Workday rises as Q3 revenues grow 16.7% on back of strong customer momentum

Stuart Lauchlan Profile picture for user slauchlan November 29, 2023
Summary:
WIth a CEO transition looming, Workday exits 2023 in good shape and with AI ambitions bedding in.

Workday Aneel Bhusri Carl Eschenbach
Aneel Bhusri, Carl Eschenbach

A strong end to calendar 2023  for Workday with revenues up 16.7% year-on-year from $1.6 billion to $1.87 billion, with net income coming in at $113.71 million compared to a year-ago loss of $74.72 million. Subscription revenue was up to $1.69 billion from $1.43 billion. 

Other stats of note: 

  • US revenue totaled $1.4 billion, growing 17% year-on-year, while international revenue totaled $462 million, also growing at 17%.
  • Full platform deals involving HCM and Financials are on the rise with new customers in Q3 including AdventHealth, Bentley Systems, Houston Methodist and Lifespan.
  • There are now more than 5000 core HCM customers. 
  • New HCM customers in Q3 included Greene King Brewing, Group 1 Automotive, Minor Hotel Group and the US  Department of Energy.
  • New Financials customers included Clearwater analytics, Ochsner Clinic Foundation and Concentrix.
  • HCM go-lives included American Electric Power. Dave and Buster's and Iberdrola.
  • Financials go-lives included NorthShore University Health System, SolutionHealth and Weis Markets.

Momentum

There is a clear sense of momentum across the business, according to co-CEO Carl Eschenbach, with some key themes coming across from customers: 

First, talent continues to be a top C-Suite priority. In this macro-environment businesses are looking to scale and drive productivity. They can achieve both outcomes by simply hiring more. Leaders are turning to Workday to help them re-skill and up-skill their workforce, all while delivering a great employee experience that helps them reduce attrition and ultimately drives productivity.

Second, leaders are continuing to consolidate their technology footprint on a true platform to realize total cost of ownership benefits, while also accelerating their operations. Workday is perfectly positioned to benefit as the intelligent digital backbone businesses can rely on to manage their most precious assets, their people, and their money.

And finally, AI, and in particular, generative AI, is becoming a business imperative. As a trusted partner and a market leader with over 65 million users under contract we can uniquely drive efficiencies and improve the employee experience…it is what we are doing and not just saying that is resonating with our customers.

That said, he added: 

At this point, I don't think people are making decisions yet just purely on AI. I think it's something that every customer looks at to make sure that they're going to be covered with a new deployment or a customer knowing that Workday has them in a strong place, but they're still looking first and foremost at running their business and moving off of crappy legacy applications into the cloud. And we're unmatched in that category. And then when we add the AI stuff, I think it just checks that AI box.

But, I would say that despite all the hype, it's still in the early days of actual large scale deployments of AI in HR and finance. We’re ready, we're waiting.

AI additions

Picking up the AI theme, co-CEO Aneel Bhusri pointed to recent AI capabilities announcements from the Workday Rising event:

On the generative AI front, we announced several new capabilities that will benefit all users with an emphasis on increasing productivity. Growing and retaining talent, streamlining business processes and driving better decision making. Examples of the use cases we previewed, which we expect to be available next year, include the ability to generate job descriptions in minutes versus hours; analyzing correct contracts for faster, more accurate revenue recognition; [creating] employee growth plans to foster and retain talent; and [providing] text-to-code generation capabilities to increase productivity of app development in Workday Extend.

Bhusri also pointed to Workday’s investment in conversational AI as an important future driver of change: 

While we are still in the exploratory phase with this technology, we believe conversational AI will fundamentally change how users interact with Workday by enabling them to easily surface information they need and interact with data through simple conversation. We're also leveraging generative AI to create a conversational experience for Workday Adaptive Planning customers. The use of conversational text will simplify the process of surfacing key planning insights, enabling users to make quicker, more strategic decisions about their businesses.

My take

A great end to a strong year for Workday. Coming up in 2024 will be Eschenbach’s assumption of the role of sole CEO, while Bhusri remains as Executive Chairman. Bhusri previously took over as CEO from his co-founder Dave Duffield, to whom he still speaks on a near weekly basis: 

He is still the touchstone for a lot of things that happen at Workday. But you know what he said to me when I became the CEO - 'There can only be one captain of the ship'. And I'd say the same thing about Carl. I'm excited about Carl being the captain of the ship…I'm really happy in transitioning back to a product and innovation and strategy role, which is really how Workday got started with Dave and I. Those are my roots.

To which, Eschenbach’s response is:

Aneel is going to be sticking around…He's truly a genius when it comes to product and product strategy. He is not going anywhere, period. I know he's my boss as Executive Chair, but I also want to be his boss sometimes and tell him he's not going anywhere.

Onwards and upwards! 

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