WDAY 10-K & 10-Q changes, risk factors and insider trading

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K, before making an investment decision. The risks and uncertainties described below reflect our beliefs and opinions as to the factors and events that could materially and adversely affect our business or the market price of our securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not any of the risks, events, or uncertainties described below have occurred in the past. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that materially and adversely affect our business. If any of the following risks actually occurs, our business operations, financial condition, operating results, and prospects could be materially and adversely affected. The market price of our securities could decline due to the materialization of these or any other risks, and you could lose part or all of your investment.

•any slowdown or failure of our technical operations infrastructure, including our data centers and computing infrastructure operated by third parties, or the impact of service outages or delays in the deployment of our applications, or the failure of our applications to perform properly;

•exposure to risks inherent to international expansion and sales to customers outside the United StatesU.S. or with international operations;

We have experienced significant growth in the number of users, transactions, and data that our operations infrastructure supports. If we do not accurately predict our infrastructure requirements or fail to adapt and scale, we may experiencesee an increase in service outages or delays, or significant increases in operating costs, which may adversely affect our business and operating results.

We have experienced, and may in the future experience, defects, system disruptions, outages, and other performance problems, including the failure of our applications to perform properly. These problems may be caused by a variety of factors, including infrastructure and software or code changes, vendor issues, software and system defects, human error, viruses, worms, security attacks (internal and external), fraud, spikes in customer usage, and denial of service issues. For example, in July 2025, we identified and subsequently remediated an issue impacting reporting from high-volume data sources in the tenants of certain customers that may have yielded incomplete queries without displaying an error message. In addition, we may also encounter difficulties integrating acquired technologies, which may result in the failure of our applications to perform properly. All of these issues may result in increased operational costs, delays in new feature rollouts, customer loss, reputational damage, and legal or regulatory liability, including liability under customer contracts.

We host our applications and serve our customers and users globally from data centers operated by third parties and rely upon third-party partnersvendors to operate certain aspects of our services. We control our applications and data, but we do not control the facilities, operations, and physical security of these locations. Disruption of or interference at these locations has and could in the future impact our operations and our business could be adversely impacted. For example, we have experienced disruptions at certain of our co-location data centers in the U.S. due to high temperatures and power outages that resulted in a brief temporary outage of our services for a subset of our customers. These facilities may also be subject to cybersecurity breaches, capacity constraints, financial difficulties, break-ins, sabotage, intentional acts of vandalism and similar misconduct, natural catastrophic events, as well as local administrative actions, changes to legal or permitting requirements, and litigation to stop, limit, or delay operations, and our disaster recovery planning may not account for all eventualities.

Any changes in third-party service levels atwith our hosted infrastructure providers, or any errors, defects, disruptions, or other performance problems with our applications or the infrastructure on which they run, including internet infrastructure, could adversely affect our reputation and may damage our customers’ or other users’ stored filesdata or result in lengthy interruptions in our services. Interruptions in our services might adversely affect our reputation and operating results, cause us to issue refunds or service credits to customers, subject us to potential liabilities, result in contract terminations, or adversely affect our renewal rates.

Our success and future growth depend largely upon the continued services of our executive officers, other members of senior management, and other key employees. Effective February 1, 2024, the start of our fiscal 2025, in accordance with an established succession plan, Aneel Bhusri stepped down from his role as Co-CEO and assumed the role of Executive Chair, and Carl Eschenbach, formerly Co-CEO alongside Mr. Bhusri, assumed the role of sole CEO. We do not have employment agreements with our executive officers or other key employees that require them to continue to work for us for any specified period, and they could terminate their employment with us at any time. We have and may continue to execute our growth plan through strategic investments to attract and retain executive officers, senior management, or other key employees that may not be offset by increased performance or revenues. In February 2026, Aneel Bhusri, formerly Executive Chair, assumed the role of CEO and Carl Eschenbach ceased to serve as CEO. Key employee and executive leadership changes have the potential to disrupt our business, impact our ability to preserve our culture, negatively affect our ability to attract and retain talent, or otherwise have a serious adverse effect on our business and operating results.

To execute our growth plan, we must attract, enable, develop, and retain highly qualified talent. Our ability to compete and succeed in a highly competitive environment is directly correlated to our ability to recruit and retain highly skilled and experienced employees, especially in the areas of product development, cybersecurity, senior sales executives, and engineers with significant experience in designing and developing software and internet-related services, includingespecially in AI.AI and emerging technologies. The expansion of our sales infrastructure, both domestically and internationally, is necessary to grow our customer base and business. Our business may be adversely affected if our efforts to attract and enable new members of our direct sales force do not generate a corresponding increase in revenues. We have experienced, and we expect to continue to experience, significant competition in hiring and retaining employees with appropriate qualifications.

We must also continue to retain, develop, and motivate existing employees through our compensation practices, company culture, and career development opportunities. The compensation and incentives we have available to attract, retain, and motivate employees may not meet the expectations of current and prospective employees as the competition for talent intensifies. For example, our equity awards may become less effective if our stock price decreases or increases at a slower rate than our talent competitors. Further, our current and future office environments and our current hybrid work policy may not meet the expectations of our employees or prospective employees, and may amplify challenges in recruiting and retention. We believe that a critical component of our success has been our corporate culture and our core values. As we continue to grow and change, we may find it difficult to maintain our corporate culture among a larger number of employees who are dispersed throughout various geographic regions, including difficulties due to managing the complexities of communicating with all employees. Efforts to restructure our workforce, such as the Fiscal 2026 Restructuring Plan,workforce may be disruptive and adversely impact employee morale or our corporate culture. Failure to maintain or adapt our culture could negatively affect our ability to attract new employees or to retain our current employees and our business and future growth prospects could be adversely affected.

Our strategy for additional growth depends, in part, on sales generated through our network of partners and professional services provided by our partners. If the operations of these partners are disrupted, including as a direct or indirect result of recent macroeconomic conditions, our own operations may suffer, which could adversely impact our operating results. Identifying partners, and negotiating and documenting relationships with them, and marketing and promoting partnerships requires significant time and resources, and we cannot ensure that these partnerships will result in increased customer adoption or usage of our applications or increased revenue. We may be at a disadvantage if our competitors are effective in providing incentives to our current or potential partners to favor their products or services or to prevent or reduce subscriptions to our services, or in negotiating better rates or terms with such partners, particularly in international markets where our potential partners may have existing relationships with our competitors. In addition, acquisitions of our partners by our competitors could end our strategic relationship with such acquired partner and result in a decrease in the number of our current and potential customers.

Our partner training and educational programs may not be effective or utilized consistently by partners. New partners may require extensive training and/or may require significant time and resources to achieve productivity.productivity, and such requirements may deter potential partners due to the significant time and financial investment required. Changes to our direct go-to-market models and expanded product and service offerings may cause friction with our partnerspartners, require increased time and financial investment, and may increase the risk in our partner ecosystem. The actions of our partners may subject us to lawsuits, potential liability, and reputational harm if, for example, any of our partners misrepresent the functionality of our products to prospective or current customers, fail to perform services to our customers’ expectations, or violate laws or our corporate policies.policies, such as laws and policies around privacy, cybersecurity, and responsible AI. In addition, we resell certain products and services offered by our partners and could incur potential liability and reputational harm if our partners fail to provide such products and services as represented to customers. Our partners may utilize our platform to develop products and services that could potentially compete with products and services that we offer currently or in the future. Concerns over competitive matters or intellectual property ownership could constrain these partnerships. If we fail to effectively manage and grow our network of partners, maintain good relationships with our partners, or properly monitor the quality and efficacy of their service delivery, or if our partners do not effectively market and sell our subscription services, use greater efforts to market and sell their own products or services or those of our competitors, or fail to meet the needs or expectations of our customers, our ability to sell our products and efficiently provide our services may be impacted, and our operating results and growth rate may be harmed.

SalesOur international presence, continued expansion, and sales to customers outside the United StatesU.S. or with international operations expose us to risks inherent in global operations.

The growth of our business and future prospects depends on our ability to further expand our operations and increase our sales outside of the United StatesU.S. as a percentage of our total revenues. Operating globally requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States.U.S. Our investments and efforts to further expand internationally may not be successful in creating additional demand for our applications outside of the United StatesU.S. or in effectively selling subscriptions to our applications in all of the markets we enter. Risks associated with doing business on a global scale that could adversely affect our business, include:

•the need to adhere to local laws and regulations, including those related to data localization, privacy, and anti-corruptionanti-corruption, which may make it more difficult to penetrate certain international market segments with highly specialized compliance, contracting, and data sovereignty requirements;

•difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation and benefits for local markets;

•difficulties in leveraging executive presence andpresence, maintaining company culture globallyglobally, and conforming with local cultural contexts and customs;

•potentially weaker protection for intellectual property and other legal rights than in the United StatesU.S. and practical difficulties in enforcing intellectual property and other rights;

•laws, contracting approaches, customs, and business practices favoring local competitorsvendors over U.S.-based companies, which may be increased by geopolitical tensions;

•restrictive governmental actions focused on cross-border trade, such as import and export restrictions, duties, quotas, potential or imposed tariffs, trade disputes, and barriers or sanctions, as well as any retaliatory actions, that may prevent us from offering certain portions of our products or services to a particular market, may increase our operating costscosts, or may subject us to monetary fines or penalties;

•compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, privacy, intellectual property, financial services, AI, and data protection laws and regulationsregulations, as well as challenges with differing legal, alternative dispute, and regulatory systems;

•increased compliance costs related to government regulatory reviews or audits, including those related to international cybersecurity and environmental, social, and governance (“ESG”)sustainability requirements;

These impacts may continue through integration activities. Moreover, we may be unable to complete proposed transactions timely or at all due tofor a variety of reasons, such as our failure to obtain any necessary funding to complete an acquisition in a timely manner or on favorable terms,funding, the failure to obtain required regulatory or other approvals, litigation,or the impact of litigation or other disputes, which may obligate us to pay a termination fee.disputes. We also may not achieve the anticipated benefits from an acquisition due to a number of factors, including:

•inability or difficulty integrating the intellectual property, technology infrastructure, and operations of the acquired business, including difficulty in addressing potential identified or unknown security risks or vulnerabilities of the acquired business or product;

•a failure to maintain the information systems of an acquired business, including difficulties in increasing or maintaining the security standards for acquired technology, which could increase the risk of a security breach of such system;

•known and unknown liabilities or risks associated with the acquired businesses, including those arising from existing contractual obligations or litigation matters;

•adverse effects on our brandbrand, reputation, or existing business relationships with business partners and customers as a result of the acquisition, including integrating acquired technologies and a delay in market acceptance of and difficulty in transitioning new and existing customers to acquired product lines or services;

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto included included in Part II, Item 8 of this report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in “Risk Factors” included in Part I, Item 1A of this report.

Workday is the enterprise AI platform thatfor helpsmanaging organizationspeople, manage their most important assets – their peoplemoney, and money.agents. We deliver cloud-basedcloud-based, AI-powered applications for HCM, financial management, HCM, planning, spend management, and analytics.planning. Our diverse customer base includes emerging, medium-sized, and large global organizations within numerous industry categories,industries, including financial services, government, higher education, healthcare, hospitality, manufacturing, professional and business services, financialretail, services,technology healthcare, education, government, technology,and media, retail, and hospitality.transportation. WithWorkday Workday, ourhelps customers have an AI-powered platform that can help them deliver better employee experiences, increase productivity, improve operational efficiencies, and provide insights for faster, data-driven decision-making.

We have achieved significant growth since our inception in 2005, when we pioneered HCM in the cloud. As a result of our innovation and commitment to customer success, today we are a Fortune 500 company with more than 11,00011,500 customers around the world. As we continue to grow, we are focused on driving sustainable, long-term subscription revenue growth by adding new customers and expanding our relationships with existing customers through increased adoption of our suite of solutions. Central to this effort is investing in strategic growth areas including leveraging the power of our platform to drive increased adoption of our full suite of applications, expanding internationally, developing innovative AI solutions, expanding internationally, growing our partner ecosystem, deepening our presence in industry verticals,verticals and the emerging and medium enterprise market, and exploring strategic acquisitions to complement our organic innovation. Our investments across these targeted growth areas may require additional costs, but we remain committed to optimizing resource allocation and realizing a return on our investments. Over time, we believe these investments will support revenue growth and a more scalable business.

We are focused on expanding our operating margin by driving scale and building efficiencies across the business through investments in people, processes, and systems. In February 2025, we announced the Fiscal 2026 Restructuring Plan, which is intended to prioritize our investments and continue advancing our ongoing focus on durable growth. The plan is currently expected to result in the reduction of approximately 8% of our workforce. In connection with this plan, we expect to exit certain owned office space. As a result of our focus on expanding operating margin, we expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues will decrease over the longer term as we grow our revenues and invest in a disciplined manner to support our long-term growth objectives.

We derive our revenues from subscription services and professional services. Subscription services revenues primarily consist of fees that give ourprovide customers access to our cloud applications, whichwith includestandard relatedand enhanced customer support. Professional services revenues include fees for deployment services, optimization services, and training.

Our professional services consulting engagements are billed on a time and materials or fixed price basis. We generally invoice our customers inas arrearsthe work is performed for ourtime professionaland services.materials arrangements, and in advance for fixed price arrangements. For contracts billed on a time and materials basis, revenues are recognized over time as the professional services are performed. For contracts billed on a fixed price basis, revenues are recognized over time based on the proportion of the professional services performed. In some cases, we supplement our consulting teams by subcontracting resources from our service partners and deploying them on customer engagements. As the Workday-related consulting practices of our partner firms continue to develop, we expect these partners to increasingly contract directly with our subscription customers for services engagements.

Costs of subscription services revenues. Costs of subscription services revenues consist primarily of expenses associated with hosting our applications and providingdelivering standard and enhanced customer support,support includingservices. These costs include employee-related expenses, expenses related to data center capacity and computingthird-party infrastructurehosted operated by third parties, andinfrastructure, depreciation of our data center equipment.equipment, amortization of certain acquisition-related intangible assets, and allocated overhead.

Costs of professional services revenues. Costs of professional services revenues consist primarily of employee-related expenses associated with these services, subcontractor expenses, travel expenses, and travelallocated expenses.overhead.

Product development expenses. Product development expenses consist primarily of employee-related expenses associated with our efforts to add new features and applications, increase functionality, and enhance the ease of use of our cloud applications, as well as expenses related to datathird-party centerhosted capacity.infrastructure, and allocated overhead.

Sales and marketing expenses. Sales and marketing expenses consist primarily of employee-related expenses, sales commissions, marketing programs, travel expenses, amortization of certain acquisition-related intangible assets, and travelallocated expenses.overhead. Marketing programs consist of advertising, events, corporate communications, brand awareness, brand ambassador campaigns, and product marketing activities. Sales commissions are considered incremental costs of obtaining a contract with a customer. Sales commissions for new revenue contracts are capitalized and amortized on a straight-line basis over a period of benefit that we have determined to be five years.

General and administrative expenses. General and administrative expenses consist primarily of employee-related expenses for our finance and accounting, legal, human resources, and information systems personnel, as well as professional services fees, allocated overhead, and other corporate expenses.

Restructuring expenses. Restructuring expenses are associated with a formal restructuring program and consist of charges related to workforce reductions, including employee transition, severance payments, employee benefits, and share-based compensation, as well as exit charges associated with the closure of facilities.facilities and other exit and disposal activities.

Total revenues were $9.6 billion for fiscal 2026, compared to $8.4 billion for fiscal 2025, compared to $7.3 billion for fiscal 2024, an increase of $1.2 billion, or 16%. Subscription services revenues were $7.7 billion for fiscal 2025, compared to $6.6 billion for fiscal 2024, an increase of $1.1 billion, or 17%.13%. Subscription services revenues were $8.8 billion for fiscal 2026, compared to $7.7 billion for fiscal 2025, an increase of $1.1 billion, or 14%. Approximately 60% of the increase in subscription services revenues was attributable to expansion ofwithin our customers that existed as of the beginning of the comparable prior fiscalyear year,period, and the remaining 40% was attributable to customers added after the beginning of the comparable prior fiscalyear year.period. Professional services revenues were $719 million for fiscal 2026, compared to $728 million for fiscal 2025, compareda to $656 million for fiscal 2024, an increasedecrease of $72$10 million, or 11%.1%. The increasedecrease in professional services revenues was driven by highervariation demandin forproject oursize and mix of deployment and integration services.services provided as we continue to expand and leverage our service partners.

Our gross revenue retention rate is based on ARR, which represents the annualized value of active subscription contracts as of the end of each period. Each subscription contract is annualized by dividing the total contract value by the number of days in the contract term and then multiplying by 365. We exclude certain subscription contracts from the calculation, including contracts with terms less than one year that are distinct from our core product offering, such as contracts for tenants which are used for implementation and testing. To the extent that we are negotiating a renewal with a customer after the expiration of the subscription, ARR is only adjusted if the customer churns. We calculate ARR on a constant currency basis using exchange rates set at the beginning of each fiscal year. ARR is a non-GAAP financial measure and should be viewed independently of, and not as a substitute for or combined with, revenue and unearned revenue.

Total costs and expenses were $8.8 billion for fiscal 2026, compared to $8.0 billion for fiscal 2025, compared to $7.1 billion for fiscal 2024, an increase of $955$800 million, or 13%.10%. The increase in operatingtotal costs and expenses included increases of $555$219 million in restructuring-related expenses, $159 million in third-party hosted infrastructure expenses, $212 million in employee-related expenses, includingnet share-basedof compensation,restructuring-related primarilycost duesavings, to higher average headcount, $84 million in restructuring expenses primarily related to the Fiscal 2026 Restructuring Plan, $57$81 million in facilities and IT-related expenses, $56$52 million inrelated data center capacity expenses, $46 million in subcontractor expenses, $44 million into professional servicesservices, expenses, $38 million in depreciation, $37$41 million in amortization of deferred sales commissionscommissions, due$27 tomillion increasedin sales,amortization of acquisition-related intangible assets, and $31$16 million related to marketing programs.programs, offset by a reduction of $19 million in subcontractor expenses.

Costs of subscription services were $1.5 billion for fiscal 2026, compared to $1.3 billion for fiscal 2025, compared to $1.0 billion for fiscal 2024, an increase of $235$264 million, or 23%.21%. The increase in costs of subscription services included increases of $132$139 million in third-party hosted infrastructure expenses, $74 million in employee-related expenses, including share-based compensation,expenses primarily due to higherdelivering averageour headcount,enhanced $44customer support services, net of restructuring-related cost savings, $29 million in datafacilities centerand capacityIT-related expenses, and $39$19 million in depreciation.amortization of acquisition-related intangible assets.

We expect costs of subscription services will continue to increase in absolute dollars as we improve and expand our technical operations infrastructure, including computingthird-party infrastructurehosted operatedinfrastructure, byand thirdas parties.we grow our enhanced customer support services.

Costs of professional services were $790 million for fiscal 2026, compared to $803 million for fiscal 2025, compareda to $740 million for fiscal 2024, an increasedecrease of $63$13 million, or 9%.2%. The increasedecrease in costs of professional services included increasesa reduction of $46$19 million in subcontractor expenses andoffset $12by an increase of $7 million in employee-relatedfacilities and IT-related expenses. Employee-related expenses remained relatively flat as a result of restructuring-related cost savings.

We expect costs of professional services as a percentage of total revenues to continue to decline as we relyexpand onand leverage our service partners to deploy our applications and asfocus on growing our subscription services revenues continue to grow as we expand both our customer base and our footprint within our existing customers.revenues.

Product development expenses were $2.7 billion for fiscal 2026, compared to $2.6 billion for fiscal 2025, compared to $2.5 billion for fiscal 2024, an increase of $160$55 million, or 7%.2%. The increase in product development expenses included an increaseincreases of $158$41 million in employee-related expenses, includingnet share-basedof compensation,restructuring-related primarilycost duesavings, $18 million in third-party hosted infrastructure expenses, and $14 million in facilities and IT-related expenses, offset by a reduction of $11 million related to higherprofessional average headcount.services.

We expect product development expenses will continue to increase in absolute dollars as we improve and extend our applications and develop new technologies, including costs incurred for hardware maintenance, data center capacity, facility costs, and IT-related expenses.technologies.

Sales and marketing expenses were $2.6 billion for fiscal 2026, compared to $2.4 billion for fiscal 2025, compared to $2.1 billion for fiscal 2024, an increase of $294$184 million, or 14%.8%. The increase in sales and marketing expenses included increases of $180$76 million in employee-related expenses, includingnet share-basedof compensation,restructuring-related primarilycost duesavings, to higher average headcount, $37$41 million in amortization of deferred sales commissionscommissions, due to increased sales, $30$19 million related to marketing programs, $17 million related to professional services, and $25$17 million in facilities and IT-related expenses.

We expect sales and marketing expenses to increase in absolute dollars as we continue to invest in our domesticdomestically and international selling and marketing activitiesinternationally to expand awareness of our brand and product offerings to attract new and existing customers.

General and administrative expenses were $912 million for fiscal 2026, compared to $820 million for fiscal 2025, compared to $702 million for fiscal 2024, an increase of $118$92 million, or 17%.11%. The increase in general and administrative expenses included increases of $73$45 million related to professional services, $20 million in employee-related expenses, includingnet share-basedof compensation,restructuring-related primarilycost due to higher average headcount,savings, and $36$14 million in professionalfacilities servicesand IT-related expenses.

Restructuring expenses were $84$303 million for fiscal 2025, with no comparable expense in the prior year. We recorded expenses2026, of $65which approximately $186 million forrelated to employee transition, severance payments, employee benefits, and share-based compensation under the Fiscal 2026 Restructuring Plancompensation, and exit$117 million related to impairment charges of $19 million associated with office space reductionsand underother along-lived separate restructuring plan.assets.

Share-based compensation expense increased by $103$107 million during fiscal 2025,2026, primarily due to restructuring activities and additional grants to new and existing employees.

Equity compensation is an important element of our compensation philosophy. While we expect share-based compensation expense to grow in absolute dollars as we expand our global workforce, we expect it to continue to decline as a percentage of total revenues.

Operating Income (Loss) and Operating Margin

Non-GAAPGAAP operating income was $2.2$721 billion,million, or 25.9%7.5% of revenues, in fiscal 2025,2026, compared to $1.7$415 billion,million, or 24.0%4.9% of revenues in fiscal 2024.2025. The increase wasis primarily due to our revenue growth outpacing headcount growth andgrowth, moderation of operating expenses, including share-based compensation, and restructuring-related cost savings, partially offset by restructuring expenses.

Reconciliations of our GAAP to non-GAAP operating income (loss) and operating margin were as follows (in millions, except percentages). See “Non-GAAP Financial Measures” below for further information.

(1)The Share-based compensation expense lines in the GAAP to non-GAAP reconciliation tables above excludeexcludes share-based compensation expenseassociated with restructuring activities of $56 million and $8 million infor fiscal 20252026 relatedand to2025, restructuringrespectively. initiatives.These Thisexpenses expense isare included in the Restructuring costs lines.costs.

Other Income (Expense),Income, Net

Other income (expense),income, net was as follows (in millions):

Other income, net increased by $50$65 million for fiscal 2025,2026, primarily due to $77 million in higher net gains on equity investments and $26 million in higher realized net gains from the sale of debt securities to fund acquisition activities and share repurchases. These increases were offset by a $32 million reduction in interest income earnedresulting from higherboth decreased investment balances and increased averagelower interest rates.

The income tax provision for fiscal 2026 and 2025 was primarily attributable to an increase in our U.S. pretax income and income tax expenses in profitable foreign jurisdictions.

As of January 31, 2025,2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $8.0$5.4 billion, which were primarily held for working capital and general corporate purposes. Our cash equivalents and marketable securities are primarily composed of, in order from largest to smallest, corporate bonds, U.S. treasury securities, money market funds, U.S. agency obligations, commercial paper, and asset-backed securities. We have financed our operations primarily through customer payments, issuance of debt,securities, and salessupranational of our common stock.securities.

Our long-term future capital requirements depend on many factors, including the effects of macroeconomic trends, customer growth rates, subscription renewal activity, headcount growth, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, infrastructure development, and our investment and acquisition activities. As part of our strategy, we may choose to seek additional debt or equity financing.financing, which may not be available on terms favorable to us or at all. Additionally, our cash provided by operating activities could be affected by various risks and uncertainties, including the “Risk Factors” included in Part I, Item 1A of this report.

Cash provided by operating activities was $2.5$2.9 billion and $2.1$2.5 billion for fiscal 20252026 and 2024,2025, respectively. In fiscal 2025, theThe improvement in cash flow provided by operating activities was primarily the result of higher cash collections of $868$1.2 millionbillion mainly due to increased salessales, and additional interest income received of $112 million from marketable debt securities,partially offset by increased employee-related payments of $465 million primarily due to higher average headcount and increased supplier payments of $171$335 million to support our continued growth.growth and increased employee-related payments of $272 million, which include payments made under the Fiscal 2026 Restructuring Plan.

Cash usedprovided in investing activities for fiscal 20252026 was $1.8$333 billion,million, which primarily resulted from a net cash outflowinflows of $667$2.6 millionbillion relatedas towe converted marketable debt securities activities,into cash consideration,to fund acquisition activities and share repurchases, offset by net of cash acquired,outflows of $522$2.1 million and $303 millionbillion for the acquisitions of HiredScore and Evisort, respectively,acquisitions, and capital expenditures of $269$162 million mainly for data center and office space projects.

Cash used in investing activities for fiscal 20242025 was $1.8 billion, which primarily resulted from a net cash outflow of $1.6$667 billionmillion fromrelated theto timingmarketable debt securities activities, net outflows of purchases$825 andmillion maturitiesfor of marketable securitiesacquisitions, and capital expenditures of $232$269 million for data center and office space projects, offset by proceeds of $144 million from sales of marketable securities.projects.

Free cash flows were $2.2$2.8 billion for fiscal 2025,2026, compared to $1.9$2.2 billion for the prior year period. The improvement was primarily the result of higher cash collections of $868$1.2 millionbillion mainly due to increased sales and additionaldecreased interestcapital income receivedexpenditures of $112$107 millionmillion, from marketable debt securities,partially offset by increased employee-related payments of $465 million primarily due to higher average headcount, increased supplier payments of $171$335 million to support our continued growth,growth and increased capitalemployee-related expenditurespayments of $37$272 million.million, which include payments made under the Fiscal 2026 Restructuring Plan.

We must also continue to retain, develop, and motivate existing employees through our compensation practices, company culture, and career development opportunities. The compensation and incentives we have availableprovide to attract, retain, and motivate employees may not meet the expectations of current and prospective employees as the competition for talent intensifies.intensifies, For example, our equity awards may become less effectiveand if our stock price decreases or increases at a slower rate than our talent competitors.competitors, our equity awards become less effective. As a part of our annual refresh grant cycle in May 2026, we awarded additional equity grants to our most critical talent to bolster their commitment to our company and to further incentivize their performance towards our goals. Further, our current and future office environments and hybrid work policy may not meet the expectations of our employees or prospective employees, and may amplify challenges in recruiting and retention. We believe that a critical component of our success has been our corporate culture and core values. As we continue to grow and change, we may find it difficult to maintain our corporate culture among a larger number of employees who are dispersed throughout various geographic regions, including difficulties due to managing the complexities of communicating with all employees. Efforts to restructure our workforce may be disruptive and adversely impact employee morale or our corporate culture. Failure to maintain or adapt our culture could negatively affect our ability to attract new employees or to retain our current employees and our business and future growth prospects could be adversely affected.

Developing software applications and related enhancements, features, and modifications, including those involving AI, including generative and agentic AI or other emerging technologies, is expensive, and the investment in product development often involves a long return on investment cycle. We believe that we must continue to dedicate a significant amount of resources to our development efforts to maintain our competitive position. Accelerated application introductions and short application life cycles require high levels of expenditures that could adversely affect our operating results if not offset by revenue increases. However, we may not receive significant revenues from these investments for several years, if at all. If we are unable to provide new features, enhancements to user experience, and modifications in a timely and cost-effective manner that achieve market acceptance, align with customer expectations, and that keep pace with rapid technological developments and changing regulatory landscapes, it may negatively impact our customer renewal rates, limit the market for our solutions, or impair our ability to attract new customers and our business and operating results could be adversely affected. For example, AI is propelling advancements in technology, but ifrapid deployment of generative and agentic AI technologies can increase operational, legal, and reputational risks. If we fail to innovate and keep up with advancements in AI technology,technology; if Workday’s AI-powered solutions, including our current and planned agentic AI solutions, fail to be delivered as planned or at all, fail to operate as expectedexpected, or fail to meet customer expectations,expectations; if our AI solutions generate inaccurate, incomplete, or misleading outputs and if our customers rely on or use such outputs to their detriment; if we fail to successfully monetize our AI-powered solutions,solutions; or if we do not have sufficient access to development resources and the technologies required to build and improve our applications, our business and reputation may be harmed.

We continue to seek opportunities to enter into new markets and/or new lines of business, some of which we may have very limited or no experience in. For example, we have and continue to make significant targeted investments in entering the medium-enterprise and U.S. federal government markets and see our success in these markets as key contributors to our future growth. Additionally, we have made and continue to make significant investments in platform offerings and AI, including generative AI and agentic capabilities. As an entrant to new markets and new lines of business, we may not be effective in convincing prospective customers that our solutions will address their needs, and we may not accurately estimate our infrastructure needs, human resource requirements, or operating expenses with regard to these new markets and new lines of business. We may also fail to accurately anticipate adoption rates of these new lines of business or their underlying technology. Also, we may not be able to properly price our solutions in these new markets, which could negatively affect our ability to sell to customers. The markets and monetization strategies for certain of our offerings, including our agentic AI solutions and Workday Data Cloud, remain relatively new and uncertain and as a result, our expansion into such offerings, and related investments, may present additional risks and challenges. For example, we offer certain AI and platform capabilities through a subscription-based flexible pricing model and may increase the number of products through which we do so. WeOur havesuccess limitedis experiencedependent withon determiningour ability to determine optimal pricing under this modelmodel, our ability to educate customers and expecteffectively amarket continuedand needsell forour additionalAI customer education withinsolutions, the sales cycle. Consequently, we may have lower levelslevel of adoption and usage of our AI solutions than we expect, which could negatively impactby our businesscustomers, and operatingour results.costs to deliver these solutions. Furthermore, customers in these new markets or of the new lines of business may demand more or different features and professional services, which may require us to devote even greater research and development, sales, support, and professional services resources to such customers. If we fail to generate adequate revenues from these new markets and lines of business, or if we fail to do so within the envisioned timeframe, it could have an adverse effect on our business, financial condition, and operating results.

•lack of experience in new geographies, markets, products, or technologies;

Our applications involve the storage and transmission of our customers’ and other users’ sensitive and proprietary information, including personal or identifying information regarding our customers, their employees, job candidates, customers, prospects, and suppliers, as well as financial, accounting, health, and payroll data. Additionally, our operations and the availability of the services we provide also depend on our information technology systems. As a result, a compromise of our applications or systems, or unauthorized access to, acquisition, use, tampering, release, alteration, theft, loss, or destruction of sensitive data, or unavailability of data or our applications, has and could disrupt our operations or impact the availability or performance of our applications; expose us and our customers to regulatory obligations and enforcement actions, litigation, investigations, remediation and indemnity obligations, or supplemental disclosure obligations; damage our reputation and brand; or result in loss of customer, consumer, and partner confidence in the security of our applications,applications; result in an increase in our insurance premiums, suspension or loss of authorization under the Federal Risk and Authorization Management Program (“FedRAMP”) or other authorizations,authorizations; impairment toimpair our business,competitive position; and result in other potential liabilities or related fees, expenses, or loss of revenues.revenues, any of which could adversely affect our business and operating results.

In the normal course of business, we are and have been the target of malicious cyber-attack attempts and have experienced and may in the future experience other security events, including the compromise of our information systems by computer hackers, employees, contractors, or vendors, as well as those involving attempts to exploit vulnerabilities in third-party technologies or services on which we rely and those involving software bugs, human error, technical malfunctions, or other malfeasance. The financial and personnel resources we employ to implement and maintain security measures, including our information security risk insurance policy, may not be sufficient to address our security needs. The security measures we have in place vary in maturity across the organization and may not be sufficient to protect against security risks, preserve our operations and services and the integrity of customer and personal information, and prevent data loss, misappropriation, and other security breaches. Our logging may not be and has not been sufficient to fully investigate the scope of an incident. Our information systems have been and may in the future be compromised by computer hackers, employees, contractors, or vendors, as well as software bugs, human error, technical malfunctions, or other malfeasance.

Cybersecurity threats and attacks are often targeted at companies such as ours and may take a variety of forms ranging from individuals or groups of security researchers, including those who appear to offer a solution to a vulnerability in exchange for some compensation, and insiders, to sophisticated hacker organizations, including state-sponsored actors whoand may launch coordinated attacks, or attacksfinancially motivated by the type of data that is processed by our customers, including our public sector customers, on our platform.actors. These threats may be directed not only at us,us but alsoor at third parties in our supply chain, including cloud service providers, software vendors, open-source software maintainers, and other service providers or partners whose products or services are integrated with or support our platform and solutions. In the normal course of business, we are and have been the target of malicious cyber-attack attempts and have experienced other security events, including those involving attempts to exploit vulnerabilities in third-party technologies or services on which we rely. As our market presence grows and as our ecosystem of partners, integrations, and service providers expands, we face increased risks of cybersecurity attack or other security threats, including supply chain attacks. Additionally, as AI technologies, including generative AI models, develop rapidly, threat actors are using these technologies to create sophisticated new attack methods that are increasingly automated, targeted, and coordinateddamaging, and more difficult to defend against. Threat actors may also target our AI models and related infrastructure in ways that we cannot yet anticipate. Further, remote work and resource access, including our hybrid work model, has and may continue to result in an increased risk of cybersecurity-related events, including phishing and other social engineering attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of our employees and our service providers continuing to work remotely from non-corporate managed networks. Examples of key cybersecurity risks include viruses, worms, ransomware, and other malicious software programs, along with social engineering attacks, fraud, credential theft or abuse, exploitation of software bugs or other defects, targeted attacks against cloud services and other hosted software, and exploitation of unmanaged software or systems, any of which can result in a compromise of our applications or systems and the data we store or process, and can result in disclosure of Workday confidential information and intellectual property, production downtimes, reputational harm, and an increase in costs to the business. For example, in August 2025, we were targeted as part of a social engineering campaign against many large organizations, resulting in unauthorized access to some of our internal systems including some commonly available business contact information in our third-party customer relationship management platform.systems. As the techniques used to obtain unauthorized access or sabotage systems change frequently, are becoming increasingly sophisticated and complex, and often are not identified until they are launched against a target, and because evidence of unauthorized activity may not have been captured or retained, or may be proactively destroyed by unauthorized actors, we may be unable to anticipate or timely detect these attacks, assess the true impact they may have on our business and operations, or to implement adequate preventative measures. Any cyber-attacks and other security events may have a significant or material impact on our business and operating results.

Furthermore, we have acquired or partnered with a number of companies, products, services, and technologies over the years, and incorporated third-party products, services, and technologies into our own products and services. Addressing security issues associated with acquisitions, partnerships, incorporated technologies, and our supply chain requires significant resources, and we have inherited and may in the future inherit additional risks upon integration with or use by Workday. In addition, if a high-profile security breach occurs with respect to an industry peer, our customers and potential customers may generally lose trust in the security of financial management, spend management, human capital management, planning, or analytics applications, or in cloud applications for enterprises in general. Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect to terminate or not renew their subscriptions, result in reputational damage, cause us to pay remediation and indemnity costs and/or issue service credits or refunds to customers for prepaid and unused subscription services, or result in lawsuits, regulatory fines, or other action or liabilities, any of which could adversely affect our business and operating results.

We rely on sophisticated information systems and technology, including those provided by third parties, for the secure collection, processing, transmission, and storage of confidential, proprietary, and personal information, and to support our business operations and the availability of our applications. In the past several years, supply chain attacks have increased in frequency and severity. As we are both a provider and consumer of information systems and technology, we are at higher risk of being impacted either directly or indirectly by these attacks. The control systems, cybersecurity program, infrastructure, physical facilities of, and personnel associated with third parties that we rely on or partner with are beyond our control. Our customers may authorize third-party technology providers to access their customer data and any unauthorized use of the third-party technology may result in unauthorized access to such data. The audits we periodically conduct of some of our third-party vendors do not guarantee the security of and may beare unable to prevent security events impacting the information technology systems of third parties thatwe arerely part of our supply chain or that provide valuable services to us, which have resulted and could result in the unauthorized access to data of Workday, our employees, our customers, our third-party partners, or other end users; acquisition, destruction, alteration, use, tampering, release, unavailability, theft or loss of confidential, proprietary, or personal data of Workday, our employees, our customers, our third-party partners, or other end users; or the disruption of our operations and our ability to conduct our business or the availability of our applications; or could otherwise adversely affect our business, financial condition, operating results, or reputation.on.

Legal requirements related to collecting, storing, handling, retaining, and transferring (collectively, “processing”) personal data are rapidly evolving at both the national and international level in ways that require our business to adapt to comply with applicable laws and support customer compliance. As the complexity of our products grows, the regulatory focus on privacy intensifies worldwide, and jurisdictions increasingly consider and adopt privacy laws, the risks related to our business’s processing of personal data also grow. The volume and complexity of these regulatory requirements may continue to increase, including in response to heightened geopolitical tensions and the rapid adoption of AI technologies. In addition, possible adverse interpretations of existing privacy-related laws and regulations by regulators in jurisdictions where our customers operate, as well as the potential adoption of new privacy-related requirements, could impose significant obligations affecting our business or prevent us from offering certain services in jurisdictions where we operate.

The global privacy and data privacyprotection compliance landscape continues to become increasingly complex, fragmented, and financially relevant to business operations. As a result, our data processing creates current and prospective risks related to increased regulatory compliance costs, government enforcement actions and/or financial penalties for non-compliance, and reputational harm. For example, the EU-U.S. Data Privacy Framework (“DPF”) is in place and provides one method under which EU data can legally be transferred to the U.S. However, it is facing legal challenges. As legal challenges to the DPF remain unresolved, uncertainty may continue regarding the legal requirements for transferring personal data from Europe, an integral aspect of our business that remains governed by, and subject to, General Data Protection Regulation (“GDPR”) requirements. FailureGaps toin complycompliance with the GDPR data processing requirements by either ourselves or our subprocessors could lead to regulatory enforcement actions, which can result in monetary penalties of up to 4% of worldwide revenue, private lawsuits, reputational damage, and loss of customers. Other EU laws, including the EU Data Act, which primarily governs access to and use of non-personal data generated by digital services, have been, and may continue to be implemented, interpreted, and enforced in ways that impose additional rules and restrictions on the deployment, operation, or use of our products and services and may require us to adapt our business practices or contractual arrangements to comply with such requirements. In addition, potential changes to the laws and regulations that relate to the processing of personal data, including legislative proposals pending in the EU and elsewhere, may change the scope or timing of our compliance obligations. Other countries such as Russia, China, Vietnam, and India have also passed or are in the process of passing laws imposing new requirements, including requirements related to consent and varying degrees of restrictive data residency or localization.

Furthermore, the U.S. Congress ishas considering numerous privacy bills,considered, and may in the future adopt, federal privacy-related legislation and data regulation, and regulators, including the U.S. Federal Trade CommissionCommission, continueshave brought and continue to bring enforcement actions forrelated unfair or deceptiveto data protection practices and may undertake its own privacy-related rulemaking. In addition to government activity, privacy advocacy and other industry groups have established or may establish various new, additional, or different self-regulatory standards that customers may require us to adhere to, which may place additional burdens on us. Increasing sensitivity of individuals to the unauthorized processing of personal data, whether real or perceived, and an increasingly uncertain trust climate has and may continue to create negative public reaction to technologies, products, and services such as ours or otherwise expose us to liability.

Taken together, the costs of compliance with and other obligations imposed by privacy and data protection laws and regulations have and may continue to require modification of our services and operations, limit use or adoption of our services, slow the pace at which we close sales transactions, or otherwise adversely affect our business. In addition, privacy and data protection laws, regulations and related enforcement activities may lead to significant fines, penalties, or liabilities for noncompliance. These requirements may impact how personal data must be stored, accessed, and deleted within the products and services and impose certain limitations on how it may be used or shared. Further, the perception of privacy concerns, whether or not valid, may inhibit the adoption, effectiveness, or use of our applications or otherwise impact our business. Compliance with applicable laws and regulations regarding personal data may require changes in services, business practices, or internal systems that result in increased costs, lower revenue, reduced efficiency, or greater difficulty competing with foreign-based firms which could adversely affect our business and operating results.

Our typical sales cycles for many new customers are six to twelve months but can extend for eighteen months or more, and we expect that this lengthy sales cycle may continue or expand as customers increasingly adopt applications across our platform. We have seen and may continue to see instances of increased scrutiny from existing and prospective customers and the lengthening of certain sales cycles. For example, we have recently experienced lengthening of certain sales cycles, particularly within net new opportunities. The extended sales cycles are particularly evident in the government, higher education, and healthcare industries which are tied to federal funding. Longer sales cycles could cause our operating and financial results to suffer in a given period. Accordingly, the effect of significant downturns in sales and market acceptance of new applications, as well as potential changes in our pricing policies or rate of renewals, may not be fully reflected in our operating results until future periods. Additionally, we may be unable to adjust our cost structure to reflect any such changes in revenues. As a result, increased growth in the number of our customers could result in our recognition of more costs than revenues in the earlier periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as subscription services revenues from new customers generally are recognized over the applicable subscription term. Furthermore, our subscription-based model is largely based on the size of our customers’ employee headcount. Therefore, the addition or loss of employees by our customers, including any significant reductions in force by our customers, or customer insolvencies resulting from severe economic hardship, can and has had an impact on our subscription services revenues. Prolonged decreases in our customers’ headcounts can materially impact our business and operating results in any given period.

In fiscal 2023, we issued $3.0 billion aggregate principal amount of senior notes (“Senior Notes”), consisting of $1.0 billion aggregate principal amount of 3.500% notes due April 1, 2027, $750 million aggregate principal amount of 3.700% notes due April 1, 2029, and $1.25 billion aggregate principal amount of 3.800% notes due April 1, 2032. Additionally, in fiscal 2023, we entered into a credit agreement (“2022 Credit Agreement”) which provides for a revolving credit facility in an aggregate principal amount of $1.0 billion. As of AprilJuly 30,31, 2026, we had no outstanding revolving loans under the 2022 Credit Agreement.

As of AprilJuly 30,31, 2026, our Co-Founder and CEO Emeritus, David Duffield, together with his affiliates, held voting rights with respect to approximately 3836 million shares of Class B common stock and 0.1 million shares of Class A common stock. As of AprilJuly 30,31, 2026, our Co-Founder, CEO, and Chair of our Board of Directors, Aneel Bhusri, together with his affiliates, held voting rights with respect to approximately 8 million shares of Class B common stock and 0.40.5 million shares of Class A common stock. In addition, Mr. Bhusri held unvested equity awards representing approximately 11.1 million shares of Class A common stock. Further, Messrs. Duffield and Bhusri have entered into a voting agreement under which each has granted a voting proxy with respect to certain Class B common stock beneficially owned by him effective upon his death or incapacity as described in our registration statement on Form S-1 filed in connection with our IPO. Messrs. Duffield and Bhusri have each initially designated the other as their respective proxies. Accordingly, upon the death or incapacity of either Mr. Duffield or Mr. Bhusri, the other would individually continue to control the voting of shares subject to the voting proxy. Collectively, the shares described above represent a substantial majority of the voting power of our outstanding capital stock. As a result, Messrs. Duffield and Bhusri have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. As stockholders, even as controlling stockholders, they are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally.

Our Class B common stock has 10 votes per share and our Class A common stock, which is the stock that is publicly traded, has one vote per share. Stockholders who hold shares of Class B common stock, including our executive officers, directors, and other affiliates, together hold a substantial majority of the voting power of our outstanding capital stock as of AprilJuly 30,31, 2026. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the conversion of all shares of all Class A and Class B shares to a single class of common stock on the date that is the first to occur of (i) October 17, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr. Duffield and Mr. Bhusri, or (iv) the date on which the holders of a majority of the shares of Class B common stock elect to convert all shares of Class A common stock and Class B common stock into a single class of common stock. This concentrated control will limit or preclude the ability of non-affiliates to influence corporate matters for the foreseeable future.

We have achieved significant growth since our inception in 2005, when we pioneered HCM in the cloud. As a result of our innovation and commitment to customer success, today we are a Fortune 500 company with more than 11,500 customers around the world. As we continue to grow, we are focused on driving sustainable, long-term subscription revenue growth by adding new customers and expanding our relationships with existing customers through increased adoption of our suite of solutions. Central to this effort is investing in strategic growth areas including developing innovative AI solutions, expanding internationally, growing our partner ecosystem, deepening our presence in industry verticals and the emerging and medium enterprise market, and exploring strategic acquisitions to complement our organic innovation. Our investments across these targeted growth areas may require additional costs, but we remain committed to optimizing resource allocation and realizing a return on our investments. Over time, we believe these investments will support revenue growth and a more scalable business.

Impact of Current Economic and Market Conditions

Recent macroeconomic events and evolving market conditions are impacting aspects of our business including customer behavior and the way we market, price, and sell our solutions. External factors such as increased tariffs, elevated inflation and energy prices, the evolving legislative and regulatory environment, and fluctuating interest rates and foreign currency exchange rates, as well as geopolitical instability and conflicts, continue to impact the global economy and create uncertainty, volatility, and disruption of financial markets. As a result, we have experienced, and may continue to experience, a moderation of revenue growth rates due to deal scrutiny and the lengthening of certain sales cycles, particularly within net new opportunities, as well as reduced growth in headcount-level commitments upon renewals of existing customers. The extended sales cycles are particularly evident in the government, higher education, and healthcare industries which are tied to federal funding. Further, we have provided, and may continue to provide, certain customers with more flexible payment terms. Additionally, to address the rapidly changing technology market and AI landscape, we are addressing shifts in customer buying behavior and demand through actions such as new pricing models and sales and marketing strategies, all of which are dependent on our ability to optimally price our solutions, customer adoption and usage, and our costs to deliver our solutions. For further discussion of the potential impacts of recent macroeconomic events and market conditions on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.

Subscription services revenues accounted for approximately 93% of our total revenues for the three and six months ended AprilJuly 30,31, 2026, and represented 97% of our total unearned revenue as of AprilJuly 30,31, 2026. Subscription services revenues are driven primarily by the number of customers, the number of workers at each customer, the specific applications subscribed to by each customer, and the price of our applications.

Our subscription revenue backlog, which is also referred to as remaining performance obligations for subscription contracts, represents contracted subscription services revenues that have not yet been recognized and includes billed and unbilled amounts. Subscription revenue backlog may fluctuate from period-to-period due to a number of factors, including the timing of renewals and overall renewal rates, new business growth, average contract duration, industry and product mix, business combinations, and seasonality.

Total revenues were $2.6 billion for the three months ended July 31, 2026, compared to $2.3 billion for the prior year period, an increase of $301 million, or 13%. Subscription services revenues were $2.5 billion for the three months ended AprilJuly 30,31, 2026, compared to $2.2 billion for the prior year period, an increase of $302 million, or 13%. Subscription services revenues were $2.4 billion for the three months ended April 30, 2026, compared to $2.1 billion for the prior year period, an increase of $295 million, or 14%. Approximately 60% of the increase in subscription services revenues was attributable to expansion within our customers that existed as of the beginning of the comparable prior year period, and the remaining 40% was attributable to customers added after the beginning of the comparable prior year period. Professional services revenues were $188$178 million for the three months ended AprilJuly 30,31, 2026, compared to $181$179 million for the prior year period, ana increasedecrease of $7$1 million, or 4%.1%. Professional services revenues remained relatively flat as we continued to expand and leverage our service providers.

Our growth in subscription services revenues attributable to existing customers is further reflected by our gross revenue retention rate of approximately 97% as of AprilJuly 30,31, 2026. Our gross revenue retention rate measures the percentage of recurring revenue retained from existing customers and is calculated by taking total annual recurring revenue (“ARR”) of our customers as of the corresponding prior period-end and comparing that to ARR from that same set of customers as of the current period-end. The metric takes into account recurring revenues lost to product or customer churn but does not account for additional revenue earned from add-ons or net expansions, which include volume and price adjustments. Our high gross revenue retention rate demonstrates our ability to maintain our existing customer base and drive strong overall customer satisfaction.

As of AprilJuly 30,31, 2026, our total subscription revenue backlog was $27.3$27.4 billion, withand $8.812-month billionsubscription expectedrevenue tobacklog bewas recognized$9.0 in revenues over the next 12 months.billion. As of AprilJuly 30,31, 2025, our total subscription revenue backlog was $24.6$25.4 billion, withand $7.612-month billionsubscription expectedrevenue tobacklog bewas recognized$7.9 in revenues over the next 12 months.billion. The increase in subscription revenue backlog was primarily driven by expansion within our existing customer base, sales to new customers, and timing of renewals for existing customers.

Total costs and expenses were $2.2$2.3 billion for the three months ended AprilJuly 30,31, 2026, compared to $2.2$2.1 billion for the prior year period, an increase of $4$236 million, or 0.2%.11%. The increase in total costs and expenses included increases of $60$126 million in employee-related expenses, $51$43 million in facilities and IT-related expenses, $32 million in third-party hosted infrastructure expenses, $36 million in facilities and IT-related expenses, $15$14 million in amortization of acquisition-related intangible assets, and $11 million in amortization of deferred sales commissions, offset by a reduction of $166 million in restructuring expenses.commissions.

Costs of subscription services were $412$436 million for the three months ended AprilJuly 30,31, 2026, compared to $350$370 million for the prior year period, an increase of $62$66 million, or 18%. The increase in costs of subscription services included increases of $47$33 million in third-party hosted infrastructure expensesexpenses, and$14 $11million in employee-related expenses, $9 million in amortization of acquisition-related intangible assets.assets, and $9 million in facilities and IT-related expenses.

Costs of professional services were $192$216 million for the three months ended AprilJuly 30,31, 2026, compared to $187$212 million for the prior year period, an increase of $5$4 million, or 3%.2%. Costs of professional services remained relatively flat.

Product development expenses were $705$747 million for the three months ended AprilJuly 30,31, 2026, compared to $663$660 million for the prior year period, an increase of $42$88 million, or 6%.13%. The increase in product development expenses included increases of $31$71 million in employee-related expenses and $16$22 million in facilities and IT-related expenses.

Sales and marketing expenses were $679$706 million for the three months ended AprilJuly 30,31, 2026, compared to $623$641 million for the prior year period, an increase of $56$65 million, or 9%.10%. The increase in sales and marketing expenses included increases of $22$28 million in employee-related expenses, $11 million in amortization of deferred sales commissions, and $11$8 million inrelated facilitiesto andmarketing IT-related expenses.programs.

General and administrative expenses were $216$231 million for the three months ended AprilJuly 30,31, 2026, compared to $212$216 million for the prior year period, an increase of $4$15 million, or 2%.7%. GeneralThe increase in general and administrative expenses remainedincluded relativelyan flat.increase of $8 million in employee-related expenses.

There were no material restructuring expenses recognized during the three and six months ended AprilJuly 30,31, 2026.

Restructuring expenses were $166$1 million and $167 million for the three and six months ended AprilJuly 30,31, 2025, ofrespectively. whichThese $132expenses included $133 million related to employee transition, severance payments, employee benefits, and share-based compensation, and $34 million related to an impairment of office space.

Share-based compensation expense decreasedincreased by $50$71 million for the three months ended AprilJuly 30,31, 2026, compared to the prior year period, primarily due to aadditional reductiongrants into restructuringnew expenses.and existing employees.

Equity compensation is an important element of our compensation philosophy. While weWe expect share-based compensation expense to grow in absolute dollars as we expandcontinue to issue share-based awards to our globalemployees workforce, we expect it tobut decline as a percentage of total revenues.

Non-GAAPGAAP operating income was $809$313 million, or 31.8%11.8% of revenues, for the three months ended AprilJuly 30,31, 2026, compared to the prior year non-GAAPGAAP operating income of $677$248 million, or 30.2%10.6% of revenues. The increase is primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses.

(1)Share-based compensation expense in the GAAP to non-GAAP reconciliation tables above excludes share-based compensation associated with restructuring activities of $42 million for the threesix months ended AprilJuly 30,31, 2025. TheseThis expensesexpense areis included in Restructuring costs. There was no comparable activity for the six months ended July 31, 2026.

Other income, net decreased by $47$42 million and $89 million for the three and six months ended AprilJuly 30,31, 2026, respectively, compared to the prior year periods. The decreases were primarily due to lower interest income followingresulting from the liquidation of marketable debt securities in the prior fiscal year to fund acquisition activities and share repurchases.

Provision For (Benefit From) Income Taxes

The provision for (benefit from) income taxes was as follows (in millions):

The income tax provision for the three and six months ended AprilJuly 30,31, 2025, was primarily attributable to earnings in the U.S. and profitable foreign jurisdictions.

As of AprilJuly 30,31, 2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $4.4$3.4 billion, which were primarily held for working capital and general corporate purposes. Our cash equivalents and marketable securities are primarily composed of, in order from largest to smallest, corporate bonds, U.S. treasury securities, U.S. agency obligations, money market funds, asset-backed securities, U.S. agency obligations, and supranational securities.

Our long-term future capital requirements depend on many factors, including the effects of macroeconomic trends, customer growth rates, subscription renewal activity, headcount growth,levels, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, infrastructure development, and our investment and acquisition activities. As part of our strategy, we may choose to seek additional debt or equity financing, which may not be available on terms favorable to us or at all. Additionally, our cash provided by operating activities could be affected by various risks and uncertainties, including the “Risk Factors” included in Part II, Item 1A of this report.

Cash provided by operating activities was $696$1.2 millionbillion and $457$1.1 millionbillion for the threesix months ended AprilJuly 30,31, 2026, and 2025, respectively. The improvement in cash provided by operating activities was primarily driven by higher cash collections of $463$723 million mainly due to increased sales, partially offset by increased employee-related payments of $90 million, increased supplier payments of $66$196 million to support our continued growth, increased employee-related payments of $191 million, higher income tax payments of $73 million, and decreased interest income of $30$58 million.

Cash provided by investing activities was $97$1.0 millionbillion for the threesix months ended AprilJuly 30,31, 2026, which primarily resulted from net cash inflows of $127$1.1 millionbillion related to marketable debt securities activity and net cash inflows of $41$29 million fromrelated the exit ofto non-marketable equity investments,investments activity, offset by capital expenditures of $80$139 million mainly for office space projects.

Cash used in investing activities was $523$510 million for the threesix months ended AprilJuly 30,31, 2025, which primarily resulted from a net outflowcash outflows of $483$431 million related to marketable debt securities activity andactivity, capital expenditures of $36$64 million mainly for office space projects.projects, and purchases of $15 million for non-marketable equity investments.

Cash used in financing activities was $1.7$3.1 billion for the threesix months ended AprilJuly 30,31, 2026, which primarily resulted from repurchases of common stock of $1.6$2.9 billion under our share repurchase programs and taxes paid of $146$273 million related to net share settlement of equity awards.awards, offset by proceeds of $98 million from the issuance of common stock from employee equity plans.

Cash used in financing activities was $501$850 million for the threesix months ended AprilJuly 30,31, 2025, which primarily resulted from repurchases of common stock of $290$589 million under our share repurchase programs and taxes paid of $211$372 million related to net share settlement of equity awards.awards, offset by proceeds of $111 million from the issuance of common stock from employee equity plans.

Free cash flows were $616$1.1 millionbillion for the threesix months ended AprilJuly 30,31, 2026, compared to $421$1.0 millionbillion for the prior year period. The improvement was primarily driven by higher cash collections of $463$723 million mainly due to increased sales, partially offset by increased employee-related payments of $90 million, increased supplier payments of $66$196 million to support our continued growth, increased employee-related payments of $191 million, increased capital expenditures of $44$75 million, higher income tax payments of $73 million, and decreased interest income of $30$58 million.

Share repurchase programs authorized by our Board of Directors that were activein effect during the periodsthree presentedand six months ended July 31, 2026, and 2025, were as follows (in millions):

As of July 31, 2026, our share repurchase programs were fully completed with no authorization remaining. In August 2026, our Board of Directors authorized the repurchase of up to an additional $4.0 billion of our outstanding shares of Class A common stock. For further information, see Note 13, Stockholders’ Equity, and Note 20, Subsequent Event, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

See “Results of Operations—Operating Income and Operating Margin” for reconciliations from the most directly comparable GAAP financial measures of GAAP operating income and GAAP operating margin, to the non-GAAP financial measures of non-GAAP operating income and non-GAAP operating margin, for the three and six months ended AprilJuly 30,31, 2026, and 2025.

See “Liquidity and Capital Resources—Free Cash Flows” for a reconciliation from the most comparable GAAP financial measure, net cash provided by operating activities, to the non-GAAP financial measure, free cash flows, for the threesix months ended AprilJuly 30,31, 2026, and 2025.

•Business combinations, goodwill, and acquisition-related intangible assets For a further discussion of our critical accounting estimates, refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2026. During the threesix months ended AprilJuly 30,31, 2026, there were no significant changes to our critical accounting estimates.