Workday Q3 Earnings Beat Estimates on Solid Revenue Growth

Workday, Inc. WDAY reported strong third-quarter fiscal 2026 results, with the bottom and top lines beating the respective Zacks Consensus Estimate. The company reported revenue growth year over year, driven by solid customer wins across various industries, including education, healthcare, financial Services, tech and media. Management’s strong focus on innovations, AI integration and international expansion is a positive factor.Net Income of WDAYNet income, on a GAAP basis, was $252 million or 94 cents per share compared with $193 million or 72 cents in the year-ago quarter. Healthy top-line growth boosted the net income during the quarter.Non-GAAP net income per share was $2.32 compared with $1.89 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 19 cents.Workday, Inc. Price, Consensus and EPS Surprise Workday, Inc. price-consensus-eps-surprise-chart | Workday, Inc. QuoteWDAY’s RevenuesNet sales during the quarter were $2.43 billion, up from $2.16 billion in the year-ago quarter, backed by rising demand for the company’s Human Capital Management and financial management solutions. The top line beat the Zacks Consensus Estimate by $17 million.In the third quarter, healthy traction in tech, media, financial services, healthcare and education drove the top line. New customer wins with Sunnybrook Health Sciences Centre, Fuji Electric and The Magnum Ice Cream Company, and expansion agreements with CommonSpirit Health, Levi Strauss and Novartis are positive factors.Subscription services revenues contributed $2.24 billion, up from $1.95 billion in the year-ago quarter. Net sales missed our estimate of $2.23 billion. At the end of the quarter, the 12-month subscription revenue backlog was $8.21 billion, up 17.6%, backed by higher contract renewals. The total subscription revenue backlog was $25.96 billion, up 17% year over year. Revenues from professional services were $188 million compared with $201 million in the prior-year quarter. The top line beat our estimate of $180.1 million.Other Details of WDAYOperating income during the quarter was $259 million compared with $165 million in the year-ago quarter. Non-GAAP operating income was $692 million, up from $569 million a year ago, with respective margins of 28.5% and 26.3%. The year-over-year improvement was backed by a combination of revenue outperformance, ongoing cost discipline and improved efficiencies across the company.WDAY’s Cash Flow & LiquidityDuring the third quarter of fiscal 2026, the company generated $588 million of cash from operating activities compared with $406 million in the prior-year quarter. As of Oct. 31, 2025, it had cash and cash equivalents and marketable securities of $6.84 billion, with long-term debt of $2.98 billion.WDAY’s OutlookFor the fourth quarter of fiscal 2026, Workday expects Subscription services revenues to be $2.35 billion, representing growth of 14%. Management expects the non-GAAP operating margin to be 28.5%.For fiscal 2026, the company expects subscription revenues to be $8.82 billion, indicating growth of 14% year over year. The non-GAAP operating margin is anticipated to be 29%. Capital expenditure is approximated to be around $200 million, down slightly from fiscal 2025. Non-GAAP tax rate is expected to be 19%. Operating cash flow is forecasted to be $2.9 billion.WDAY’s Zacks Rank & Stocks to ConsiderWorkday currently carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the broader industry have been discussed below.Celestica Inc. CLS sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.In the last reported quarter, it delivered an earnings surprise of 7.48%. The growing proliferation of AI-based applications and generative AI tools across industries presents a solid growth opportunity for Celestica. Celestica’s focus on product diversification and increasing its presence in high-value markets is positive. Its strong research and development foundations allow it to produce high-volume electronic products and highly complex technology infrastructure products for a wide range of industries.CommScope Holdings Inc. COMM sports a Zacks Rank #1. CommScope’s comprehensive, differentiated portfolio allows it to hold a dominant position in the communication infrastructure industry.In the last reported quarter, COMM delivered an earnings surprise of 67.57%. With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, CommScope is dedicated to developing solutions designed to support wireline and wireless network convergence, which will be essential for the success of 5G technology.  Ericsson ERIC carries a Zacks Rank #2 (Buy) at present. It delivered an earnings surprise of 23.08% in the last reported quarter.Ericsson is well-positioned to cash in on the market momentum with its competitive 5G product portfolio. The company continues to execute its strategy to become a leading mobile infrastructure provider and establish a focused enterprise business. The combination of strategic buyouts and continuous innovation are expected to accelerate commercial expansion and solidify Ericsson’s position in the wireless equipment market.Free Report: Profiting from the 2nd Wave of AI ExplosionThe next phase of the AI explosion is poised to create significant wealth for investors, especially those who get in early. It will add literally trillion of dollars to the economy and revolutionize nearly every part of our lives.Investors who bought shares like Nvidia at the right time have had a shot at huge gains.But the rocket ride in the "first wave" of AI stocks may soon come to an end. The sharp upward trajectory of these stocks will begin to level off, leaving exponential growth to a new wave of cutting-edge companies.Zacks' AI Boom 2.0: The Second Wave report reveals 4 under-the-radar companies that may soon be shining stars of AI’s next leap forward.Access AI Boom 2.0 now, absolutely free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Ericsson (ERIC): Free Stock Analysis Report Celestica, Inc. (CLS): Free Stock Analysis Report Workday, Inc. (WDAY): Free Stock Analysis Report CommScope Holding Company, Inc. (COMM): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks