With newly named co-CEO Carl Eschenbach claiming Workday’s on a path “to becoming one of the largest and most profitable software companies in the world,” Workday not only delivered very strong Q4 revenue growth but also saw its total subscription backlog jump again by more than 28%.
That combination of near-term execution and significant long-term commitments was likely at the core of Eschenbach’s bullish comment and marked a decidedly new tone from the Financials and HCM powerhouse.
I’ll have more details from the Q4 earnings call later this week, but here are some quick reactions to Workday’s numbers:
- Workday’s Q4 (for the 3 months ended Jan. 31) subscription revenue grew 21.7% year over year to $1.5 billion
- That figure underscores strong consistency in Workday’s ability to continue growing aggressively over the past year in spite of the global economic uncertainty and the resulting slower growth that a number of cloud vendors have experienced
- For the past five quarters, here are Workday’s growth rates for subscription revenue, starting with the period just ended and working backward in time:
- Q4: 21.7%
- Q3: 22.3%
- Q2: 22.8%
- Q1: 23.2%
- Q4 of fiscal 2022: 22.2%
- Workday is expecting very solid growth to continue, as CFO Barbara Larson said in a press release that “we are maintaining the midpoint of our preliminary fiscal year 2024 subscription-revenue guidance.”
- The total subscription backlog number cited in the headline shows that as Workday continued to meet its short-term revenue objectives, it is also continuing to secure long-term commitments from customers around the world. Total subscription backlog refers to business that has been contracted but not yet recognized as revenue, a trend I discussed for some other major cloud-application vendors in Cloud RPO Growth: Oracle, SAP, ServiceNow Crush Salesforce. We can now add Workday to that list of high-performance vendors as well
- For the past five quarters, Workday’s reported very solid growth in total subscription backlog, and the numbers are definitely worth a look:
- Q4: up 28.4% to $16.45 billion
- Q3: up 28.5% to $14.1 billion
- Q2: up 27.4% to $13.47 billion
- Q1: up 25.5% to $12.65 billion
- Q4 of FY22: up 26.9% to $12.81 billion
I have to say that I liked Eschenbach’s rallying cry about Workday’s aspiration to become one of the world’s biggest and most profitable software companies. While saying it and doing it are two very different things, the market in which Workday competes is jammed with high-growth, high-aspiration, high-performance companies, and I’m glad to see Workday’s new co-CEO overtly declaring his vision for what Workday can achieve.
As for how Workday expects to reach that rarified air, co-founder and co-CEO Aneel Bhusri said that in spite of the current “unpredictable environment,” Workday will continue to aggressively leverage its “unique approach to embedding artificial intelligence and machine learning into the very core of our platform.”
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