q4 was $626 million, growing 13%. For the year, US revenue was $7.18 billion, up 13%. International revenue was $2.38 billion, up 12%. Twelve-month subscription revenue backlog, or CRPO, was $8.83 billion at the end of Q4, growing 15.8%. Total subscription revenue backlog at the end of Q4 was $28.1 billion, up 12%. Average contract duration in Q4 was down year-over-year, driven by a higher mix of renewal and customer base activity. Gross revenue retention rates remained strong at 97%, demonstrating the mission-critical nature of our platform and our high customer satisfaction.

Speaker #2: Up 15%. And international revenue in the quarter was $626 million, growing 13%. For the year, U.S. revenue was $7.18 billion, up 13%. And international revenue was $2.38 billion.

Speaker #2: Up 12%. Twelve-month subscription revenue backlog, or CRPO, was $8.83 billion at the end of Q4, growing 15.8%. Total subscription revenue backlog at the end of Q4 was $28.1 billion.

Speaker #2: Up 12%. Average contract duration in the quarter was down year over year, driven by a higher mix of renewal and customer-based activity. Gross revenue retention rates remained strong at 97%.

Speaker #2: Demonstrating the mission-critical nature of our platform and our high customer satisfaction. In addition, net expansion rates remained consistent through FY26. Contributing roughly 60% of our subscription revenue growth for the quarter and the full year.

Zane Rowe: In addition, net expansion rates remained consistent through FY 26, contributing roughly 60% of our subscription revenue growth for the quarter and the full year. Non-GAAP operating income for Q4 was $774 million, representing a non-GAAP operating margin of 30.6%. Margin strength was a result of solid revenue growth, ongoing efficiencies we are driving across the business, and a slightly slower ramp in hiring. Full-year non-GAAP operating income was $2.82 billion, reflecting a non-GAAP operating margin of 29.6%. Q4 operating cash flow was $1.28 billion, resulting in full-year operating cash flow of $2.94 billion, growth of 19%. Free cash flow for the quarter was $1.22 billion, and for the year, it was $2.78 billion, up 27%.

Speaker #2: Non-GAAP operating income for the fourth quarter was $774 million, representing a non-GAAP operating margin of 30.6%. Margin strength was a result of solid revenue growth, ongoing efficiencies we are driving across the business, and a slightly slower ramp in hiring.

Speaker #2: Full year non-GAAP operating income was $2.82 billion. Reflecting a non-GAAP operating margin of 29.6%. Q4 operating cash flow was $1.28 billion. Resulting in full year operating cash flow of $2.94 billion.

Speaker #2: Growth of 19%. Free cash flow for the quarter was $1.22 billion. And for the year, it was $2.78 billion. Up 27%. We repurchased $1.5 billion of our shares during the quarter.

Zane Rowe: We repurchased $1.5 billion of our shares during the quarter and $2.9 billion for the full year. We had $2.9 billion in remaining authorization as of quarter end. We ended the year with $5.4 billion in cash and marketable securities. Our headcount as of 31 January was 21,070 workmates around the globe. Now turning to guidance. We are focused on driving adoption of our agentic solutions, including Sana, Paradox, and other Workday agents, as well as our Data Cloud, which ramp in availability throughout the year. We expect FY 2027 subscription revenue of approximately $9.925 billion to $9.950 billion, growth of 12% to 13%. We anticipate Q1 FY 2027 subscription revenue to be approximately $2.335 billion, growth of 13%.

Speaker #2: And $2.9 billion for the full year. We had $2.9 billion in remaining authorization as of quarter-end. We ended the year with $5.4 billion in cash and marketable securities.

Speaker #2: Our headcount as of January 31 was 21,070 workmates around the globe. Now, turning to guidance. We are focused on driving adoption of our agentic solutions, including SANA, Paradox, and other Workday agents, as well as our Data Cloud, which will ramp in availability throughout the year.

Speaker #2: We expect FY27 subscription revenue of approximately $9.925 billion to $9.950 billion. Growth of 12 to 13%. We anticipate Q1 FY27 subscription revenue to be approximately $2.335 billion.

Speaker #2: Growth of 13%. As we mentioned last quarter, this year's sequential performance is impacted by the DIA contract, which added nearly a point to Q4 subscription revenue growth.

Zane Rowe: As we mentioned last quarter, this year's sequential performance is impacted by the DIA contract, which added nearly a point to Q4 subscription revenue growth and is not expected to continue in Q1. We expect CRPO to increase between 14.5% and 15.5% in Q1. We expect subscription revenue to increase roughly 5% sequentially in Q2. We anticipate FY 2027 professional services revenue of approximately $710 million as we continue to leverage our partner ecosystem. For Q1, we expect professional services revenue of $180 million. We expect FY 2027 non-GAAP operating margin of approximately 30%, and for Q1, we expect a non-GAAP operating margin of 30.5%. This outlook incorporates an accelerated pace of AI investment across both product and go-to-market.

Speaker #2: And is not expected to continue in Q1. We expect CRPO to increase between 14.5 and 15.5% in Q1. We expect subscription revenue to increase roughly 5% sequentially in Q2.

Speaker #2: We anticipate FY27 professional services revenue of approximately $710 million. As we continue to leverage our partner ecosystem. For Q1, we expect professional services revenue of $180 million.

Speaker #2: We expect FY27 non-GAAP operating margin of approximately 30%. And for Q1, we expect a non-GAAP operating margin of 30.5%. This outlook incorporates an accelerated pace of AI investment across both product and go-to-market.

Speaker #2: We expect the Q1 GAAP operating margin to be approximately 19 points lower than our non-GAAP operating margin, and the full-year FY27 GAAP operating margin to be approximately 18 to 19 points lower.

Zane Rowe: We expect the Q1 GAAP operating margin to be approximately 19 points lower than our non-GAAP operating margin and the full-year FY 2027 GAAP operating margin to be approximately 18 to 19 points lower. The FY 2027 non-GAAP tax rate is expected to be 19%. We expect FY 2027 operating cash flow of $3.450 billion and capital expenditures of approximately $270 million, resulting in free cash flow of $3.180 billion, growth of 15%. As Anil mentioned, we are focused on what we believe is a generational opportunity for AI to revolutionize our HCM and finance solutions, as well as open new markets. While we remain committed to our medium-term subscription revenue growth targets, we are prioritizing incremental investment in our agentic AI roadmap to capture a larger market opportunity.

Speaker #2: The FY27 non-GAAP tax rate is expected to be 19%. We expect FY27 operating cash flow of $3.450 billion. And capital expenditures of approximately $270 million.

Speaker #2: Resulting in free cash flow of $3.180 billion. Growth of 15%. As Anil mentioned, we are focused on what we believe is a generational opportunity for AI to revolutionize our HCM and finance solutions.

Speaker #2: As well as open new markets. While we remain committed to our medium-term subscription revenue growth targets, we are prioritizing incremental investment in our Agentic AI roadmap to capture a larger market opportunity.

Speaker #2: We remain focused on both GAAP and non-GAAP margin expansion, albeit at a slower pace in the near term than what we previously communicated. We believe this investment will drive a more durable growth profile that optimizes for long-term operating profit and free cash flow.

Zane Rowe: We remain focused on both GAAP and non-GAAP margin expansion, albeit at a slower pace in the near term than what we previously communicated. We believe this investment will drive a more durable growth profile that optimizes for long-term operating profit and free cash flow. We look forward to sharing our progress over the next several quarters. With that, I'll turn it back over to the operator to begin Q&A.

Speaker #2: We look forward to sharing our progress over the next several quarters. With that, I'll turn it back over to the operator to begin Q&A.

Speaker #1: Thank you. And we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Operator: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star one a second time. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to one question. Again, it is star one if you would like to join the queue, and our first question comes from the line of Mark Murphy with JPMorgan. Your line is open.

Speaker #1: If you would like to withdraw your question, press star one a second time. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker #1: To be able to take as many questions as possible, we ask that you please limit yourself to one question. Again, it is star one if you would like to join the queue.

Speaker #1: And our first question comes from the line of Mark Murphy with JPMorgan. Your line is open.

Mark Murphy: Thank you so much, Anil. Welcome back to the CEO role. I'm curious, how you know, how you picture shaping the next chapter for Workday, specifically as it relates to differentiating the AI strategy. For example, I'm wondering if you see some ways to push a more aggressive pace or a more organic, you know, AI product roadmap, maybe trying to achieve the zero day close kind of a vision or agentic consolidation, or, you know, some other type of truly breathtaking outcomes.

Speaker #3: Thank you so much, Anil. Welcome back to the CEO role. I'm curious—how do you picture shaping the next chapter for Workday, specifically as it relates to differentiating the AI strategy?

Speaker #3: And for example, I'm wondering if you see some ways to push a more aggressive pace or a more organic AI product roadmap—maybe trying to achieve the zero-day close kind of a vision, or Agentic consolidation.

Speaker #3: Or some other type of truly breathtaking outcomes.

Speaker #2: Okay. Well, it's good to be back, Mark. It's good to hear your voice. I'm very optimistic about what we're doing on the Agentic front.

Aneel Bhusri: Well, it's good to be back, Mark. It's good to hear your voice. I'm very optimistic about what we're doing on the agentic front, and you highlighted two use cases that we're actually building. I'm going to turn over to Gerrit in a second. When I look at where our business is today, the core is rock solid. We built these great HR and financial applications, and they continue to grow, and we have this opportunity to build these agentic solutions on top. We've already shown that the acquired solutions are generating pretty rapid growth. As the organic solutions, which are even more deeply embedded and, frankly, harder for anyone else to replicate as they come to market, and we get the customer adoption we're seeing, I'm very bullish on where we're headed.

Speaker #2: And you highlighted two use cases that we're actually building. I'm going to turn over to Garrett in a second. But when I look at where our business is today, the core is rock solid.

Speaker #2: We built these great HR and financial applications, and they continue to grow. And we have this opportunity to build these agentic solutions on top.

Speaker #2: We've already shown that the acquired solutions are generating pretty rapid growth. And as the organic solutions, which are even more deeply embedded and frankly harder for anyone else to replicate, as they come to market, and we get the customer adoption we're seeing, I'm very bullish on where we're headed.

Speaker #2: I'm going to turn over to Garrett to talk about those two use cases.

Aneel Bhusri: I'm going to turn over to Gerrit to talk about those two use cases.

Speaker #3: Yeah. Thank you, Anil. And as Anil has said, we have a very big ambition for what we describe as lights-out finance. So we are looking at a full automation of all the key processes across our suite, including HR.

[Company Representative] (Workday): Yeah, thank you, Anil. As Anil has said, we have a very big ambition for what we describe as Lights Out Finance. We are looking at a full automation of all the key processes across our suite, including HR. Since you specifically asked about the finance space, the model that we are looking at is applying continuous AI to the finance processes. Think about a compliance autopilot, which continuously tests and verifies ledger and transactions, all based on analysis of all transactions that are coming in, and then even optimizing them with our document and contract intelligence, you know, for instance, for real-time bookings, making sure they are set at the right value, at the right discount rates, with your supply chain.

Speaker #3: But since you're specifically asked about the finance space, the model that we are looking at is supplying continuous AI to the finance processes. So think about a compliance autopilot, which continuously tests and verifies ledger and transactions.

Speaker #3: Always-on analysis of all transactions that are coming in, and then even optimizing them with our document and contract intelligence. For instance, for real-time bookings, making sure they are set at the right value at the right discount rates.

Speaker #3: If you're a supply chain, those are just a few select examples. And I think you can all summarize them under the lights-out finance vision.

[Company Representative] (Workday): Those are just a few select example, and I think you can all summarize them under the Lights Out Finance vision. You heard me earlier mentioning that, but I still want to come back to that one more time, all coming together through the Sana AI user experience. We are thinking about both backend automation and AI front-end innovation.

Speaker #3: And you heard me earlier mentioning that, but I still want to come back to that one more time. All coming together through the SANA AI user experience.

Speaker #3: So, we are thinking about both backend automation and AI frontend innovation.

Speaker #2: Thank you very much.

Mark Murphy: Thank you very much.

Speaker #1: And our next question comes from the line of Kirk Matern with Evercore ISI. Your line is open. And please check your mute button. Your line is live.

Operator: Our next question comes from the line of Kirk Materne with Evercore ISI. Your line is open. Please check your mute button. Your line is live.

Speaker #4: Sorry about that. Anil, welcome back. Thanks for taking the question. I guess Garrett outlined a lot of progress you guys have been making on Agentic.

Kirk Materne: Sorry about that. Anil, welcome back. Thanks for taking the question. I guess, you know, Gerrit outlined a lot of progress you guys have been making on agentic, yet, you know, the guide for next year seems, you know, fairly conservative, a little bit below what people were thinking about. Does that reflect, I guess, just your general view that some of the agentic offerings are going to take a little while to sort of, you know, make their way into your account base, or some of the execution issues in Q4, you're trying to account for that in the guidance? I was wondering if you could just give us some color. Obviously, coming in, you have the opportunity to sort of reset the bar.

Speaker #4: Yet the guide for next year seems fairly conservative, a little bit below what people were thinking about. Does that reflect, I guess, just your general view that some of the Agentic offerings are going to take a little while to sort of make their way into your account base?

Speaker #4: Or were some of the execution issues in the fourth quarter you're trying to account for that in the guidance? I was wondering if you could give us some color.

Speaker #4: Obviously, coming in, you have the opportunity to sort of reset the bar. Just kind of trying to get some perspective on what went into the full-year guide.

Kirk Materne: Just kind of trying to get some perspective on, you know, what went into the full year guide. Thanks.

Speaker #4: Thanks.

Speaker #3: Yeah. I guess, first of all, Kirk, it's good to hear your voice. And back in the saddle, it's only been a few weeks. I'm pretty optimistic about this year.

Aneel Bhusri: Yeah, I guess, first of all, Kirk, it's good to hear your voice. You know, I'm back in the saddle. It's only been a few weeks. I'm pretty optimistic about this year. I would hope that we significantly surpass that. You know, I'm an optimist, but I see the opportunities on the agentic front that probably are more second half based in terms of the agents coming into production and being used by customers. I love our Flex Credits model, which is moving towards this consumption model.

Speaker #3: I would hope that we significantly surpass that. But I'm an optimist. But I see the opportunities on the Agentic front that probably are more second half based in terms of the agents coming into production and being used by customers.

Speaker #3: And I love our flex credits model, which is moving towards this consumption model. So I'll probably put that over to Zane in terms of where we came out.

Aneel Bhusri: You know, I'll probably put that over to Zane in terms of where we came out, but I'm very optimistic about this year, and I don't know if, you know, you remember me when I was CEO before, but I do try to be conservative on the guide and then beat it.

Speaker #3: But I'm very optimistic about this year, and I don't know if you remember me when I was CEO before, but I do try to be conservative on the guide.

Speaker #3: And then beat it.

Speaker #4: Hey, Kirk. Yeah, just to add to that—I mean, we still feel like we've got good momentum. The guide hasn't changed materially from what we indicated 90 days ago.

Zane Rowe: Hey, Kirk. Yeah, just to add to that, I mean, we still feel like we've got good momentum. The guide hasn't changed materially from what we indicated, you know, 90 days ago, I'd say business in general is similar to what we saw. Rob called out a few areas within the quarter. You know, we mentioned obviously, you're, you know, you're lapping a DIA contract that did have some impact in Q4. We still believe in our federal business and are excited about what that will bring to this upcoming fiscal year. Not a big shift or change. Obviously, we called out some of what we saw in Q4, and we expect to see some of those transactions and deals still come to fruition through FY 2027.

Speaker #4: And I'd say business in general is similar to what we saw. Rob called out a few areas within the quarter. We mentioned, obviously, you're lapping a DIA contract that did have some impact in the fourth quarter.

Speaker #4: And we still believe in our federal business and are excited about what that will bring to this upcoming fiscal year. So not a big shift or change.

Speaker #4: Obviously, we call that some of what we saw in the fourth quarter. And we expect to see some of those transactions and deals still come to fruition through FY27.

Speaker #4: And then as Anil alluded to, we're excited about flex credits. But recognize that's probably more of a second half motion and then you expect to see the revenue come in radically beyond that.

Zane Rowe: As Anil alluded to, we're excited about Flex Credits, but recognize that's probably more of a second half motion. You expect to see the revenue come in ratably beyond that. That's sort of an overview of the guide, but no shift in guidance philosophy other than you know, as you can tell, Anil's excited about us beating it.

Speaker #4: So that's sort of an overview of the guide. But no shift in guidance philosophy other than as you can tell, Anil's excited about us beating it.

Speaker #1: And our next question comes from the line of Keith Weiss with Morgan Stanley. Your line is open.

Operator: Our next question comes from the line of Keith Weiss with Morgan Stanley. Your line is open.

Speaker #2: Excellent. Thank you for taking the call. And welcome back, Anil. It's great to be talking to you again in the CEO role. In the conversation and talking about the sort of organic innovation, should part of our takeaway be that the M&A strategy is going to take more of a backseat?

Keith Weiss: Excellent. Thank you for taking the call, and welcome back, Aneel. It's great to be talking to you again in the CEO role. In the conversation in talking about the sort of organic innovation, should part of our takeaway be that the M&A strategy is going to take more of a backseat? It seemed pretty prominent throughout FY 2026 or calendar 2025. Should we expect you guys to be moving away from M&A and those, and buying the AI technology and moving more towards organic growth? Then maybe, like, a follow-up for Zane. Within that 12% to 13% growth that we're looking for in FY 2027 on the subscription revenue line, can you give us any indication on what the inorganic contribution to that number might be?

Speaker #2: It seemed pretty prominent throughout FY26 or calendar 25. Should we expect you guys to be moving away from M&A in those and buying the AI technology and moving more towards organic growth?

Speaker #2: And then maybe a follow-up for Zane. Within that 12% to 13% growth that we're looking for in FY27 on the subscription revenue line, can you give us any indication on what the inorganic contribution to that number might be?

Speaker #3: Well, so in terms of acquisitions, I'm not going to say we're not going to do any. But we're leaning in pretty heavily on organic development and organically built agents.

Aneel Bhusri: Well, you know, in terms of acquisitions, I'm not gonna say we're not gonna do any, but we're leaning in pretty heavily on organic development and organically built agents, and I'm super bullish. It's not that I'm new to what we've been doing. I have been close with Garrett over the last 18 months, and I'm really excited about what's coming out to market. That is our primary focus. We'll be opportunistic if we see another company that's exciting, like Asana, a Paradox, or HiredScore, we might do it, but that's not our focus really right now is on the organic development of agents.

Speaker #3: And I'm super bullish. It's not that I'm new to what we've been doing. I have been close with Garrett over the last 18 months.

Speaker #3: And I'm really excited about what's coming out to market. So that is our primary focus. But we'll be opportunistic if we see another company that's exciting like Asana or a Paradox or Hirescore.

Speaker #3: We might do it. But that's not our focus really right now is on the organic development of agents.

Speaker #4: And Keith, as it relates to the guide, similar to how we framed our guide in the past, I'd say not a material component of that is inorganic as Anil alluded to.

Zane Rowe: Keith, as it relates to the guide, similar to how we framed our guide in the past, I'd say not a material component of that is inorganic. As Anil alluded to, we're focused on organic growth, and were there to be anything more significant, we'd call it out similar to what we did last year as far as its impact on our overall growth trajectory. Not much expected in the FY 27 outlook as we have it presented today.

Speaker #4: We're focused on organic growth, and if there were to be anything more significant, we'd call it out, similar to what we did last year as far as its impact on our overall growth trajectory.

Speaker #4: But not much expected in the FY27 outlook as we have it presented today.

Speaker #2: Excellent. That's super helpful. Yes. Thank you.

Keith Weiss: Excellent. That's super helpful, guys. Thank you.

Speaker #4: Keith.

Zane Rowe: Thanks.

Speaker #1: And our next question comes from the line of John Defucci with Guggenheim. Your line is open.

Operator: Our next question comes from the line of John DiFucci with Guggenheim. Your line is open.

Speaker #2: Thank you for taking my question. I have a lot of questions for Garrett, but I'm going to ask a question because it wasn't asked yet for Zane.

John DiFucci: Thank you for taking my question. I have a lot of questions for Garrett, but I'm gonna ask a question because it wasn't asked yet for Zane, and I think it has to be addressed. On the last conference call. Oh, by the way, welcome back, Anil. It's good to see you. On the last call, Zane, you said there'd be a $15 million in non-recurring revenue in Q4, but your guide implies a $25 million sequential decline in subscription in Q1, which doesn't really seem to make sense for a subscription model. I mean, you did say it's a full even if it was a full 1% impact to subscription in Q4, that would be $20 million. Still $20 million in a $25 million decline.

Speaker #2: And I think it has to be addressed. On the last conference call and oh, by the way, welcome back, Anil. It's good to see you.

Speaker #2: On the last call, Zane, you said there'd be a $15 million in non-recurring revenue in the fourth quarter. But your guide implies a $25 million sequential decline in subscription in one Q, which doesn't really seem to make sense for a subscription model.

Speaker #2: I mean, you did say it's a full even if it was a full 1% impact to subscription in the first in the fourth quarter, that would be $20 million.

Speaker #2: Still, $20 million in a 25 million decline. I don't know. Can you just help explain what's going on there? Because I know I'm going to have to do that.

John DiFucci: I don't know. Can you just help explain what's going on there? I know I'm gonna have to do that.

Speaker #3: Yeah, sure. I don't know, I'll help you out. Yeah. As we called out in the fourth quarter, we had the DIA contract, which is not included in our forecast for Q1.

Zane Rowe: Yeah, sure, John. I'll help you out. Yeah, as we called out in Q4, we had the DIA contract, which is not included in our forecast for Q1. Sequentially, there's an impact there. As you note, as with any sort of year, that we have less days in Q1 as well, which brings sort of a natural seasonal component to our typical Q1. In addition to that, Rob called out some of the deals that pushed from Q4. Many of them closed in Q1, but a lot of them also are expected to close through the course of the year. Nothing material beyond what I called out with the DIA contract that clearly had a benefit in Q4 and is not expected to continue in Q1.

Speaker #3: So, sequentially, there's an impact there. As you note, as with any sort of year that we have fewer days in Q1 as well, which brings sort of a natural seasonal component to our typical Q1.

Speaker #3: And then in addition to that, Rob called out some of the deals that pushed from Q4. Many of them closed in Q1. But a lot of them also are expected to close through the course of the year.

Speaker #3: So nothing material beyond what I called out with the DIA contract that clearly had a benefit in Q4 and is not expected to continue in Q1.

Speaker #2: Yeah. But that's let's say it was $20 million instead of $15. It's a $25 million decline in a subscription model. I don't unless you some people just didn't renew this quarter at the end of the quarter.

John DiFucci: That's, let's say it was $20 million instead of 15. It's a $25 million decline. In a subscription model, unless some people just didn't renew this quarter, at the end of the quarter, but I think somebody said in the prepared remarks that, I think it was Rob, that the retention rates were, you know, high, as they always are for you guys. I just, I don't know, maybe it's just prudence, but it doesn't make sense that excluding the DIA deal, even the 2 days de-delta between Q4 and Q1. I don't mean to dwell on this. It's just important. It's just numbers here. Is it just prudence? Is that what we should be thinking?

Speaker #2: But I think somebody said in the prepared remarks that I think it was Rob that the retention rates were high. As they always are for you guys.

Speaker #2: So I don't know. Maybe it's just prudence. But it doesn't make sense that excluding the DIA deal, even the two days delta between the fourth and the first quarter and I don't mean to dwell on this.

Speaker #2: It's just important. It's just numbers here. Is it just prudence? Is that what we should be thinking?

Speaker #4: No. I mean, look—I mean, we haven't changed our guidance philosophy. The days do matter. As you think about the sequential growth, as I call that with DIA, I'd actually say we've seen good consistency on the renewal side as well.

Zane Rowe: No, I mean, look, I mean, we haven't changed our guidance philosophy. The days, you know, do matter, you know, as you think about the sequential growth, you know, as I call out with DIA. I'd actually say we've seen good consistency on the renewal, on the renewal side as well. Gross retention remains at 97%. You know, obviously, we're focused on executing well in Q1, we'll continue to focus on that, but nothing more than that as you think about the sequential decline, at least, that you're calling out this year.

Speaker #4: So gross retention remains at 97%. And then obviously, we're focused on executing well in Q1. So we'll continue to focus on that. But nothing more than that, as you think about the sequential decline, at least that you're calling out this year.

Speaker #2: Okay. Thank you, Zane. Thank you.

John DiFucci: Okay. Thank you, Zane. Thank you.

Speaker #4: Sure, John.

Zane Rowe: Sure, John.

Speaker #1: And our next question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open.

Operator: Our next question comes from the line of Brad Zelnick with Deutsche Bank. Your line is open.

Speaker #3: Great, thank you so much. And welcome back, Anil. It's great to have you back to the party. My question for you: I appreciate the Q2 guidance and the need to invest, given the moment.

Brad Zelnick: Great. Thank you so much, and welcome back, Anil. It's great to have you back to the party. My question for you, I appreciate the 27 guidance and the need to invest given the moment, but specifically, any finer details you can provide as to where those dollars are going, and how much time do you envision that it takes to stabilize growth overall? I think in response to Kirk's question, you talked about in the back half seeing agentic adoption kick in, but I think investors at this time are really focused on total company growth across all app software.

Speaker #3: But specifically, any finer details you can provide as to where those dollars are going? And how much time do you envision that it takes to stabilize growth overall?

Speaker #3: I think, in response to Kirk's question, you talked about, in the back half, seeing agentic adoption kick in. But I think investors at this time are really focused on total company growth across all app software.

Aneel Bhusri: Yeah.

Speaker #3: And just any insight you can provide on seeing the agentic offerings, particularly the organic ones, translate to overall acceleration. Thank you.

Brad Zelnick: Just any insight you can provide on seeing the agentic offerings, particularly the organic ones, translate to overall acceleration. Thank you.

Speaker #2: So I think the business is very stable right now. What I'm very focused on is re-accelerating growth. And you don't get many chances in a career to go through two technology waves where I was there at the start of the cloud.

Aneel Bhusri: I think the business is very stable right now. What I'm very focused on is reaccelerating growth. You know, you don't get many chances in a career to go through two technology waves where I was there at the start of the cloud. I was actually there at the start of client server. I'm old enough. I was there for that, too. AI is just a huge opportunity for Workday to reaccelerate growth. The core is stable. It's more about getting to higher growth rates, so I'm pretty optimistic. As I've seen what Garrett's building, I do see the organic agents really coming to market. They're in early access right now, but they're a consumption-based model, so there's a delay before we see the actual revenue from it.

Speaker #2: I was actually there at the start of client-server. I'm old enough. I was there for that too. And AI is just a huge opportunity for Workday to re-accelerate growth.

Speaker #2: The core is stable. It's more about getting to higher growth rates. So I'm pretty optimistic. And as I've seen what Garrett's building I do see the organic agents really coming to market.

Speaker #2: They're in early access right now. But they're a consumption-based model. So there's a delay before we see the actual revenue from it. I think we end this year, the second half of this year, really strongly.

Aneel Bhusri: I think we end this year, the second half of this year, really strongly, and we set up a really amazing following year where, you know, we turn into a consumption platform just like the hyperscalers. That's a material change from the FT model we've had for, you know, the entire time I've been part of the company, and I'm really excited to get to that place where it's... It won't just be our agents, it'll also be all the third-party agents that get built that leverage our APIs, that will also be based on that Flex Credits consumption model, too. There's a lot of upside that I see coming forward. I would just start with or end with what I started with. The core is very stable.

Speaker #2: And we set up a really amazing following year where we turn into a consumption platform just like the hyperscalers. And that's a material change from the FT model we've had for the entire time I've been part of the company.

Speaker #2: And I'm really excited to get to that place where it's and it won't just be our agents. It'll also be all the third-party agents that get built that leverage our APIs that will also be based on that flex credit consumption model too.

Speaker #2: So there's a lot of upside that I see coming forward. But I would just start with or end with what I started with. The core is very stable.

Aneel Bhusri: Our systems are embedded in our customer sites. We have long-term contracts. It's our opportunity now to build on top of that.

Speaker #2: Our systems are embedded in our customer sites. We have long-term contracts it's our opportunity now to build on top of that.

Speaker #3: Helpful. Thank you so much.

[Company Representative] (Workday): Helpful. Thank you so much.

Speaker #1: And our next question comes from the line of Raimon Lenccio with Barclays. Your line is open.

Operator: Our next question comes from the line of Raimo Lenschow with Barclays. Your line is open.

Speaker #4: Perfect, thanks. And Anil, welcome back as well from me. Quick question for Rob, actually. One of your mandates was to kind of think about more international, international build-out.

Raimo Lenschow: Perfect, thanks. Anil, welcome back as well from me. Quick question on for Rob, actually. Like, you know, one of your mandates was to kind of think about more international build out. Can you talk a little bit about what you've seen there, in terms of progress? Thank you.

Speaker #4: Can you talk a little bit about what you've seen there in terms of progress? Thank you.

Speaker #3: Yeah. Raimon, thank you. Look, we continue to see progress in our European business. I've had a couple of really solid quarters. Asia being solid as well in growth.

Rob Enslin: Yeah, Raimo, thank you. Look, we continue to see progress in our European business. We've had a couple of really solid quarters. Asian being solid as well in growth. The Southeast Asian model, we've actually opened up India, where we've closed one or two deals already, and our Canadian business is actually doing really, really well. I feel like we're doing a really focused job on driving those markets, and we'll continue to see that benefit come through in 2027. My expectation is that these organic agents will actually help us reignite as well in our customer base in Europe, and in Australia, New Zealand, and parts of Asia as well, including Japan.

Speaker #3: So the Southeast Asian model, we've actually opened up India. We've closed one or two deals already. And our Canadian business is actually doing really, really well.

Speaker #3: So I feel like we're doing a really focused job on driving those markets. And we'll continue to see that benefit come through in 2027.

Speaker #3: And my expectation is that these organic agents will actually help us reignite as well in our customer base in Europe and in Australia and New Zealand and parts of Asia as well, including Japan.

Speaker #4: Okay. Perfect. Thank you.

Raimo Lenschow: Okay, perfect. Thank you.

Speaker #1: And our next question comes from the line of Michael Turan with Wells Fargo. Your line is open.

Operator: Our next question comes from the line of Michael Turrin with Wells Fargo. Your line is open.

Speaker #5: Hey. Great. Thanks very much. Appreciate you taking the question. It seems one of the key questions on Workday seems to be whether you're able to offset just the lower seat growth environment, if that's the world we're in with more product expansion.

Michael Turrin: Hey, great, thanks very much. Appreciate you taking the question. It seems one of the key questions on Workday seems to be whether you're able to offset just a lower seat growth environment, if that's the world we're in, with more product expansion. I think Garrett mentioned $400 million now in emerging AI ARR, and I was just wondering if there's anything else you can tell us around how that impacts the economic profile of those customers who are adopting? Are expansion rates you're observing greater? Any quantification around how much? Just as a small second part on Rob's comment on Q4 deal elongation, I'm wondering if there's any way for us to size any impacts on CRPO there. Thanks very much.

Speaker #5: I think Garrett mentioned $400 million now in emerging AI ARR, and I was just wondering if there's anything else you can tell us around how that impacts the economic profile of those customers who are adopting, or expansion rates you're observing, or any quantification around how much? And just as a small second part, on Rob's comment on Q4 deal elongation.

Speaker #5: I'm wondering if there's any way for us to size any impacts on CRPO there. Thanks very much.

Speaker #3: Yeah. Look, I think the some of the deals that moved from Q4, as I said, we see them closing. We don't see them moving out of our pipeline.

Rob Enslin: Look, I think, some of the deals that moved from Q4, as I said, you know, we see them closing. We don't see them moving out of our pipeline. We just see them elongated. I think we're covering that pretty well with these new products that we sold into non-organic agents, which were a significant part of our Q4 business. As we bring these different releases of organic agents on board, we already have the consumption Flex Credits model in action in Q4.

Speaker #3: We just see them elongated. I think we're covering that pretty well with these new products that we sold into the non-organic agents, which were significant part of our Q4 business.

Speaker #3: And as we bring these different releases of organic agents on board, we already have the consumption flex credit model in action in Q4. We saw some success with customers I mentioned in my script.

Rob Enslin: We saw some success with customers I mentioned in my script. We'll continue to see as we launch more of these organic agents, that the consumption model will actually apply. That's why we're pretty positive about the back half of the year as well.

Speaker #3: And we'll continue to see as we launch more of these organic agents that the consumption model will actually apply. And that's why we're pretty positive about the back-off of the year as well.

Speaker #5: Yeah. And we see on the AI agent side, on the economic equation, you can basically see it in two key models if you will.

[Company Representative] (Workday): When we see, you know, on the AI agent side, you know, on the economic equation, you can basically see it in two key models, if you will. On the one side, you know, the agents are really delivering efficiency gains, and to a large degree, you know, transferring labor costs into software costs. We just talked about self-service agent, which we have just, you know, put into general availability in three months. Our early access customers have already seen a more than 20% reduction in case volume, right? Those are not people anymore who have to answer these cases, but a self-service agent processing them autonomously. Payroll agent, which is now going into GA, one of our big organically developed agent, doing payroll compliance, payroll corrections. It's a huge back office spend doing that automated, and highly accurate.

Speaker #5: On the one side, the agents are really delivering efficiency gains and, to a large degree, transferring labor costs into software costs. We just talked about self-service agent, which we have just put into general availability in the past three months.

Speaker #5: And our early access customers have already seen a more than 20% reduction in case volume, right? So those are not people anymore who have to answer these cases, but the self-service agent processing them autonomously, payroll agent, which is now going into GA, one of our big organically developed agents, and payroll compliance, payroll corrections.

Speaker #5: It's a huge back-office spend doing that automated. And highly accurate. It's a huge efficiency gain for these companies. So that's basically category number one.

[Company Representative] (Workday): It's a huge efficiency gain for these companies. That's basically category number one. You have category number two, right? A lot of the agents that we are doing are really leveraging AI to solve unsolved business problems. Think about contract intelligence, document-driven accounting. You know, the reality is that customers don't have an army of lawyers and contract experts matching every transactions against all of their supply chain contracts. Now, with our AI model, they can basically make sure to optimize their spend and procurement and have real net savings based on having full contextual awareness of all of their commitments, all of their supply chain, and the transactions happening in real time.

Speaker #5: And then you have category number two, right? A lot of the agents that we are doing are really leveraging AI to solve unsolved business problems.

Speaker #5: Think about contract intelligence, document-driven accounting, the reality is that customers don't have an army of lawyers and contract experts matching every transaction against all of their supply chain contracts.

Speaker #5: But now, with our AI model, they can basically make sure to optimize their spend and procurement, and have real net savings based on having full contextual awareness of all of their commitments, all of their supply chain, and the transactions happening in real time.

Speaker #5: So those are delivering ROI then on basically true business returns. And we have both of these agents, right? Backend automation, and new value scenarios.

Brent Thill: Those are delivering ROI then on basically, you know, true business returns. We have both of these agents, right? Backend automation and new value scenarios.

Speaker #5: Thanks very much.

Zane Rowe: Thanks very much.

Speaker #1: And our next question comes from the line of Karl Kirsted with UBS. Your line is open.

Operator: Our next question comes from the line of Karl Keirsted with UBS. Your line is open.

Speaker #5: Okay. Great. Thanks. Anil, welcome back to the arena. I had a question for you, maybe zooming out a little bit. So this is a broader question.

Karl Keirstead: Okay, great. Thanks, Anil, welcome back to the arena. I had a question for you, maybe zooming out a little bit, so this is a broader question. Anil, you were the disruptor 20 years ago, and you and others forced incumbents at the time, Oracle and PeopleSoft, et cetera, to react, and in many cases it took them years to actually pivot, and some frankly didn't make it. I just wanted to ask you whether you think a number of SaaS companies are going to have to do something similar and re-architect their cores, AI-enable their cores? How challenging do you think that process might be? Is the period 20 years ago that you lived through a good analogy? Thank you.

Speaker #5: Anil, you were the disruptor 20 years ago. And you and others forced incumbents at the time—Oracle and PeopleSoft, etc.—to react. And in many cases, it took them years to actually pivot, and some, frankly, didn't make it.

Speaker #5: So I just wanted to ask you whether you think a number of SaaS companies are going to have to do something similar and re-architect their cores, AI-enable their cores, and how challenging do you think that process might be?

Speaker #5: And is the period 20 years ago that you lived through a good analogy? Thank you.

Speaker #3: It's a great question. I think I do think it's different. So in the transition from client-server to cloud, it was basically throwing away the old architecture and building a new architecture.

Aneel Bhusri: It's a great question. I do think it's different. In the transition from client-server to cloud, it was basically throwing away the old architecture and building a new architecture. In this move from cloud to AI, the difference is AI is built on cloud, right? Every cloud company out there is moving towards AI, but every AI company is actually built on the cloud. By the way, every one of these AI leaders actually runs Workday, just for what it's worth, Anthropic, Google, and OpenAI all run Workday. It's orthogonal to that last transition because it's about the data, not about the process.

Speaker #3: In this move from cloud to AI, the difference is AI is built on cloud, right? Every cloud company out there is moving towards AI.

Speaker #3: But every AI company is actually built on the cloud. By the way, every one of these AI leaders actually runs Workday, just for what it's worth.

Speaker #3: Anthropic, Google, and OpenAI all run Workday. So it's orthogonal to that last transition because it's about the data, not about the process. I think the keys for all the enterprise apps companies are, number one, to make sure that they have the right data model to inform the large language models and make sure they're getting the best reasoning results.

Aneel Bhusri: I think that the keys for all the enterprise apps companies are, number one, to make sure that they have the right data model, to, you know, to inform the Large Language Models and make sure they're getting the best reasoning results. In order to do that, it's a big investment in APIs. You know, we're pretty far along on that path, but I think that's going to be the case for all the SaaS companies. The second piece is identifying where the savings are going to come for from customers, because every technology transition is about ROI and productivity gains. If there's no ROI or productivity gain, there is no technology transition that really amounts to anything.

Speaker #3: And in order to do that, it's a big investment in APIs. And we're pretty far along on that path. But I think that's going to be the case for all the SaaS companies.

Speaker #3: The second piece is identifying where the savings are going to come from customers because every technology transition is about ROI and productivity gains. If there's no ROI or productivity gain, there is no technology transition that really amounts to anything.

Speaker #3: And so we're working really hard to figure out how do we improve business process execution for our customers at a lower cost. And I think that's where the agentic model fits in.

Aneel Bhusri: We're working really hard to figure out how do we improve business process execution for our customers at a lower cost? I think that's where the agentic model fits in. What can agents do to replace human labor? Obviously, longer term, we've got to figure out what we're gonna do with those, with the humans that are displaced. I think that is an important thing to think about, but it's a different mindset. It's a role-based mindset as it relates to these agents. What roles are going to get replaced by agentic solutions, and how will that improve the way work gets done? But it is different than the last generation because cloud's not getting replaced, it's getting built on top of.

Speaker #3: What can agents do to replace human labor? And then obviously, longer term, we got to figure out what we're going to do with those with the humans that are displaced.

Speaker #3: I think that's an important thing to think about. But it's a different mindset. It's a role-based mindset as it relates to these agents. What roles are going to get replaced by agentic solutions?

Speaker #3: And how will that improve the way work gets done? So but it is different than the last generation because cloud's not getting replaced. It's getting built on top of.

Speaker #5: Okay. Got it. Very helpful, Anil. Thank you.

Karl Keirstead: Okay, got it. Very helpful, Anil. Thank you.

Speaker #1: And our next question comes from the line of Brentville with Jefferies. Your line is open.

Operator: Our next question comes from the line of Brent Thill with Jefferies. Your line is open.

Speaker #6: Thanks. Zane, on the operating margin guide, I think the Street was looking for perhaps a little more move up. I know you mentioned go-to-market and AI.

Brent Thill: Thanks. Zane, on the operating margin guide, I think the street was looking for perhaps a little more move up. I know you mentioned go-to-market and AI. Is there anything else that we should consider on the guide on op margin, why you're not seeing any operating improvement on margin?

Speaker #6: Is there anything else that we should consider on the guide on margin Y? You're not seeing any operating improvement on margin?

Speaker #3: Yeah. Brent, obviously, as you've heard, we're focused on the investments in particular with AI. Thinking through both the engineering side, the delivery adoption side, and all of the go-to-market elements, and I think with Anil coming in, it gives us a chance.

Zane Rowe: Yeah, Brent, you know, obviously, as you've heard, we're focused on the investments, in particular with AI, you know, thinking through both the engineering side, the delivery adoption side, and all of the go-to-market elements. I think with Anil coming in, it gives us a chance. You know, we've made good progress over the last three years. We're not done yet. We'll continue to focus on margin and efficiencies and growing that number. With this year, we really want to anchor in. We think this is the opportunity to dig in and to really grow the business and lean in more on that side, leveraging AI and the capabilities that we have organically. It's just a focus on that.

Speaker #3: We've made good progress over the last three years. We're not done yet. We'll continue to focus on margin and efficiencies and growing that number.

Speaker #3: But with this year, we really want to anchor in. We think this is the opportunity to dig in and to really grow the business and lean in more on that side, leveraging AI and the capabilities that we have organically.

Speaker #3: So it's just a focus on that. Again, we feel like we've got opportunities beyond this year to continue to grow it, and we'll just see how the year progresses.

Zane Rowe: Again, we feel like we've got opportunities beyond this year to continue to grow it. We'll just see how the year progresses.

Speaker #4: Yeah. I'm optimistic on upside to the margin guidance, Brent. By the way, good to hear your voice. I'm optimistic on that. But it's predicated on believing in our growth story, which I completely believe in.

Aneel Bhusri: Yeah, I'm optimistic on upside to the margin guidance, Brent. By the way, good to hear your voice. I'm optimistic on that, it's predicated on believing in our growth story, which I completely believe in. You know, margins will grow with re-accelerated growth. As we get these organic agents working with our inorganic agents. By the way, the inorganic agents, I don't think we get enough credit for how well they've done in a very short amount of time, I'm particularly excited about what we're going to see with Sana, both as our new user experience, prompt-based user experience for all employees in our organization, but also as we move into some new areas that you'll hear about down the road.

Speaker #4: And margins will grow with re-accelerated growth. And as we get these organic agents working with our inorganic agents by the way, the inorganic agents, I don't think we get enough credit for how well they've done in a very short amount of time.

Speaker #4: And I'm particularly excited about what we're going to see with Sana, both as our new user experience—prompt-based user experience—for all employees and organizations, but also as we move into some new areas that you'll hear about down the road.

Aneel Bhusri: You know, I think that growth is going to drive incremental margin upside that probably not easy to lock in right now, but I see it coming down the path.

Speaker #4: I think that growth is going to drive incremental margin upside that's probably not easy to lock in right now, but I see it coming down the path.

Speaker #6: Anil, if I can just ask one quick follow-up. Just, you've had some departures—Patrick Blair, head of sales. Can you talk through how you're working through that transition with some of the sales changes in the field?

Brent Thill: Anil, if I can just ask one quick follow-up. Just, you've had, you know, some departures, Patrick Blair, head of sales. Can you talk through how you're working through that transition with some of the sales changes in the field?

Speaker #3: Yeah. I'll turn that over to Rob.

Aneel Bhusri: Yeah, I'll turn that over to Rob.

Speaker #5: Hey, Brent. Yeah. I mean, Brent, it's pretty simple with Patrick moving on the regional leaders. We have real confidence in, and I've been doing a really good job of, over the last couple of years, especially bringing on new solutions and products and driving their business.

[Company Representative] (Workday): Hey, Brent. Yeah. Brent, well, it's pretty simple. With Patrick moving on, the regional leaders we have real confidence in and have been doing a really good job of over the last couple of years, especially bringing on new solutions and products and driving their business. They'll report directly into me, and it's all about in AI, it's all about speed and of decision-making and urgency. It allows us to move faster, and it puts a lot of the decision-making right at the customer, where we want it. We also, you know, tying into that, it also allows us to build activation engines for where we're going with four deployment engineers to drive consumption faster.

Speaker #5: They'll report directly into me. And it's all about—in AI, it's all about speed of decision-making and urgency. It allows us to move faster, and it puts a lot of the decision-making right at the customer, where we want it.

Speaker #5: We also, tying into that, it also allows us to build activation engines for where we're going with Ford deployment engineers to drive consumption faster.

Speaker #5: And we want to get that out into the market with incredible amount of speed and so that's really the focus. And around the changes.

[Company Representative] (Workday): We want to get that out into the market with incredible amount of speed. That's really the focus and around the changes.

Speaker #4: Yeah. I would just say that I am excited that Rob is flattened the organization and in this world, flatter organizations move faster and I'm excited about where the sales organization's headed.

Aneel Bhusri: Yeah, I would just say that I am excited that Rob is flattened the organization and, you know, in this world, flatter organizations move faster, and I'm excited about where the sales organization's headed.

Speaker #6: Thank you.

Gabriela Borges: Thank you.

Speaker #1: And we will now take two more questions. Our next question comes from the line of Alex Zukin with Wolf Research. Your line is open.

Operator: We will now take two more questions. Our next question comes from the line of Alex Zukin with Wolfe Research. Your line is open.

Speaker #5: Yeah, hey guys. Thanks for taking my question. Anil, welcome back as well from me. Maybe a quick tech one for you. You talked about monetizing first-party agents, both organic and inorganic.

Alex Zukin: Yeah. Hey, guys. Thanks for taking my question, Neil, welcome back as well from me. Maybe a quick tech one for you. You talked about monetizing first-party agents, both organic and inorganic, I wanted to ask you specifically how you're thinking about monetizing third-party agents, who you have Data Cloud. As you see more kind of investment construction going across these kind of multi-system agentic frameworks, how do you guys make sure that you monetize that for the value and the data context that you provide? Then, Zane, I just really simple one for you: Should we still think about the 35% operating margin targets for fiscal 2028 as on the table or not?

Speaker #5: But I wanted to ask you specifically how you're thinking about monetizing third-party agents. You have data cloud. As you see more kind of investment construction going across these kind of multi-system agentic frameworks, how do you guys make sure that you monetize that for the value and the data context that you provide?

Speaker #5: And then, Zane, I just really simple one for you. Should we still think about the 35% operating margin targets for fiscal 28 as on the table or not?

Speaker #4: So on the first question, Alex, I think you should think of us as an evolving layer on top of hyperscalers. And in the same way that they charge for consumption of compute cycles and application cycles, we're going to continue to flex that muscle.

Aneel Bhusri: On the first question, Alex, you know, I think you should think of us as an evolving layer on top of hyperscalers. In the same way that they charge for consumption of compute cycles and application cycles, we're gonna continue to flex that muscle. There are some vendors out there, including some of our peers, that I would consider them at some level, parasites on Workday. They get a free ride on our underlying system of record, and we're gonna put an end to that. If you run stuff off of Workday, whether it's from our agents or third-party agents, there'll be a consumption model tied to it.

Speaker #4: There are some vendors out there, including some of our peers, that would consider them at some level parasites on Workday. They get a free ride on our underlying system of record.

Speaker #4: And we're going to put an end to that. If you run stuff off of Workday whether it's from our agents or third-party agents, there'll be a there's a consumption model tied to it.

Speaker #4: And Garrett's really been the driver of that. So I'm going to ask Garrett to weigh in on that as well as it relates to flex credits.

Aneel Bhusri: Gerrit's really been the driver of that, so I'm gonna ask Gerrit to weigh in on that, on that as well, as it relates to Flex Credits, and then Zane can answer the second part of the question.

Speaker #4: And then, Zane can answer the second part of the question.

Speaker #6: Yeah. So the model that Anil has described really works that we have a tiered pricing structure for AI or programmatic access to the Workday platform.

[Company Representative] (Workday): You know, the model that Anil has described, you know, really works. We have a tiered pricing structure for AI or programmatic access to the Workday platform. The way how you should think about that is that we capture consumption in form of API calls. You know, they are monetized on Flex Credits. That's the most basic unit. If a third-party agent chooses to access that layer, you know, they can basically capture or recapture the value on our side via simple API calls. If they want to get richer information, like you has indicated, we also have Data Cloud. Data Cloud, again, is available on Flex Credits. It provides richer context. If third parties want to aggregate agents, right? Because we shouldn't think about APIs like in the old days, that you have modern agents and legacy APIs.

Speaker #6: And the way how you should think about that is that we capture consumption in the form of API calls. They are monetized on flex credits.

Speaker #6: That's the most basic unit. So for third-party agent chooses to access that layer, they can basically be captured or we capture the value on our side via simple API calls.

Speaker #6: If they want to get richer information like you had indicated, we also have data cloud. Data cloud, again, is available on flex credits. It provides richer context.

Speaker #6: And if third parties want to aggregate agents, right? Because we shouldn't think about APIs like in the old days where you have modern agents and legacy APIs.

Speaker #6: APIs and agents are eventually one and the same thing, right? Our agents, they're all exposed as APIs because we embrace the open ecosystem. You can use them in Microsoft.

[Company Representative] (Workday): APIs and agents are, you know, eventually one and the same thing, right? Our agents, they're all exposed as APIs because we embrace the open ecosystem. You can use them in Microsoft, you can use them in Google Gemini. Those, you know, APIs, those agent APIs, they have a premium price tag to them, right? Because they complete meaningful work. They are not just a simple SOAP or REST API. If you're now a customer or a partner or an ISV, you have all of these choices, right? You can subscribe to our applications and be captured on Workday pricing. You can build your own agents, and then you can decide whether you want to consume raw APIs, data context, or highly differentiated agent APIs, which are basically aggregating large chunks of work across HR and finance for you already.

Speaker #6: You can use them in a Google Gemini. And those APIs, those agent APIs, they have a premium price tag to them, right? Because they complete meaningful work.

Speaker #6: They are not just a simple SOAP or REST API. And if you know a customer or a partner or an ISV, you have all of these choices, right?

Speaker #6: You can subscribe to our applications and we capture that on Workday pricing. You can build your own agents and then you can decide whether you want to consume raw APIs data context or highly differentiated agent APIs which are basically aggregating large chunks of work across HR and finance for you already.

Speaker #5: Hey, Alex. And just to add to the framework question that you asked—as we've discussed, the intent here with incremental investment is to move up our growth.

[Company Representative] (Workday): Hey, Alex, just to add the framework question that you asked. You know, as we've discussed, the intent here with incremental investment is to move up our growth, you know, we're holding to the range between 12 and 15% that we highlighted at our last financial analyst day. We believe these initiatives will move us higher on that range than where we otherwise would have been. With that, as I mentioned earlier, we're investing more into this fiscal year, we'll update later on in the year at our next financial analyst update on where we believe, A, the growth would be, and then where we believe accordingly, sort of operating margin would be at that point in time as well.

Speaker #5: And we're holding to the range between 12 and 15 percent that we highlighted at our last financial analyst day. But we believe these initiatives will move us higher on that range than where we otherwise would have been.

Speaker #5: With that, as I mentioned earlier, we're investing more into this fiscal year and we'll update later on in the year at our next financial analyst update on where we believe A, the growth would be and then where we believe the accordingly sort of operating margin would be at that point in time as well.

Speaker #5: If you recall, there was a sliding scale and Anil's focus is on driving the growth more so than more so than just hitting that operating margin exclusively.

[Company Representative] (Workday): If you recall, there was a sliding scale, and Anil's focus is on driving the growth more so than just hitting that operating margin exclusively.

Speaker #5: Super helpful. Thank you, guys.

Alex Zukin: Super helpful. Thank you, guys.

Speaker #6: Thank you.

[Company Representative] (Workday): Thank you.

Speaker #1: And our final question comes from the line of Gabriela Borges with Goldman Sachs. Your line is open.

Operator: Our final question comes from the line of Gabriela Borges with Goldman Sachs. Your line is open.

Speaker #7: Hey, good afternoon. Thanks for taking my question. Anil and Garrett, I wanted to link together a couple of the points you're making. This idea of AI being built on top of cloud and then the potential for Workday to monetize any other vendor or corporate-built tool that is extracts richer information out of Workday my question for you is how do you manage the risk that vendors or customers build solutions next to Workday that leverages all the domain experience that you've built but ultimately Workday becomes part of this biggest stack such that the incremental value is being accrued in the intelligence layer which would be outside Workday?

Gabriela Borges: Hey, good afternoon. Thanks for taking my question. Anil and Gerrit, I wanted to link together a couple of the points you're making. This idea of AI being built on top of cloud, and then the potential for Workday to monetize a corporate built tool that extracts richer information out of Workday. My question to you is, how do you manage the risk that vendors or customers build solutions next to Workday that leverages all the domain experience that you've built, but ultimately, Workday becomes part of this bigger stack, such that the incremental value is being accrued in the intelligence layer, which would be outside Workday? Maybe just talk to us a little bit about how you manage and mitigate against that type of risk.

Speaker #7: Maybe just talk to us a little bit about how you manage and mitigate against that type of risk.

Speaker #4: Well, I'd first of all say that the API layer that ultimately will become the same with the agentic layer whether we have the apps on top or a third-party apps have apps on the top, it's our intelligence layer.

Aneel Bhusri: Well, I'd first of all say that the API layer that ultimately will become the same with the agentic layer. Whether we have the apps on top or a third party apps, have apps on the top, it's our intelligence layer, it's our metadata, it's our security model, it's our data model, it's our business process framework. People underestimate the power of our business process framework. There are 20 years of knowledge into these HR and financial applications that even with the best AI, is going to take five, six, seven years to replicate. You know, we're not standing still. We want to get to a model where we're pretty much indifferent if it's third parties or us building the apps on top. We get compensated either way through the consumption model. Gerd?

Speaker #4: It's our metadata. It's our security model. It's our data model. It's our business process framework. And people underestimate the power of our business process framework.

Speaker #4: There are 20 years of knowledge into these HR and financial applications that even with the best AI is going to take five, six, seven years to replicate.

Speaker #4: And we're not standing still. So we want to get to a model where we're pretty much indifferent if it's third parties or us building the apps on top.

Speaker #4: We get compensated either way through the consumption model. Garrett?

Speaker #6: Yeah. And Gabriela, I think it's a great question. So it allows us to really cut to the chase, I think. Look, the reality is the question is where this intelligent system is being built.

[Company Representative] (Workday): Gabriela, I think it's a great question. It allows us, you know, to really cut through the chase, I think. You know, look, the reality is, the question is where, you know, this intelligence system is being built and what's driving that. From, you know, what we see, I think what research shows today that, you know, the idea that you create just, you know, a big model and connect it to a database of data, and it just figures everything out is utterly unviable, right? It just creates, you know, a completely lawless AI, which has no understanding of enterprise processes, compliance, determinism, and repeatability. You basically have to build an HR and finance system for AI, right? That's the intelligence layer, right? It's not bimodal, you know, smart model and dump data.

Speaker #6: And what's driving that? And from what we see, I think what research shows today that the idea that you create just a big model and connect it to a database of data and it just figures everything out is utterly unviable, right?

Speaker #6: It just creates a completely lawless AI which has no understanding of enterprise processes, compliance, determinism, repeatability. So you basically have to build an HR and finance system for AI, right?

Speaker #6: So that's the intelligence layer, right? It's not bimodal, smart model, and dump data. It's actually about AI-enabled ERP. And that's the intelligence layer that Anil spoke about that we are building.

[Company Representative] (Workday): It's actually about an AI-enabled ERP. That's the intelligence layer that Anil spoke about that we are building. We are opening that up via APIs at the same point in time, because we believe in the openness of the ecosystem and the openness of the engagement layer, right? We are great partners with all of the AI companies out there. At the same point in time, the reason why they work with us, and as Anil put it, why they use Workday, is because you need to have an HR AI and an AI finance system. That's the intelligence that we are building, where we create value and frankly, where we capture value.

Speaker #6: We are opening that up via APIs at the same point in time because we believe in the openness of the ecosystem and the openness of the engagement layer, right?

Speaker #6: And we are great partners with all of the AI companies out there. But at the same point in time, the reason why they work with us and as Anil put it, why they use Workday is because you need to have an HR AI and an AI finance system.

Speaker #6: And that's the intelligence that we are building, where we create value and, frankly, where we capture value.

Speaker #7: I appreciate the call. Thank you.

Gabriela Borges: I appreciate the call. Thank you.

Speaker #1: And ladies and gentlemen, this concludes our question and answer session as well as today's call. We thank you for your participation and you may now disconnect.

Operator: Ladies and gentlemen, this concludes our question and answer session, as well as today's call. We thank you for your participation, and you may now disconnect.