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Item 2. Management’s Discussion and Analysis

2025-11-26 compared with 2025-08-22 · 112 added, 80 removed, 268 unchanged (42% of the section changed)

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

Workday is the enterprise artificial intelligence (“AI”) platform for managing people, money, and agents.

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

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

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Impact of Current Economic Conditions

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

Three Months Ended July 31, Six Months Ended July 31,

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

2025 2024 Change 2025 2024 Change

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$ 1,559 $ 1,166 34 %

As of July 31,

As of October 31,

2025 2024 Change

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

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Components of Results of Operations

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

Subscription services revenues accounted for approximately 92% of our total revenues for the three and six months ended July 31, 2025, and represented 97% of our total unearned revenue as of July 31, 2025.

Subscription services revenues accounted for approximately 92% of our total revenues for the three and nine months ended October 31, 2025, and represented 97% of our total unearned revenue as of October 31, 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.

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General and administrative expenses consist primarily of employee-related expenses for our finance and accounting, legal, human resources, and information systems personnel, as well as professional services fees and other corporate expenses.

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Restructuring expenses.

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

Three Months Ended July 31, Six Months Ended July 31,

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

2025 2024 % Change 2025 2024 % Change

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Total revenues $ 2,432 $ 2,160 13 % $ 7,020 $ 6,235 13 %

Total revenues were $2.3 billion for the three months ended July 31, 2025, compared to $2.1 billion for the prior year period, an increase of $263 million, or 13%.

Subscription services revenues were $2.2 billion for the three months ended July 31, 2025, compared to $1.9 billion for the prior year period, an increase of $266 million, or 14%.

Total revenues were $2.4 billion for the three months ended October 31, 2025, compared to $2.2 billion for the prior year period, an increase of $272 million, or 13%.

Subscription services revenues were $2.2 billion for the three months ended October 31, 2025, compared to $2.0 billion for the prior year period, an increase of $286 million, or 15%.

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 $179 million for the three months ended July 31, 2025, compared to $182 million for the prior year period, a decrease of $3 million, or 2%.

Professional services revenues remained relatively flat with the change due to variation in project size and mix of deployment and integration services provided as we continue to expand and leverage our service partners.

Total revenues were $4.6 billion for the six months ended July 31, 2025, compared to $4.1 billion for the prior year period, an increase of $513 million, or 13%.

Subscription services revenues were $4.2 billion for the six months ended July 31, 2025, compared to $3.7 billion for the prior year period, an increase of $509 million, or 14%.

Professional services revenues were $188 million for the three months ended October 31, 2025, compared to $201 million for the prior year period, a decrease of $14 million, or 7%.

Professional services revenues decreased due to variation in project size and mix of deployment and integration services provided as we continue to expand and leverage our service partners.

Total revenues were $7.0 billion for the nine months ended October 31, 2025, compared to $6.2 billion for the prior year period, an increase of $785 million, or 13%.

Subscription services revenues were $6.5 billion for the nine months ended October 31, 2025, compared to $5.7 billion for the prior year period, an increase of $795 million, or 14%.

Approximately 60% of the increase in subscription services revenues was attributable to expansion within 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 $360 million for the six months ended July 31, 2025, compared to $356 million for the prior year period, an increase of $3 million, or 1%.

Professional services revenues were $547 million for the nine months ended October 31, 2025, compared to $557 million for the prior year period, a decrease of $10 million, or 2%.

Professional services revenues decreased due to variation in project size and mix of deployment and integration services provided as we continue to expand and leverage our service partners.

Gross Revenue Retention Rate

Our growth in subscription services revenues attributable to existing customers is further reflected by our gross revenue retention rate of approximately 97% as of July 31, 2025.

Our growth in subscription services revenues attributable to existing customers is further reflected by our gross revenue retention rate of approximately 97% as of October 31, 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.

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ARR is a non-GAAP financial measure and should be viewed independently of, and not as a substitute for or combined with, revenue and unearned revenue.

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Subscription Revenue Backlog

As of July 31, 2025, our total subscription revenue backlog was $25.4 billion, with $7.9 billion expected to be recognized in revenues over the next 12 months.

As of July 31, 2024, our total subscription revenue backlog was $21.6 billion, with $6.8 billion expected to be recognized in revenues over the next 12 months.

As of October 31, 2025, our total subscription revenue backlog was $26.0 billion, with $8.2 billion expected to be recognized in revenues over the next 12 months.

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.

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.

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

Three Months Ended July 31, Six Months Ended July 31,

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

2025 2024 2025 2024

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Total costs and expenses $ 2,173 $ 1,995 $ 6,473 $ 5,895

Total costs and expenses were $2.1 billion for the three months ended July 31, 2025, compared to $2.0 billion for the prior year period, an increase of $126 million, or 6%.

The increase in total costs and expenses included increases of $52 million in employee-related expenses, net of restructuring-related cost savings, $46 million in third-party hosted infrastructure expenses, $27 million in facilities and IT-related expenses, and $10 million in amortization of deferred sales commissions.

Total costs and expenses were $4.3 billion for the six months ended July 31, 2025, compared to $3.9 billion for the prior year period, an increase of $400 million, or 10%.

Total costs and expenses were $2.2 billion for the three months ended October 31, 2025, compared to $2.0 billion for the prior year period, an increase of $178 million, or 9%.

The increase in total costs and expenses included increases of $44 million in facilities and IT-related expenses, $44 million in employee-related expenses, net of restructuring-related cost savings, $37 million in third-party hosted infrastructure expenses, $17 million related to marketing programs, $11 million in amortization of deferred sales commissions, and $9 million related to professional services.

Total costs and expenses were $6.5 billion for the nine months ended October 31, 2025, compared to $5.9 billion for the prior year period, an increase of $578 million, or 10%.

Included in the increase in total costs and expenses was $163 million in restructuring expenses primarily related to the Fiscal 2026 Restructuring Plan.

Additional increases included $88 million in employee-related expenses, net of restructuring-related cost savings, $72 million in third-party hosted infrastructure expenses, $52 million in facilities and IT-related expenses, and $19 million in amortization of deferred sales commissions.

Additional increases included $131 million in employee-related expenses, net of restructuring-related cost savings, $108 million in third-party hosted infrastructure expenses, $96 million in facilities and IT-related expenses, $30 million in amortization of deferred sales commissions, $18 million related to marketing programs, and $17 million related to professional services.

Costs of Subscription Services

Costs of subscription services were $370 million for the three months ended July 31, 2025, compared to $304 million for the prior year period, an increase of $66 million, or 22%.

Costs of subscription services were $395 million for the three months ended October 31, 2025, compared to $329 million for the prior year period, an increase of $65 million, or 20%.

The increase in costs of subscription services included increases of $32 million in third-party hosted infrastructure expenses, $20 million in employee-related expenses primarily due to delivering our enhanced customer support services, net of restructuring-related cost savings, and $10 million in facilities and IT-related expenses.

Costs of subscription services were $720 million for the six months ended July 31, 2025, compared to $594 million for the prior year period, an increase of $126 million, or 21%.

The increase in costs of subscription services included increases of $64 million in third-party hosted infrastructure expenses, $37 million in employee-related expenses due to delivering our enhanced customer support services, net of restructuring-related cost savings, and $17 million in facilities and IT-related expenses.

Costs of subscription services were $1.1 billion for the nine months ended October 31, 2025, compared to $924 million for the prior year period, an increase of $191 million, or 21%.

The increase in costs of subscription services included increases of $96 million in third-party hosted infrastructure expenses, $57 million in employee-related expenses primarily due to delivering our enhanced customer support services, net of restructuring-related cost savings, and $27 million in facilities 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 our enhanced customer support services.

Costs of Professional Services

Costs of professional services were $212 million for the three months ended July 31, 2025, compared to $207 million for the prior year period, an increase of $5 million, or 2%.

Costs of professional services remained relatively flat as a result of restructuring-related cost savings that reduced employee-related expenses.

Costs of professional services were $399 million for the six months ended July 31, 2025, compared to $406 million for the prior year period, a decrease of $7 million, or 2%.

Costs of professional services were $196 million for the three months ended October 31, 2025, compared to $201 million for the prior year period, a decrease of $4 million, or 2%.

Costs of professional services remained relatively flat as a result of restructuring-related cost savings that reduced employee-related expenses.

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Costs of professional services were $595 million for the nine months ended October 31, 2025, compared to $606 million for the prior year period, a decrease of $11 million, or 2%.

The decrease in costs of professional services included a reduction of $15 million in subcontractor expenses.

Employee-related expenses remained relatively flat as a result of restructuring-related cost savings.

We expect costs of professional services as a percentage of total revenues to continue to decline as we expand and leverage our service partners to deploy our applications and focus on growing our subscription revenues.

Product Development

Product development expenses were $660 million for the three months ended July 31, 2025, compared to $649 million for the prior year period, an increase of $10 million, or 2%.

Product development expenses remained relatively flat as a result of restructuring-related cost savings that reduced employee-related expenses.

Product development expenses were $1.3 billion for the six months ended July 31, 2025, compared to $1.3 billion for the prior year period, an increase of $17 million, or 1%.

Product development expenses remained relatively flat as a result of restructuring-related cost savings that reduced employee-related expenses.

Product development expenses were $666 million for the three months ended October 31, 2025, compared to $647 million for the prior year period, an increase of $19 million, or 3%.

The increase in product development expenses included increases of $12 million in facilities and IT-related expenses and $10 million in employee-related expenses, net of restructuring-related cost savings.

Product development expenses were $2.0 billion for the nine months ended October 31, 2025, compared to $2.0 billion for the prior year period, an increase of $36 million, or 2%.

The increase in product development expenses included increases of $20 million in facilities and IT-related expenses and $20 million in employee-related expenses, net of 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, third-party hosted infrastructure, and facilities and IT.

Sales and Marketing

Sales and marketing expenses were $641 million for the three months ended July 31, 2025, compared to $611 million for the prior year period, an increase of $30 million, or 5%.

The increase in sales and marketing expenses included increases of $12 million in employee-related expenses, net of restructuring-related cost savings, $10 million in amortization of deferred sales commissions, and $7 million in facilities and IT-related expenses.

Sales and marketing expenses were $1.3 billion for the six months ended July 31, 2025, compared to $1.2 billion for the prior year period, an increase of $80 million, or 7%.

The increase in sales and marketing expenses included increases of $37 million in employee-related expenses, net of restructuring-related cost savings, $19 million in amortization of deferred sales commissions, and $13 million in facilities and IT-related expenses.

Sales and marketing expenses were $677 million for the three months ended October 31, 2025, compared to $620 million for the prior year period, an increase of $57 million, or 9%.

The increase in sales and marketing expenses included increases of $21 million related to marketing programs, $11 million in amortization of deferred sales commissions, and $9 million in facilities and IT-related expenses.

Employee-related expenses remained relatively flat as a result of restructuring-related cost savings.

Sales and marketing expenses were $1.9 billion for the nine months ended October 31, 2025, compared to $1.8 billion for the prior year period, an increase of $137 million, or 8%.

The increase in sales and marketing expenses included increases of $42 million in employee-related expenses, net of restructuring-related cost savings, $30 million in amortization of deferred sales commissions, $23 million in facilities and IT-related expenses, and $21 million related to marketing programs.

We expect sales and marketing expenses to increase in absolute dollars as we continue to invest domestically and internationally to expand awareness of our brand and product offerings to attract new and existing customers.

General and Administrative

General and administrative expenses were $216 million for the three months ended July 31, 2025, compared to $202 million for the prior year period, an increase of $14 million, or 7%.

The increase in general and administrative expenses was primarily driven by higher employee-related expenses, which were partially offset by restructuring-related cost savings.

General and administrative expenses were $429 million for the six months ended July 31, 2025, compared to $403 million for the prior year period, an increase of $26 million, or 6%.

The increase in general and administrative expenses included increases of $10 million in employee-related expenses, net of restructuring-related cost savings, and $8 million in facilities and IT-related expenses.

General and administrative expenses were $234 million for the three months ended October 31, 2025, compared to $198 million for the prior year period, an increase of $36 million, or 18%.

The increase in general and administrative expenses included increases of $13 million related to professional services, $9 million in employee-related expenses, net of restructuring-related cost savings, and $8 million in facilities and IT-related expenses.

General and administrative expenses were $662 million for the nine months ended October 31, 2025, compared to $600 million for the prior year period, an increase of $62 million, or 10%.

The increase in general and administrative expenses included increases of $20 million in employee-related expenses, net of restructuring-related cost savings, $19 million related to professional services, and $15 million in facilities and IT-related expenses.

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 $167 million for the six months ended July 31, 2025, were related to the Fiscal 2026 Restructuring Plan, and included $133 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 six months ended July 31, 2024, were related to exit charges associated with office space reductions under a separate restructuring plan.

Restructuring expenses of $172 million for the nine months ended October 31, 2025, were related to the Fiscal 2026 Restructuring Plan, and included $133 million for employee transition, severance payments, employee benefits, and share-based compensation, and $39 million for an impairment of office space.

Restructuring expenses of $9 million for the nine months ended October 31, 2024, were related to exit charges associated with office space reductions under a separate restructuring plan.

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Share-based Compensation

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

Three Months Ended July 31, Six Months Ended July 31,

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

2025 2024 2025 2024

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15.5 % 17.0 % 17.5 % 18.0 %

Share-based compensation expense increased by $21 million for the three months ended July 31, 2025, compared to the prior year period, primarily due to additional grants to new and existing employees.

Share-based compensation expense increased by $96 million for the six months ended July 31, 2025, compared to the prior year period, primarily due to the Fiscal 2026 Restructuring Plan and additional grants to new and existing employees.

Share-based compensation expense increased by $8 million for the three months ended October 31, 2025, compared to the prior year period, primarily due to additional grants to new and existing employees.

Share-based compensation expense increased by $105 million for the nine months ended October 31, 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.

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Operating Income and Operating Margin

GAAP operating income was $248 million, or 10.6% of revenues, for the three months ended July 31, 2025, compared to the prior year GAAP operating income of $111 million, or 5.3% of revenues.

GAAP operating income was $259 million, or 10.7% of revenues, for the three months ended October 31, 2025, compared to the prior year GAAP operating income of $165 million, or 7.6% of revenues.

The increase is primarily due to our revenue growth outpacing headcount growth, moderation of operating expenses, including share-based compensation, and restructuring-related cost savings.

GAAP operating income was $287 million, or 6.3% of revenues, for the six months ended July 31, 2025, compared to the prior year GAAP operating income of $175 million, or 4.3% of revenues.

GAAP operating income was $547 million, or 7.8% of revenues, for the nine months ended October 31, 2025, compared to the prior year GAAP operating income of $340 million, or 5.5% of revenues.

The increase is primarily due to our revenue growth outpacing headcount growth, moderation of operating expenses, including share-based compensation, and restructuring-related cost savings, partially offset by the Fiscal 2026 Restructuring Plan expenses recognized in the first quarter.

Non-GAAP operating income was $680 million, or 29.0% of revenues, for the three months ended July 31, 2025, compared to the prior year non-GAAP operating income of $518 million, or 24.9% of revenues.

Non-GAAP operating income was $692 million, or 28.5% of revenues, for the three months ended October 31, 2025, compared to the prior year non-GAAP operating income of $569 million, or 26.3% of revenues.

The increase is primarily due to our revenue growth outpacing headcount growth, moderation of operating expenses, and restructuring-related cost savings.

Non-GAAP operating income was $1.4 billion, or 29.6% of revenues, for the six months ended July 31, 2025, compared to the prior year non-GAAP operating income of $1.0 billion, or 25.4% of revenues.

Non-GAAP operating income was $2.1 billion, or 29.2% of revenues, for the nine months ended October 31, 2025, compared to the prior year non-GAAP operating income of $1.6 billion, or 25.7% of revenues.

The increase is primarily due to our revenue growth outpacing headcount growth, moderation of operating expenses, and restructuring-related cost savings.

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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 July 31, Six Months Ended July 31,

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

2025 2024 2025 2024

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Non-GAAP operating margin 28.5 % 26.3 % 29.2 % 25.7 %

(1) For the six months ended July 31, 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 the Fiscal 2026 Restructuring Plan.

(1) For the nine months ended October 31, 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 the Fiscal 2026 Restructuring Plan.

These expenses are included in the Restructuring costs lines.

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

Three Months Ended July 31, Six Months Ended July 31,

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

2025 2024 2025 2024

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$ 79 $ 62 $ 198 $ 178

Other income, net decreased by $1 million for the three months ended July 31, 2025, and increased by $4 million for the six months ended July 31, 2025, compared to the prior year periods.

Other income, net increased by $17 million and $20 million for the three and nine months ended October 31, 2025, respectively, compared to the prior year periods.

The increase was primarily due to realized gains from debt securities sold in the current quarter to fund acquisition activities and share repurchases.

Provision For Income Taxes

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

Three Months Ended July 31, Six Months Ended July 31,

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

2025 2024 2025 2024

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$ 86 $ 34 $ 197 $ 86

The income tax provision for the six months ended July 31, 2025, was primarily attributable to earnings in the U.S.

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The income tax provision for the nine months ended October 31, 2025, was primarily attributable to earnings in the U.S.

and profitable foreign jurisdictions.

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

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

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 share-based compensation and increase in research and development credits.

On July 4, 2025, the One Big Beautiful Bill Act (“The 2025 Tax Act”) was signed into law.

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The 2025 Tax Act did not have a material impact on our annual effective tax rate and is expected to reduce our domestic cash tax outflows for the remainder of fiscal 2026.

Due to the complexity and various upcoming effective dates of the 2025 Tax Act, we are still in the process of assessing its impact on our consolidated financial statements.

Due to the complexity and various upcoming effective dates of the 2025 Tax Act, we are still in the process of assessing its impact on our condensed consolidated financial statements.

The final impact may differ from our current estimates based on further analysis, regulatory guidance, and any legislative changes.

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Liquidity and Capital Resources

As of July 31, 2025, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $8.2 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, money market funds, U.S.

agency obligations, asset-backed securities, and commercial paper.

As of October 31, 2025, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $6.8 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, money market funds, corporate bonds, U.S.

treasury securities, U.S.

agency obligations, asset-backed securities, supranational securities, and commercial paper.

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

We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to the remaining term of contracted noncancelable subscription agreements, which are not reflected on the Condensed Consolidated Balance Sheets, and, if necessary, our borrowing capacity under our 2022 Credit Agreement that provides for $1.0 billion of unsecured financing, are sufficient to meet our working capital, capital expenditure, share repurchase, and debt repayment needs over the next 12 months and beyond.

We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to the remaining term of contracted noncancelable subscription agreements, which are not reflected on the Condensed Consolidated Balance Sheets, and, if necessary, our borrowing capacity under our 2022 Credit Agreement that provides for $1.0 billion of unsecured financing, are sufficient to meet our working capital, capital expenditure, planned acquisition, share repurchase, and debt repayment needs over the next 12 months and beyond.

Our long-term future capital requirements depend on many factors, including the effects of macroeconomic trends, customer growth rates, subscription renewal activity, headcount growth, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, infrastructure development, and our investment and acquisition activities.

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Our cash flows were as follows (in millions):

Six Months Ended July 31,

Nine Months Ended October 31,

Net cash provided by (used in):

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Effect of exchange rate changes 1 0

Net decrease in cash, cash equivalents, and restricted cash

$ (285) $ (375)

Net increase (decrease) in cash, cash equivalents, and restricted cash $ 1,064 $ (701)

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Operating Activities

Cash provided by operating activities was $1.1 billion and $943 million for the six months ended July 31, 2025, and 2024, respectively.

The improvement in cash provided by operating activities was primarily the result of higher cash collections of $427 million due to increased sales, partially offset by increased employee-related payments of $176 million, which include payments made under the Fiscal 2026 Restructuring Plan, and increased supplier payments of $95 million to support our continued growth.

Cash provided by operating activities was $1.7 billion and $1.3 billion for the nine months ended October 31, 2025, and 2024, respectively.

The improvement in cash provided by operating activities was primarily the result of higher cash collections of $767 million mainly due to increased sales, partially offset by increased supplier payments of $249 million to support our continued growth and increased employee-related payments of $211 million, which include payments made under the Fiscal 2026 Restructuring Plan.

Investing Activities

Cash used in investing activities was $510 million for the six months ended July 31, 2025, which primarily resulted from net cash outflow of $431 million related to marketable debt securities activity, capital expenditures of $64 million mainly for office space projects, and purchases of $15 million for non-marketable equity investments.

Cash used in investing activities was $603 million for the six months ended July 31, 2024, which primarily related to cash consideration of $522 million for the acquisition of HiredScore, net of cash acquired, and capital expenditures of $136 million for data center and office space projects, offset by proceeds of $57 million related to marketable debt securities activity.

Cash provided by investing activities was $1.2 billion for the nine months ended October 31, 2025, which primarily resulted from net inflows of $2.3 billion as we converted marketable debt securities into cash to fund acquisition activities and share repurchases, offset by net outflows of $974 million for acquisitions, and capital expenditures of $102 million mainly for office space projects.

Cash used in investing activities was $1.1 billion for the nine months ended October 31, 2024, which primarily resulted from net outflows of $824 million for acquisitions, capital expenditures of $183 million for data center and office space projects, and net outflows of $39 million related to marketable debt securities.

We expect capital expenditures will be approximately $200 million in fiscal 2026.

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Financing Activities

Cash used in financing activities was $850 million for the six months ended July 31, 2025, which primarily resulted from repurchases of common stock of $589 million under our share repurchase programs and taxes paid of $372 million related to net share settlement of equity awards, offset by proceeds of $111 million from the issuance of common stock from employee equity plans.

Cash used in financing activities was $715 million for the six months ended July 31, 2024, which was primarily due to repurchases of common stock of $440 million under our share repurchase programs and taxes paid of $381 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 $1.8 billion for the nine months ended October 31, 2025, which primarily resulted from repurchases of common stock of $1.4 billion under our share repurchase programs and taxes paid of $495 million related to net share settlement of equity awards, offset by proceeds of $111 million from the issuance of common stock from employee equity plans.

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.

Free Cash Flows

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

Free cash flows were $1.0 billion for the six months ended July 31, 2025, compared to $807 million for the prior year period.

The improvement was primarily the result of higher cash collections of $427 million due to increased sales and decreased capital expenditures of $72 million, partially offset by increased employee-related payments of $176 million, which include payments made under the Fiscal 2026 Restructuring Plan, and increased supplier payments of $95 million to support our continued growth.

Free cash flows were $1.6 billion for the nine months ended October 31, 2025, compared to $1.2 billion for the prior year period.

The improvement was primarily the result of higher cash collections of $767 million mainly due to increased sales and decreased capital expenditures of $81 million, partially offset by increased supplier payments of $249 million to support our continued growth and increased employee-related payments of $211 million, which include payments made under the Fiscal 2026 Restructuring Plan.

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

Six Months Ended July 31,

Nine Months Ended October 31,

Net cash provided by operating activities $ 1,661 $ 1,349

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Free cash flows $ 1,559 $ 1,166

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Share Repurchase Programs

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 August 2024 and May 2025 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.

We repurchase shares of our Class A common stock under share repurchase programs authorized by our Board of Directors.

Under these programs, in accordance with applicable securities laws and other restrictions, we may repurchase shares of our Class A common stock through open market purchases, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, or by other means.

The timing and total amount of share repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations.

The share repurchase programs have no expiration date, may be suspended or discontinued at any time, and do not obligate us to acquire any amount of Class A common stock.

Share repurchase programs authorized by our Board of Directors that were active during the three and nine months ended October 31, 2025, and 2024, were as follows (in millions):

Authorization Date

Amount Authorized

Authorization Completion Date

November 2022

$ 500 Q1 fiscal 2025

February 2024

500 Q3 fiscal 2025

1,000 Q3 fiscal 2026

September 2025 4,000

As of October 31, 2025, we were authorized to repurchase a remaining $4.4 billion of our outstanding shares of Class A common stock under our share repurchase programs.

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.

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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.

Except as discussed in Note 11, Leases , of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report, 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.

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, except as discussed below.

In July 2025, a 20-year lease for our new European headquarters in Dublin, Ireland, commenced, resulting in an operating lease liability of $333 million.

For further information, see Note 1 2, Leases , of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

In November 2025, we completed our acquisition of Sana Labs AB (“Sana”) for approximately $1.0 billion in cash.

For further information, see Note 21, Subsequent Events , of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Non-GAAP Financial Measures

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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.

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• Share-based compensation expense.

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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 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 and six months ended July 31, 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 six months ended July 31, 2025, and 2024.

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Critical Accounting Policies and Estimates

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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 six months ended July 31, 2025, there were no significant changes to our critical accounting policies and estimates.

During the three and nine months ended October 31, 2025, there were no significant changes to our critical accounting policies and estimates.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis