Workday’s Q1 numbers came in yesterday and made Wall Street happy. The firm turned in a net profit of $136,000, while revenue was up 17% year-on-year to $1.68 billion, of which subscription revenue was up 20% to $1.53 billion.
Co-CEO Carl Eschenbach, now six months into the role, cited a number of key customer successes during the quarter:
In HCM, where we are the clear market leader, we saw sustained momentum with several new customer wins, including Dollar Tree, Interpublic Group, Johor Corporation and McLean Company, along with notable HCM go-lives, including DICK'S Sporting Goods, J. Crew and Lexmark International. Increasingly, customers are looking to leverage the full power of Workday by purchasing both HCM and Financial Management. New full Platform wins in Q1 include IBEX Global Solutions, Pima County, The Rio and Stephens Transport. We also had several core Fins go-live, including Whole Foods, Vanderbilt University Medical Center; and Extendicare, which went live on both Financials and HCM.
Customers are increasingly leaning into Workday as their trusted platform across the board. This was reflected in strong renewals and healthy expansion activity across our installed base in Q1. Wins include Brown & Brown, IU Group, Nissan and Racetrack, to name a few. We are seeing expand to momentum across our product portfolio, including solutions that deliver faster time to value for customers such as Peakon, Planning, Health and Talent Optimization. This momentum is helping our sales teams create and close a healthy amount of pipeline all in the same quarter.
Planning is a particular sweet spot for ‘land and expand’ into HCM and Financials, he went on:
We land customers with Planning, and then they come right back in and buy both. Financials, obviously, but we're also seeing people buy HCM on the back of a planning land because of workforce planning. In the example of Exxon, we only had a portion of their business for Planning, and they expanded it much more broadly across their entire business because they saw the value that they got from that platform that they started to use a year ago.
Eschenbach cited two key themes that he sees as setting Workday apart:
The first is that Workday is mission-critical. Workday is the intelligent digital backbone for enterprises who are looking to consolidate their technology footprint and move from best-of-breed applications to best-in-suite or best-in-platform. Enterprises are clearly looking to benefit from the reduced total cost of ownership and a rapid pace of innovation that Workday delivers.
Second, Workday's approach to AI and ML is a clear differentiator for us. With over 60 million users all on a unified data model. We are uniquely positioned to be the secure steady hand to support our customers through this tectonic technology shift, same as we did with cloud.
Aneel Bhusri, Workday founder and co-CEO, picked up on the AI angle, arguing:
One, AI and ML are embedded into the very core of our platform, allowing us to rapidly deliver and sustain new ML-infused capabilities into our products to drive more business value for our customers.
Two, we have the quantity and quality of data that further differentiates us, meaning that we not only have access to an enormous amount of data due to the more than 60 million users representing more than 600 billion transactions over the last year. But we also have a unified data model that allows us to build and train models in a way our competitors simply cannot replicate.
And three, we firmly believe that to deliver on the possibilities it offers AI and ML must be leveraged in a trustworthy and ethical way. Workday has always been a trusted partner to help companies keep their most critical assets, their people and money, safe, secure and private. This approach becomes even more essential when leveraging AI and ML.
He cited a couple of examples of how Workday is using AI in its offerings, beginning with the addition of semantic search capabilities to Workday Peakon Employee Voice:
While manual keyword searches take hours or days, semantic search can analyze employee comments in seconds to quickly provide leaders with the insights they need to address emerging workplace trends. Employee Engagement is one of the biggest hot buttons for CEOs today, and we're continuing to see more organizations turn to Peakon to help them stay on top of and address employee sentiment. In fact, Peakon hit a significant milestone in Q1 as it surpassed more than 500 million total survey responses, and 70 million written comments, providing us with one of the world's largest standardized data sets on employee sentiment.
Meanwhile, for CFO customers:
We recently unveiled Predictive Forecaster, a capability within Workday adaptive planning, that creates ML-based forecasts with the ability to add additional regressors and datasets. The feature which is in limited availability today, supports our next evolution of Workday adaptive planning to produce increasingly predictive plans and enhance insights to help organizations more effectively navigate today's business landscape.
No corporate presentation is complete at present without mention of generative AI. Bhusri obliged on that front, but was keen to make the point that this isn’t something new for his company:
Despite the recent hype around large language models, Workday has been delivering AI and ML, including LLMs, for several years. We believe we need to look past the hype cycle and identify the real ways our customers can extract business value from LLMs.
Today we're using generative AI tools behind the scenes to help power products like Workday Search and Skills Cloud, while exploring a variety of generative AI use cases for our customers. For example, we're looking at many content generation use cases within our Workday talent management, recruiting, financial management, and core HCM applications.
Bhusri also made an important statement of intent:
For years, we have taken a leading role in AI-focused policy discussions at the federal state and local level in the US, while partnering with the European Union and other governments around the world to provide thoughtful and concrete policy approaches to responsible AI. Simply put, we believe AI technology should be regulated. This is an area that you will continue to hear more from us in future quarters.
A solid quarter - and a very welcome and articulate explanation of Workday’s AI thinking.