What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-23 compared with 2024-12-05 · 132 added, 151 removed, 183 unchanged (61% of the section changed)

1 unchanged sentence

You should read the following discussion of our financial condition and results of operations in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this report.

Workday is a leading platform that helps organizations manage their most important assets - their people and money.

We deliver cloud-based applications for financial management, human capital management, planning, spend management, and analytics.

Our diverse customer base includes medium-sized and large, global organizations within numerous industry categories, including professional and business services, financial services, healthcare, education, government, technology, media, retail, and hospitality.

With Workday, our customers have a unified platform with AI built into its core that can help them deliver better employee experiences, improve operational efficiencies, and provide insights for faster, data-driven decision-making.

Workday is the artificial intelligence (“AI”) platform to help organizations manage their people, money, and agents.

We deliver cloud-based, AI-powered applications for financial management, human capital management (“HCM”), planning, spend management, and analytics.

Our diverse customer base includes emerging, medium-sized, and large global organizations within numerous industries, including professional and business services, financial services, healthcare, education, government, technology, media, retail, and hospitality.

Workday helps customers 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 11,000 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 footprint with existing customers through product add-ons, increased headcount level commitments, and price adjustments.

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 financial management and HCM applications, expanding internationally, innovating with AI, growing our partner ecosystem, deepening our industry verticals, and exploring strategic acquisitions to complement our organic innovation.

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.

We are continuing to focus on expanding our operating margin by driving scale and building efficiencies across the business through investments in people, processes, and systems.

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 are focused on expanding our operating margin by driving scale and building efficiencies across the business through investments in people, processes, and systems.

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.

In February 2025, we announced a restructuring plan (“Fiscal 2026 Restructuring Plan”), which is intended to prioritize our investments and continue advancing our ongoing focus on durable growth.

The plan resulted in the reduction of approximately 7.5% of our workforce.

In connection with this plan, we have exited certain owned office space.

Impact of Current Economic Conditions

Recent macroeconomic events including elevated inflation and fluctuating interest rates, as well as geopolitical factors including the Russia-Ukraine and Israel-Hamas conflicts, continue to impact the global economy and create uncertainty, volatility, and disruption of financial markets.

Despite this, we are confident in the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers on their human capital and finance digital transformation journeys.

Recent macroeconomic events including increased tariffs, elevated inflation, and fluctuating interest rates and foreign currency exchange rates, as well as geopolitical instability, continue to impact the global economy and create uncertainty, volatility, and disruption of financial markets.

We remain confident in the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers on their human capital and finance digital transformation journeys.

Demand for our products remains strong, we continue to achieve solid new subscription bookings, and our near-term revenues are relatively predictable as a result of our subscription-based business model.

6 unchanged sentences

The following table provides an overview of our key metrics (in millions, except percentages, basis points, and headcount data):

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 Change 2024 2023 Change

Three Months Ended April 30,

2025 2024 Change

Total revenues $ 2,240 $ 1,990 13 %

Subscription services revenues $ 2,059 $ 1,815 13 %

GAAP operating income (loss) $ 165 $ 88 88 % $ 340 $ 104 226 %

GAAP operating income $ 39 $ 64 (38) %

Non-GAAP operating income (1)

$ 677 $ 515 32 %

GAAP operating margin 7.6 % 4.7 % 294 bps 5.5 % 2.0 % 350 bps

GAAP operating margin 1.8 % 3.2 % (144 bps)

Non-GAAP operating margin (1)

26.3 % 24.8 % 154 bps 25.7 % 24.0 % 171 bps

30.2 % 25.9 % 437 bps

Operating cash flows $ 457 $ 372 23 %

1 unchanged sentence

$ 421 $ 291 45 %

As of October 31,

As of April 30,

2025 2024 Change

3 unchanged sentences

Headcount (2)

20,515 19,415 6 %

(1) See “Non-GAAP Financial Measures” below for further information.

(2) Does not reflect the impact of the Fiscal 2026 Restructuring Plan which reduced our workforce by approximately 7.5%.

Components of Results of Operations

2 unchanged sentences

Professional services revenues include fees for deployment services, optimization services, and training.

Subscription services revenues accounted for approximately 91% of our total revenues for the three and nine months ended October 31, 2024, and represented 96% of our total unearned revenue as of October 31, 2024.

Subscription services revenues accounted for approximately 92% of our total revenues for the three months ended April 30, 2025, and represented 96% of our total unearned revenue as of April 30, 2025.

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.

17 unchanged sentences

Costs of subscription services revenues.

Costs of subscription services revenues consist primarily of expenses associated with hosting our applications and providing customer support, including employee-related expenses, expenses related to data center capacity and computing infrastructure operated by third parties, and depreciation of our data center equipment.

Costs of subscription services revenues consist primarily of expenses associated with hosting our applications, providing standard customer support, and delivering our enhanced customer support service, Workday Success Plans.

These costs include employee-related expenses, expenses related to data center capacity and third-party hosted infrastructure, and depreciation of our data center equipment.

Costs of professional services revenues .

9 unchanged sentences

General and administrative expenses consist of employee-related expenses for finance and accounting, legal, human resources, information systems personnel, professional fees, 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 charges associated with the closure of facilities and other exit and disposal activities.

Results of Operations

Our total revenues were as follows (in millions, except percentages):

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 % Change 2024 2023 % Change

Three Months Ended April 30,

2025 2024 % Change

Subscription services $ 2,059 $ 1,815 13 %

1 unchanged sentence

Total revenues $ 2,240 $ 1,990 13 %

Total revenues were $2.2 billion for the three months ended October 31, 2024, compared to $1.9 billion for the prior year period, an increase of $294 million, or 16%.

Subscription services revenues were $2.0 billion for the three months ended October 31, 2024, compared to $1.7 billion for the prior year period, an increase of $268 million, or 16%.

Total revenues were $2.2 billion for the three months ended April 30, 2025, compared to $2.0 billion for the prior year period, an increase of $250 million, or 13%.

Subscription services revenues were $2.1 billion for the three months ended April 30, 2025, compared to $1.8 billion for the prior year period, an increase of $244 million, or 13%.

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 $201 million for the three months ended October 31, 2024, compared to $175 million for the prior year period, an increase of $27 million, or 15%.

The increase in professional services revenues was driven by increased progress on fixed fee projects of $15 million and higher demand for deployment and integration services of $12 million.

Total revenues were $6.2 billion for the nine months ended October 31, 2024, compared to $5.3 billion for the prior year period, an increase of $898 million, or 17%.

Subscription services revenues were $5.7 billion for the nine months ended October 31, 2024, compared to $4.8 billion for the prior year period, an increase of $835 million, or 17%.

Approximately 60% of the increase in subscription services revenues was attributable to expansion of our customers that existed as of the beginning of the prior fiscal year, and the remaining 40% was attributable to customers added after the beginning of the prior fiscal year.

Professional services revenues were $557 million for the nine months ended October 31, 2024, compared to $494 million for the prior year period, an increase of $63 million, or 13%.

The increase in professional services revenues was driven by higher demand for deployment and integration services of $47 million and increased progress on fixed fee projects of $16 million.

Professional services revenues were $181 million for the three months ended April 30, 2025, compared to $175 million for the prior year period, an increase of $6 million, or 4%.

The increase in professional services revenues was driven by higher demand for our deployment and integration services.

Gross Revenue Retention Rate

Our growth in subscription services revenues attributable to existing customers is further reflected by our gross revenue retention rate of 98% as of October 31, 2024.

Our growth in subscription services revenues attributable to existing customers is further reflected by our gross revenue retention rate of approximately 98% as of April 30, 2025.

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.

8 unchanged sentences

Subscription Revenue Backlog

As of October 31, 2024, our total subscription revenue backlog was $22.2 billion, with $7.0 billion expected to be recognized in revenues over the next 12 months.

As of October 31, 2023, our total subscription revenue backlog was $18.4 billion, with $6.0 billion expected to be recognized in revenues over the next 12 months.

As of April 30, 2025, our total subscription revenue backlog was $24.6 billion, with $7.6 billion expected to be recognized in revenues over the next 12 months.

As of April 30, 2024, our total subscription revenue backlog was $20.7 billion, with $6.6 billion expected to be recognized in revenues over the next 12 months.

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.

1 unchanged sentence

Our costs and expenses were as follows (in millions):

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Three Months Ended April 30,

Costs of subscription services $ 350 $ 290

3 unchanged sentences

General and administrative 212 200

Restructuring

Total costs and expenses $ 2,201 $ 1,926

Total costs and expenses were $2.0 billion for the three months ended October 31, 2024, compared to $1.8 billion for the prior year period, an increase of $217 million, or 12%.

The increase in operating expenses included increases of $132 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount, $20 million in facilities and IT-related expenses, $20 million in data center capacity expenses, $16 million in professional services and subcontractor expenses, $9 million in amortization of deferred sales commissions due to increased sales, and $8 million in depreciation.

Total costs and expenses were $5.9 billion for the nine months ended October 31, 2024, compared to $5.2 billion for the prior year period, an increase of $662 million, or 13%.

The increase in operating expenses included increases of $404 million in employee-related expenses, including share-based compensation, primarily due to higher average headcount, $63 million in professional services and subcontractor expenses, $48 million in facilities and IT-related expenses, $37 million in data center capacity expenses, $29 million in amortization of deferred sales commissions due to increased sales, and $25 million in depreciation.

Total costs and expenses were $2.2 billion for the three months ended April 30, 2025, compared to $1.9 billion for the prior year period, an increase of $274 million, or 14%.

Included in the increase in operating expenses was $158 million in restructuring expenses primarily related to the Fiscal 2026 Restructuring Plan.

Employee-related expenses, including share-based compensation, increased $36 million due to higher average headcount, partially offset by restructuring-related cost savings.

Additional increases included $27 million in data center capacity and third-party hosted infrastructure expenses, $25 million in facilities and IT-related expenses, $11 million in professional services expenses, $9 million in amortization of deferred sales commissions, and $9 million in depreciation.

Costs of Subscription Services

Costs of subscription services were $329 million for the three months ended October 31, 2024, compared to $264 million for the prior year period, an increase of $66 million, or 25%.

The increase in costs of subscription services included increases of $33 million in employee-related expenses primarily due to higher average headcount, $17 million in data center capacity expenses, and $8 million in depreciation.

Costs of subscription services were $924 million for the nine months ended October 31, 2024, compared to $759 million for the prior year period, an increase of $165 million, or 22%.

The increase in costs of subscription services included increases of $100 million in employee-related expenses primarily due to higher average headcount, $29 million in data center capacity expenses, and $20 million in depreciation.

We expect costs of subscription services will continue to increase in absolute dollars as we improve and expand our technical operations infrastructure, including our data centers and computing infrastructure operated by third parties.

Costs of subscription services were $350 million for the three months ended April 30, 2025, compared to $290 million for the prior year period, an increase of $60 million, or 21%.

Employee-related expenses, including share-based compensation, increased $19 million due to higher average headcount and the growth of our Workday Success Plan service offering, partially offset by restructuring-related cost savings.

Additional increases included $23 million in data center capacity and third-party hosted infrastructure expenses, $10 million in depreciation, and $10 million in facility and IT-related expenses.

We expect costs of subscription services will continue to increase in absolute dollars as we improve and expand our technical operations infrastructure, including third-party hosted infrastructure, and as we grow the Workday Success Plan offering.

Costs of Professional Services

Costs of professional services were $201 million for the three months ended October 31, 2024, compared to $181 million for the prior year period, an increase of $19 million, or 11%.

The increase in costs of professional services included an increase of $16 million in subcontractor expenses.

Costs of professional services were $606 million for the nine months ended October 31, 2024, compared to $552 million for the prior year period, an increase of $54 million, or 10%.

The increase in costs of professional services included increases of $40 million in subcontractor expenses and $9 million in employee-related expenses.

Costs of professional services were $187 million for the three months ended April 30, 2025, compared to $199 million for the prior year period, a decrease of $12 million, or 6%.

The decrease in costs of professional services was primarily a result of restructuring-related cost savings that reduced employee-related costs.

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

Product Development

Product development expenses were $647 million for the three months ended October 31, 2024, compared to $619 million for the prior year period, an increase of $28 million, or 5%.

The increase in product development expenses included an increase of $32 million in employee-related expenses primarily due to higher average headcount.

Product development expenses were $2.0 billion for the nine months ended October 31, 2024, compared to $1.8 billion for the prior year period, an increase of $123 million, or 7%.

The increase in product development expenses included an increase of $110 million in employee-related expenses primarily due to higher average headcount.

Product development expenses were $663 million for the three months ended April 30, 2025, compared to $656 million for the prior year period, an increase of $7 million, or 1%.

Product development expenses remained relatively flat, as increases within employee-related expenses, including share-based compensation, were offset by restructuring-related cost savings.

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.

Sales and Marketing

Sales and marketing expenses were $620 million for the three months ended October 31, 2024, compared to $538 million for the prior year period, an increase of $82 million, or 15%.

The increase in sales and marketing expenses included increases of $57 million in employee-related expenses primarily due to higher average headcount, $10 million related to marketing programs, $9 million in amortization of deferred sales commissions due to increased sales, and $8 million in facilities and IT-related expenses.

Sales and marketing expenses were $1.8 billion for the nine months ended October 31, 2024, compared to $1.6 billion for the prior year period, an increase of $223 million, or 14%.

The increase in sales and marketing expenses included increases of $134 million in employee-related expenses primarily due to higher average headcount, $29 million in amortization of deferred sales commissions due to increased sales, $24 million related to marketing programs, and $20 million in facilities and IT-related expenses.

Sales and marketing expenses were $623 million for the three months ended April 30, 2025, compared to $573 million for the prior year period, an increase of $50 million, or 9%.

Employee-related expenses, including share-based compensation, increased $26 million due to higher average headcount, partially offset by restructuring-related cost savings.

Additional increases included $9 million in amortization of deferred sales commissions, $7 million in professional services expenses, and $6 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 domestic and international selling and marketing activities to expand awareness of our brand and product offerings to attract new and existing customers.

General and Administrative

General and administrative expenses were $198 million for the three months ended October 31, 2024, compared to $176 million for the prior year period, an increase of $22 million, or 12%.

The increase in general and administrative expenses included increases of $9 million in professional services expenses and $8 million in employee-related expenses primarily due to higher average headcount.

General and administrative expenses were $609 million for the nine months ended October 31, 2024, compared to $512 million for the prior year period, an increase of $97 million, or 19%.

The increase in general and administrative expenses included increases of $51 million in employee-related expenses primarily due to higher average headcount, $24 million in professional services expenses, and $9 million in realignment costs.

We expect general and administrative expenses will continue to increase in absolute dollars as we continue to grow our business and invest in our infrastructure, people, and systems to support our global operations.

General and administrative expenses were $212 million for the three months ended April 30, 2025, compared to $200 million for the prior year period, an increase of $11 million, or 6%.

The increase in general and administrative expenses included an increase of $6 million in professional services expenses.

Other general and administrative expenses remained relatively flat, as increases within employee-related expenses were offset by restructuring-related cost savings.

We expect general and administrative expenses will continue to increase in absolute dollars as we continue to grow our business and invest in our people, processes, and systems to support our global operations.

Restructuring

Restructuring expenses of $166 million for the three months ended April 30, 2025, were related to the Fiscal 2026 Restructuring Plan, and included $132 million for employee transition, severance payments, employee benefits, and share-based compensation, and $34 million for an impairment of office space.

Restructuring expenses of $8 million for the three months ended April 30, 2024, were related to exit charges associated with office space reductions under a separate restructuring plan.

Share-based Compensation

Costs and expenses include share-based compensation expenses as follows (in millions):

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Costs and expenses include share-based compensation expense as follows (in millions):

Three Months Ended April 30,

Costs of subscription services $ 42 $ 38

3 unchanged sentences

General and administrative 70 71

Total share-based compensation expenses $ 368 $ 349 $ 1,122 $ 1,071

Restructuring

Total share-based compensation expense $ 459 $ 385

Percentage of total revenues

20.5 % 19.3 %

Share-based compensation expenses increased by $19 million for the three months ended October 31, 2024, compared to the prior year period, primarily due to additional grants to new and existing employees.

Share-based compensation expenses increased by $51 million for the nine months ended October 31, 2024, compared to the prior year period, primarily due to additional grants to new and existing employees.

Share-based compensation expense increased by $74 million for the three months ended April 30, 2025, compared to the prior year period, primarily due to the Fiscal 2026 Restructuring Plan 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

GAAP operating income was $165 million, or 7.6% of revenues, for the three months ended October 31, 2024, compared to the prior year GAAP operating income of $88 million, or 4.7% of revenues.

The increase was primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses, including share-based compensation.

GAAP operating income was $340 million, or 5.5% of revenues, for the nine months ended October 31, 2024, compared to the prior year GAAP operating income of $104 million, or 2.0% of revenues.

The increase was primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses, including share-based compensation.

Non-GAAP operating income was $569 million, or 26.3% of revenues, for the three months ended October 31, 2024, compared to the prior year non-GAAP operating income of $462 million, or 24.8% of revenues.

The increase was primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses.

Non-GAAP operating income was $1.6 billion, or 25.7% of revenues, for the nine months ended October 31, 2024, compared to the prior year non-GAAP operating income of $1.3 billion, or 24.0% of revenues.

While we expect share-based compensation expense to grow in absolute dollars as we expand our global workforce, we expect it to decline as a percentage of total revenues.

Operating Income and Operating Margin

GAAP operating income was $39 million, or 1.8% of revenues, for the three months ended April 30, 2025, compared to the prior year GAAP operating income of $64 million, or 3.2% of revenues.

The decline resulted from the Fiscal 2026 Restructuring Plan expenses recognized in the current quarter, offset by improvements due to our revenue growth outpacing headcount growth and moderation of operating expenses, including share-based compensation.

Non-GAAP operating income was $677 million, or 30.2% of revenues, for the three months ended April 30, 2025, compared to the prior year non-GAAP operating income of $515 million, or 25.9% of revenues.

The increase was primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses.

Reconciliations of our GAAP to non-GAAP operating income (loss) and operating margin were as follows (in millions, except percentages).

Reconciliations of our GAAP to non-GAAP operating income and operating margin were as follows (in millions, except percentages).

See “Non-GAAP Financial Measures” below for further information.

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Operating income (loss) $ 165 $ 88 $ 340 $ 104

Share-based compensation expenses 368 349 1,122 1,071

Three Months Ended April 30,

Operating income $ 39 $ 64

Share-based compensation expense (1)

Employer payroll tax-related items on employee stock transactions (1)

1 unchanged sentence

Acquisition-related costs

Realignment costs 0 0 9 0

Non-GAAP operating income (loss) $ 569 $ 462 $ 1,602 $ 1,280

Restructuring costs

Non-GAAP operating income $ 677 $ 515

Operating margin 1.8 % 3.2 %

Share-based compensation expenses 17.0 % 18.7 % 18.0 % 20.1 %

Share-based compensation expense (1)

18.6 % 19.3 %

Employer payroll tax-related items on employee stock transactions (1)

1 unchanged sentence

Acquisition-related costs

0.3 % 0.0 % 0.3 % 0.0 %

Realignment costs 0.0 % 0.0 % 0.1 % 0.0 %

Restructuring costs

Non-GAAP operating margin 30.2 % 25.9 %

Other Income (Expense), Net

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

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Total other income (expense), net $ 62 $ 41 $ 178 $ 114

Other income, net increased by $20 million for the three months ended October 31, 2024, primarily due to a favorable change of $17 million on our equity investments.

Other income, net increased by $64 million for the nine months ended October 31, 2024, primarily due to increases of $53 million in interest income earned from higher investment balances and increased interest rates and a favorable change of $15 million on our equity investments.

Provision For (Benefit From) Income Taxes

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

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Provision for (benefit from) income taxes $ 34 $ 15 $ 86 $ 25

The income tax provision for the nine months ended October 31, 2024, was primarily attributable to earnings in the U.S.

and profitable foreign jurisdictions, offset by the excess tax benefit from stock-based compensation and increase in research and development credits.

The income tax provision for the nine months ended October 31, 2023, was primarily attributable to earnings in profitable foreign jurisdictions and an increase in U.S.

taxes due to capitalized research and development expenditures.

(1) For the three months ended April 30, 2025, the Share-based compensation expense and Employer payroll tax-related items on employee stock transactions lines in the GAAP to non-GAAP reconciliation tables above exclude $42 million and $2 million, respectively, related to restructuring initiatives.

These expenses are included in the Restructuring costs lines.

Other Income, Net

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

Three Months Ended April 30,

Total other income, net

Other income, net increased by $5 million for the three months ended April 30, 2025, primarily due to lower losses recognized in the current quarter on our equity investments as compared to the prior year period.

Provision For Income Taxes

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

Three Months Ended April 30,

Provision for income taxes

The income tax provision for the three months ended April 30, 2025, was primarily attributable to earnings in the U.S.

and profitable foreign jurisdictions.

The income tax provision for the three months ended April 30, 2024, was primarily attributable to earnings in U.S.

and profitable foreign jurisdictions, offset by the excess tax benefit from share-based compensation.

The Organization for Economic Cooperation and Development (“OECD”) released Pillar Two model rules defining a 15% global minimum tax for large multinational corporations.

The OECD continues to release additional guidance and countries are implementing legislation, with widespread adoption of the Pillar Two Framework expected in the near future.

We are in the process of evaluating the potential impacts of Pillar Two.

While we do not currently expect Pillar Two to have a material impact on our effective tax rate, our analysis is ongoing and incomplete, and it is possible that Pillar Two could have a material adverse effect on our tax liability.

Pillar Two rules are at varying stages of adoption across the jurisdictions where we operate.

The specific rules and timeline to implement these rules vary by jurisdiction.

The adoption of Pillar Two rules may affect our effective tax rate and current tax obligations and liabilities.

While we do not currently anticipate Pillar Two rules to have a material impact on our consolidated financial results, we are monitoring developments from the OECD, governmental bodies, such as the EU, and intergovernmental economic organizations, to evaluate the impact of changing global tax laws.

For further information, see Note 16, Income Taxes , of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Liquidity and Capital Resources

As of October 31, 2024, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $7.2 billion, which were primarily held for working capital and general corporate purposes.

Our cash equivalents and marketable securities are composed of, in order from largest to smallest, corporate bonds, U.S.

treasury securities, money market funds, U.S.

agency obligations, and commercial paper.

As of April 30, 2025, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $8.0 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, and commercial paper.

We have financed our operations primarily through customer payments, issuance of debt, and sales of our common stock.

3 unchanged sentences

Our cash flows were as follows (in millions):

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Three Months Ended April 30,

Net cash provided by (used in):

3 unchanged sentences

Effect of exchange rate changes 1 0

Net increase (decrease) in cash, cash equivalents, and restricted cash $ (326) $ 128 $ (701) $ (319)

Net decrease in cash, cash equivalents, and restricted cash

$ (566) $ (253)

Operating Activities

Cash provided by operating activities was $406 million and $451 million for the three months ended October 31, 2024, and 2023, respectively.

The decline in cash flow provided by operating activities was primarily the result of increased employee-related payments of $119 million primarily due to higher average headcount and increased supplier payments of $62 million to support our strategic growth objectives, offset by higher cash collections of $158 million due to increased sales.

Cash provided by operating activities was $1.3 billion and $1.2 billion for the nine months ended October 31, 2024, and 2023, respectively.

The improvement in cash flow provided by operating activities was primarily the result of higher cash collections of $555 million due to increased sales and additional interest income received of $102 million from marketable debt securities, offset by increased employee-related payments of $288 million primarily due to higher average headcount and increased supplier payments of $139 million to support our strategic growth objectives.

Cash provided by operating activities was $457 million and $372 million for the three months ended April 30, 2025, and 2024, respectively.

The improvement in cash provided by operating activities was primarily the result of higher cash collections of $205 million due to increased sales, offset by increased supplier payments of $79 million to support our continued growth and increased employee-related payments of $32 million primarily due to higher average headcount.

Investing Activities

Cash used in investing activities for the three months ended October 31, 2024, was $450 million, which primarily resulted from cash consideration of $302 million, net of cash acquired, for the acquisition of Evisort, capital expenditures of $47 million for data center and office space projects, and a net cash outflow of $96 million related to marketable debt securities activity.

Cash used in investing activities for the three months ended October 31, 2023, was $172 million, which primarily resulted from a cash outflow of $148 million from the timing of purchases and maturities of marketable securities and capital expenditures of $60 million for data center and office space projects, offset by proceeds of $46 million from sales of marketable securities.

Cash used in investing activities for the nine months ended October 31, 2024, was $1.1 billion, which primarily resulted from cash consideration, net of cash acquired, of $522 million and $302 million for the acquisitions of HiredScore and Evisort, respectively, capital expenditures of $183 million for data center and office space projects, and a net cash outflow of $39 million related to marketable debt securities activity.

Cash used in investing activities for the nine months ended October 31, 2023, was $1.3 billion, which primarily resulted from a cash outflow of $1.2 billion from the timing of purchases and maturities of marketable securities and capital expenditures of $183 million for data center and office space projects, offset by proceeds of $93 million from sales of marketable securities.

Cash used in investing activities for the three months ended April 30, 2025, was $523 million, which primarily resulted from net cash outflow of $483 million related to marketable debt securities activity and capital expenditures of $36 million mainly for office space projects.

Cash used in investing activities for the three months ended April 30, 2024, was $258 million, which was primarily related to cash consideration of $512 million for the acquisition of HiredScore, net of cash acquired, and capital expenditures of $81 million for data center and office space projects, offset by net proceeds of $335 million related to marketable debt securities activity.

We expect capital expenditures will be approximately $250 million in fiscal 2026.

This includes investments in our data centers and office facilities to support our continued growth.

This primarily includes investments in our office facilities to support our continued growth.

Financing Activities

Cash used in financing activities was $282 million for the three months ended October 31, 2024, which was primarily due to repurchases of common stock of $158 million under our share repurchase programs and taxes paid of $124 million related to net share settlement of equity awards.

Cash used in financing activities was $150 million for the three months ended October 31, 2023, which was primarily due to repurchases of common stock of $145 million under our share repurchase programs.

Cash used in financing activities was $996 million for the nine months ended October 31, 2024, which was primarily due to repurchases of common stock of $597 million under our share repurchase programs and taxes paid of $505 million related to net share settlement of equity awards, offset by proceeds of $106 million from the issuance of common stock from employee equity plans.

Cash used in financing activities was $201 million for the nine months ended October 31, 2023, which was primarily due to due to repurchases of common stock of $283 million under our share repurchase programs, offset by proceeds of $95 million from the issuance of common stock from employee equity plans.

Cash used in financing activities was $501 million for the three months ended April 30, 2025, which primarily resulted from repurchases of common stock of $290 million under our share repurchase programs and taxes paid of $211 million related to net share settlement of equity awards.

Cash used in financing activities was $367 million for the three months ended April 30, 2024, which primarily resulted from taxes paid of $239 million related to net share settlement of equity awards and repurchases of common stock of $128 million under our share repurchase programs.

Free Cash Flows

In evaluating our performance internally, we focus on long-term, sustainable growth in free cash flows.

We define free cash flows, a non-GAAP financial measure, as net cash provided by (used in) operating activities minus capital expenditures.

We define free cash flows, a non-GAAP financial measure, as net cash provided by operating activities minus capital expenditures.

See “Non-GAAP Financial Measures” below for further information.

Free cash flows were $359 million for the three months ended October 31, 2024, compared to $391 million for the prior year period.

The decline was primarily the result of increased employee-related payments of $119 million primarily due to higher average headcount and increased supplier payments of $62 million to support our strategic growth objectives, offset by higher cash collections of $158 million due to increased sales and a decrease in capital expenditures of $13 million for data centers.

Free cash flows were $1.2 billion for the nine months ended October 31, 2024, compared to $970 million for the prior year period.

The improvement was primarily the result of higher cash collections of $555 million due to increased sales and additional interest income received of $102 million from marketable debt securities, offset by increased employee-related payments of $288 million primarily due to higher average headcount and increased supplier payments of $139 million to support our strategic growth objectives.

Reconciliation of our GAAP net cash provided by (used in) operating activities to non-GAAP free cash flows is as follows (in millions):

Three Months Ended October 31, Nine Months Ended October 31,

2024 2023 2024 2023

Net cash provided by (used in) operating activities $ 406 $ 451 $ 1,349 $ 1,153

Free cash flows were $421 million for the three months ended April 30, 2025, compared to $291 million for the prior year period.

The improvement in free cash flows was primarily the result of higher cash collections of $205 million due to increased sales and decreased capital expenditures of $44 million, offset by increased supplier payments of $79 million to support our continued growth and increased employee-related payments of $32 million primarily due to higher average headcount.

Reconciliation of our GAAP net cash provided by operating activities to non-GAAP free cash flows is as follows (in millions):

Three Months Ended April 30,

Net cash provided by operating activities $ 457 $ 372

Capital expenditures (36) (81)

1 unchanged sentence

Share Repurchase Programs

In August 2024, our Board of Directors authorized the August 2024 Share Repurchase Program, under which we may repurchase up to $1.0 billion of our outstanding shares of our Class A common stock.

Prior to the August 2024 Share Repurchase Program, our Board of Directors authorized a $500 million share repurchase program in February 2024, which we completed in the third quarter of fiscal 2025, and a $500 million share repurchase program in November 2022, which we completed in the first quarter of fiscal 2025.

For further information, see Note 14, Stockholders’ Equity , of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

In August 2024, our Board of Directors authorized the repurchase of up to $1.0 billion of our outstanding shares of Class A common stock (“August 2024 Share Repurchase Program”), and in May 2025, our Board of Directors authorized the repurchase of up to an additional $1.0 billion of our outstanding shares of Class A common stock (“May 2025 Share Repurchase Program”)

Prior to the May 2025 and August 2024 Share Repurchase Programs, our Board of Directors authorized a $500 million share repurchase program in February 2024, which we completed in the third quarter of fiscal 2025, and a $500 million share repurchase program in November 2022, which we completed in the first quarter of fiscal 2025.

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.

Contractual Obligations

Our contractual obligations primarily consist of borrowings under our Senior Notes, agreements for third-party hosted infrastructure platforms for business operations, leases for office space and co-location facilities for data center capacity, and other purchase obligations entered into in the ordinary course of business.

There have been no material changes outside the ordinary course of business to our contractual obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2024.

Except as discussed in Note 11, Leases , there have been no material changes outside the ordinary course of business to our contractual obligations disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.

Non-GAAP Financial Measures

1 unchanged sentence

Our measures of non-GAAP operating income, non-GAAP operating margin, and free cash flows meet the definition of non-GAAP financial measures.

Change in Non-GAAP Financial Measures

Effective beginning fiscal 2025, we will exclude certain acquisition-related costs and realignment costs from our non-GAAP results as they may vary from period to period independent of the operating performance of our business.

There was no impact to prior period amounts presented in this report as a result of this change since no qualifying costs were incurred in the first three quarters of fiscal 2024.

Non-GAAP Operating Income and Non-GAAP Operating Margin

3 unchanged sentences

For the reasons set forth below, we believe that excluding these components provides useful information to investors and others in understanding and evaluating our operating results and prospects in the same manner as management, in comparing financial results across accounting periods and to those of peer companies, and to better understand the long-term performance of our core business.

• Share-based compensation expenses.

Share-based compensation primarily consists of non-cash expenses for employee RSUs and our ESPP, and includes share-based compensation associated with acquisitions.

• Share-based compensation expense.

Share-based compensation primarily consists of non-cash expenses for employee restricted stock units (“RSUs”) and our employee stock purchase plan (“ESPP”).

Although share-based compensation is an important aspect of the compensation of our employees and executives, this expense is determined using a number of factors, including our stock price, volatility, and forfeiture rates, that are beyond our control and generally unrelated to operational decisions and performance in any particular period.

Further, share-based compensation expenses are not reflective of the value ultimately received by the grant recipients.

Further, share-based compensation expense is not reflective of the value ultimately received by the grant recipients.

• Employer payroll tax-related items on employee stock transactions.

We exclude the employer payroll tax-related items on employee stock transactions in order to show the full effect that excluding share-based compensation expenses has on our operating results.

Similar to share-based compensation expenses, this tax expense is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of our business.

We exclude the employer payroll tax-related items on employee stock transactions in order to show the full effect that excluding share-based compensation expense has on our operating results.

Similar to share-based compensation expense, this tax expense is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of our business.

• Amortization of acquisition-related intangible assets.

6 unchanged sentences

We exclude the effects of acquisition-related costs as we believe these transaction-specific expenses are inconsistent in amount and frequency and do not correlate to the operation of our business.

• Realignment costs.

Realignment costs are associated with a formal restructuring plan and are primarily related to employee severance, the closure of facilities, and cancellation of certain contracts.

• Restructuring costs.

Restructuring costs are associated with a formal restructuring plan and are primarily related to workforce reductions, the closure of facilities, and other exit and disposal activities.

We exclude these expenses because they are not reflective of ongoing business and operating results.

Free Cash Flows

We define free cash flows as net cash provided by (used in) operating activities minus capital expenditures.

We define free cash flows as net cash provided by operating activities minus capital expenditures.

We use free cash flows as a measure of financial progress in our business, as it balances operating results, cash management, and capital efficiency.

8 unchanged sentences

We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure, and to view our non-GAAP financial measures in conjunction with the most comparable GAAP financial measures.

See “Results of Operations—Operating Income (Loss) and Operating Margin” for reconciliations from the most directly comparable GAAP financial measures of GAAP operating income (loss) and GAAP operating margin, to the non-GAAP financial measures of non-GAAP operating income and non-GAAP operating margin, for the three and nine months ended October 31, 2024, and 2023.

See “Liquidity and Capital Resources—Free Cash Flows” for a reconciliation from the most comparable GAAP financial measure, net cash provided by (used in) operating activities, to the non-GAAP financial measure, free cash flows, for the three and nine months ended October 31, 2024, and 2023.

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 months ended April 30, 2025, and 2024.

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 three months ended April 30, 2025, and 2024.

Critical Accounting Policies and Estimates

8 unchanged sentences

• Business combinations, goodwill, and acquisition-related intangible assets

• Non-marketable equity investments

For a further discussion of our critical accounting policies, refer to our Annual Report on Form 10-K for the fiscal year ended January 31, 2025.

During the three and nine months ended October 31, 2024, there were no significant changes to our critical accounting policies and estimates.

During the three months ended April 30, 2025, there were no significant changes to our critical accounting policies and estimates.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis