Workday Inc Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mark Murphy - JPMorgan Chase & Co - Analyst : Congrats. It's nice to see the cRPO dollars added figure, I believe, reached its highest level ever. I wanted to ask if you can walk us through the vision and the scale of the investment that you think is required for the Agent System of Record. I'm curious if a chunk of the savings from the restructuring are going to be redirected into building that Agent System of Record. And then relating to that, do you have any Lighthouse customers that are raising their hand in some way, saying we want to manage entire fleets of agents, including some third-party agents using that product?

Question: Kash Rangan - Goldman Sachs Group, Inc. - Analyst : Congrats on a nice finish to the year. Carl, one question for you. You guys have tremendous visibility in your business. Your backlog is CRPO, 3 times over, right? But on the flip side, as you have contracts that come up for renewal, from presumably 2022 levels customers signed a three-year contract in '22, they're coming up for all 2025, what is the health of that renewal base look like, especially in a world with AI, without AI? There is workforce reductions happening. And as you overlay your AI upsell on top of that, what are the opportunities for the company to -- upon the renewal to attach itself and its impressive list of AI products as to ensure that you're able to grow to meet your goals? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 9:30PM, WDAY.OQ - Q4 2025 Workday Inc Earnings Call

Question: Kirk Materne - Evercore ISI Institutional Equities - Analyst : Congrats on the nice finish to the year. I think this one is probably for Zane. Zane obviously, your cadence for the year sort of infers a little bit of acceleration from the first half to the second half. You went through some of the reasons why. Just sort of two-part question around that. I guess, one, in the back half of the year, are you guys expecting much contribution from some of the agent revenue or some of the agents that you put out over the last six months? And I guess secondly, you had a strong fourth quarter. Do you feel better about that sort of opportunity or sort of the -- just the visibility, I guess, into the back half of the year today versus three months? I know 4Q is a big bookings quarter for you. So I think that your visibility is perhaps a little bit better today than it was then (inaudible) just reiterated guidance, so I would infer that, but I was wondering if you could just put a little bit more color around that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 9:30PM, WDAY.OQ - Q4 2025 Workday Inc Earnings Call

Question: Brad Sills - BofA Securities - Analyst : I wanted to ask a question about international. We haven't heard from a lot of companies that Europe was a source of strength this quarter, and I know it has been a focus area for you. So I would love to get some color as to where you're seeing strength in Europe. How do you feel about the feet on the street that you have over there? Which countries are working nicely in the go-to-market and some of the progress, and which ones would we expect to see more progress from going forward?

Question: Raimo Lenschow - Barclays - Analyst : Congrats from me as well. Any expectations for a change in go-to-market now with Rob Enslin finally coming on board? And I'm thinking more international as well since you have that success, is there any change? Or do you -- are you doubling down on that one of the way you do it?

Question: Michael Turrin - Wells Fargo Securities, LLC - Analyst : Zane, I just want to go back to the margin potential relative to the guidance and how you're thinking about that. It's clear there are product areas you can reinvest in, so I don't think we would have expected all of the leverage from the head count reduction potentially flow into the initial guide for the upcoming year. But can you just kind of speak to the trade-offs you're evaluating currently? And then how we should think about those in the context of the overall margin potential of Workday from here? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 9:30PM, WDAY.OQ - Q4 2025 Workday Inc Earnings Call

Question: Brent Thill - Jefferies LLC - Analyst : Carl, on federal, you've mentioned some good wins, and you feel the momentum there. I think there has been also some concerns could things kind of go a little sideways until they figure out the exact direction where they're going with the new administration. I'm just curious if you could lay out how you think that plays out for you over the next year?

Question: Alex Zukin - Wolfe Research, LLC - Analyst : Congrats on a [solid into] the year. I guess maybe just a two-parter for me. Maybe first, Carl. On the [Agentic] front, we're all trying to kind of grapple with what this means from a TAM expansion point for the systems of record. I'm curious how you guys are framing it in terms of the ability to really monetize and add a tremendous level of new value to your existing customer relationships? And then maybe, Zane, what -- it felt like -- was there a change in calculus that accompanied the RIF in terms of free -- like seeing something that maybe you want to move faster to free up more? Or was that always kind of in the cards for the previous margin guidance?

Question: John DiFucci - Guggenheim - Analyst : I think my question has sort of been touched on, guys, but it's something that I struggled with the last couple of years, actually. And we all know that the last couple of years have been challenging, not just for you but for everybody. But we've always thought of Workday as a good house in a tough neighborhood. Your core business of large transformational deals just hasn't been prioritized in recent years. But you've done a good job, we think, anyway, but doing a lot of things like to offset that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 25, 2025 / 9:30PM, WDAY.OQ - Q4 2025 Workday Inc Earnings Call Like meaning in the partners in a way you never did, going down market, and Doug will have a big part of that, too, and continued selling back into the base. I guess my question, and I think it's just a general question, but are we now at a point where the numbers are doable? And if when things improve, but meaning things you don't have control over, you'll come out of this actually stronger than you were during the post-covid sort of Mardi Gras period.

Question: John DiFucci - Guggenheim - Analyst : Carl, is Global Payroll Connect? Is that part of what's happening to, are you seeing benefit from that yet? Or is that just still too early?

Question: Karl Keirstead - UBS Investment Bank - Analyst : I just wanted to go back to the point around your decision to reinvest what appears to be most of the savings from the head count cuts. And in particular, maybe to get a little bit of better understanding on how your spending mix is changing. So maybe what areas are you trimming as a result of the RIF, whether it's focused on functional areas or geos that you're downsizing? And then conversely, where are those new dollars being freed up to invest in? It sounds certainly like AI, but are there any other new investment areas that you'll direct the funds to? Maybe an uptick in certain sales rep capacity? So maybe you could describe what what's getting cut, what's getting increased to help us understand how the spending mix is changing as a result of the head count cut?

Question: Chris Quintero - Morgan Stanley - Analyst : This is Chris Quintero on for Keith here. Actually want to go back to the Agent partnership you announced at Salesforce last year, which is super interesting. But I didn't hear you call it out in the prepared remarks. So just curious to hear maybe how that integration has gone and has it contributed at all to potentially better win rates at all?