Workday posts robust Q2 revenue growth

working day (DAY OF S -1.04%)a leader in enterprise cloud applications for finance and human resources, announced its results for the second quarter of fiscal 2025 on 2024-08-22.

The company reported operating income of $111 million, a significant increase from $36 million a year earlier, and total revenue of $2.085 billion, up 16.7% from last year.

However, while maintaining its full-year subscription revenue target, Workday issued a cautious outlook for the third quarter.

Source: Expectations based on management guidance as provided in the 2024-05-23 earnings report.

Business overview and areas of interest

Workday offers enterprise cloud applications that support finance and HR functions. The company, which serves more than 10,000 organizations with AI-based solutions, focuses on continuous innovation to stay competitive in the rapidly evolving enterprise software market. Workday focuses on product development and AI integration and boasts a broad customer base and strategic partnerships with firms such as Amazon Web Services (AMZN -2.21%) and Google Cloud (GOOG -1.28%) (GOOGL -1.24%)which strengthens its service offerings and market reach.

In recent efforts, Workday has focused on integrating AI into its platform to deliver advanced data-driven business intelligence solutions. The company also promotes the Workday Extend, Workday AI Marketplace and Built on Workday initiatives, which reflect a strong commitment to innovation. In addition, partnerships with companies such as Salesforce (CRM -0.96%) help expand Workday’s market presence.

Notable developments in Q2

The second quarter saw significant achievements for Workday, both financially and strategically. Financially, Workday reported a robust 16.7% increase in total revenue to $2.085 billion and a 17.2% increase in subscription revenue to $1.903 billion. Operating income rose to $111 million from $36 million, translating to a GAAP operating margin of 5.3%, up from 2.0% in Q2 FY2024. Non-GAAP operating income also increased to $518 million (a 24.9% margin), slightly beating guidance for a 24.5% margin.

Noteworthy product innovations were introduced this quarter. Workday launched Workday Payroll with Strada globally and launched Global Payroll Connect, designed to improve payroll services. It also updated its Workday Extend, Workday AI Marketplace, and Built on Workday initiative, showcasing continued product evolution.

On the artificial intelligence (AI) side, Workday has expanded its AI services with the Workday AI Marketplace and AI-powered recruiting tools. These moves align well with industry trends toward automated, data-driven solutions.

Workday also expanded its customer base, surpassing 70 million users under contract. It has secured significant contracts with entities such as Clemson University and Presbyterian Healthcare Services. Inclusion in the Fortune 500 list enhanced its market credibility and brand strength.

Partnerships played a key role in Q2. The company also announced new alliances with companies such as Equifax (EFX -0.65%) and Salesforce. Workday’s ties to AWS and Google Cloud highlight its ongoing commitment to using cutting-edge technology to create value.

While Workday demonstrated strong performance, high acquisition costs and stock-based compensation were notable expenses. Stock-based compensation came in at $370 million for the quarter, and amortization of acquisition-related intangible assets fell from $21 million to $20 million.

Looking ahead

For Q3 2025, Workday has set its subscription revenue guidance at $1.955 billion and expects to maintain a non-GAAP operating margin of approximately 25.25%. The company reaffirmed its full-year subscription revenue target of $7.7 billion to $7.725 billion, indicating growth of about 17 percent. Non-GAAP operating margin for the full year is also estimated to be approximately 25.25%. Investors should watch how new product launches, AI integration and customer acquisitions drive revenue and efficiencies in the coming quarters.

Given Workday’s focus on innovation, market expansion and strategic partnerships, these areas are critical to its future growth. However, ongoing scrutiny of large transactions and lengthening sales cycles, particularly for full-platform transactions, along with regulatory environments, remain areas that need to be closely monitored.