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Call sheet · Q2'25

Workday (WDAY)

Q2'25 earnings call · held 2024-08-22 · compared with the Q1'25 call · management-credibility review
10/12
Disclosure score
2 medium, 4 low flags
Financial quality
Bottom line
The sleeper story is Workday's partner ecosystem quietly becoming a growth engine - doubling new ACV contribution in one quarter while direct sales face macro headwinds. Management's decision to explicitly call current IT spending 'the new norm' and preemptively lower multi-year growth targets to mid-teens signals this isn't a temporary downturn but structural industry deceleration. The binding constraint is enterprise decision complexity - full platform deals involving multiple buyers (CHRO, CFO, CIO) are taking longer to close, not competitive losses. Carl's most revealing quote: 'We think the current environment is the new norm going forward,' showing they're planning for permanently slower growth. My view changes if partner-sourced revenue reaches 25%+ of new bookings, which would offset direct sales pressures and validate the ecosystem strategy.

The 30-second version

  • Mid-teens growth becomes the new normal, not a temporary downturn
  • Operating leverage machine hits overdrive: 500 bps margin expansion in 24 months
  • Partner ecosystem quietly doubled new ACV contribution in one quarter

What changed this quarter

MetricQ1'25Q2'25Change
Subscription Revenue$1.815B (+19% YoY)$1.903B (+17% YoY)200 bps deceleration
12-month Backlog (cRPO)$6.6B (+18% YoY)$6.80B (+16% YoY)200 bps deceleration
Total Backlog$20.68B (+24% YoY)$21.58B (+21% YoY)300 bps deceleration
Non-GAAP Operating Margin25.9%24.9%100 bps decline
Operating Cash Flow$372M (+34% YoY)$571M (+34% YoY)Maintained strong growth
Professional Services Revenue$175M$182M$7M increase
International Revenue Mix$497M (25% of total)$524M (25% of total)Stable mix, 18% growth
Share Repurchases$134M$309M+131% acceleration
FY25 Subscription Revenue Guidance$7.7-7.725B (~17%)$7.7-7.725B (~17%)Maintained despite headwinds
FY25 Operating Margin Guidance~25%25.25%+25 bps raise

Accountability tracked

7 new promises made4 narrative shifts flagged6 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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