Workday announced its results for the second quarter of fiscal 2025. Total revenue rose 16.7% year over year to $2.085 billion. Subscription revenue rose slightly faster, by 17.2% year over year, to $1.903 billion. The company also saw a rise in operating income and its non-GAAP operating revenue
Zane Rowe, Workday’s CFO, commented, “Our second quarter performance was ahead of our expectations across our key financial metrics. We remain focused on balancing targeted investments across our growth areas and driving efficiencies across the company as we leverage the power of the platform.
“We see a macroeconomic environment consistent with last quarter and are reiterating our full-year FY25 subscription revenue guidance while slightly raising our expectation for FY25 non-GAAP operating margin.”
Workday is also becoming more profitable and taking a bigger market share. Operating income as a percentage of revenue rose by 3.3% year over year, rising from $36 million in Q2 2024 to $111 million this quarter. Non-GAAP operating income was $518 million, 24.9% of revenues, again a rise year over year.
Gartner recognised this success, estimating that Workday had the largest ERP Worldwide SaaS revenue share at 19.6% (Access for Gartner Clients). In total, Workday now has 70 million users under contract and more than 2,000 Workday Financial Management customers.
The growth has also seen Workday join the Fortune 500 for the first time, making it one of the largest U.S. companies by revenue.
Carl Eschenbach, CEO of Workday, commented, “Workday delivered a solid quarter of growth and operating margin expansion, as businesses of all sizes and industries around the world increasingly turn to Workday as their trusted partner in navigating the future of work.
“Through the power of our unified, AI-powered platform and our expanding partner ecosystem, we’re reimagining H.R. and Finance to consistently increase the value we deliver to our customers. Our commitment to customer success, A.I. innovation, and delivering true business value will propel us into the future.”
Enterprise Times: What does this mean
Another strong set of results from Workday as it continues to win customers in the U.S. and Worldwide. With Gartner recognising its strength in the global market, it can no longer be seen as an HCM vendor by its competitors. However, SAP has a long tail of installations, and it will be interesting to see whether it can maintain that number-one position over the next few years. Oracle will also have a say as the industry enters convention season.
The future looks good for Workday, though. Its 12-month subscription revenue backlog is $6.80 billion, up 16.1% from the same period last year. The total subscription revenue backlog is $21.58 billion, up 20.9% year over year.
The company seems to be accelerating its growth. Enterprises are still migrating from legacy solutions, though. Workday also increased its fiscal guidance for the full year ending January 2025. It expects subscription revenue of between $7.700 billion to $7.725 billion, a growth of roughly 17%
However, it will be interesting to see whether companies shift from early cloud-based solutions to Workday over the next few years. Workday customer satisfaction and retention are normally very high. However, neither were mentioned in this set of results. Customer satisfaction may be revealed at Workday Rising during the week beginning September 16th, Interestingly, the same week as Dreamforce.
The markets responded positively to the results. Over the last five days, shares have risen 12.6% to $257.03 and are up 11.65% from the same date last year.
