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WDAY · Health
Date: 2026-03-20 Analyst: Fundamentals Analyst Fiscal Year End: January (FY2026 = ended Jan 31, 2026)
Company Snapshot
| Metric | Value |
|---|---|
| Sector | Technology — Software (Application) |
| Market Cap | $35.7B |
| Current Price | ~$135.87 |
| 52-Week Range | $117.76 – $276.00 |
| Trailing P/E | 52.5 |
| Forward P/E | 10.9 |
| Profit Margin | 7.3% |
| Operating Margin | 12.0% |
| Dividend | None (payout ratio 0%) |
Note: The massive gap between trailing P/E (52.5) and forward P/E (10.9) suggests either analyst expectations of dramatically higher earnings or a data anomaly. FY2024 net income was inflated by a $1.058B deferred tax benefit reversal. Normalized earnings paint a different picture — see below.
1. Revenue
| FY | Revenue ($M) | YoY Growth |
|---|---|---|
| FY2023 (Jan 2023) | 6,216 | — |
| FY2024 (Jan 2024) | 7,259 | +16.8% |
| FY2025 (Jan 2025) | 8,446 | +16.4% |
| FY2026 (Jan 2026) | 9,552 | +13.1% |
| CAGR | Period | Rate |
|---|---|---|
| 3-Year (FY2023→FY2026) | 3 years | 15.4% |
Assessment: Revenue growth is decelerating from ~17% to ~13%. Still healthy for a $9.5B revenue SaaS company, but the growth premium narrative is weakening. Need FY2021-FY2022 data (not available from Yahoo) to compute 5-year CAGR.
Data Gap: Yahoo only provides 4 fiscal years of income statement data (FY2023-FY2026). FY2021 and FY2022 income statements not available. This limits 5-year CAGR calculations.
2. Net Income
| FY | Net Income ($M) | EPS (Diluted) | Notes |
|---|---|---|---|
| FY2023 | (367) | ($1.44) | Operating loss year |
| FY2024 | 1,381 | $5.21 | Includes $1,058M deferred tax benefit |
| FY2025 | 526 | $1.95 | Clean year |
| FY2026 | 693 | $2.59 | Includes $303M restructuring charges |
Normalized Net Income (adjusting for unusual items + tax effects)
| FY | Normalized NI ($M) | Notes |
|---|---|---|
| FY2023 | (335) | Adj for $40M restructuring |
| FY2024 | 1,381 | No unusual items per data (but tax benefit distorts) |
| FY2025 | 595 | Adj for $84M restructuring |
| FY2026 | 901 | Adj for $303M restructuring |
Assessment: GAAP net income is noisy. FY2024's $1.38B was inflated by a one-time $1.058B deferred tax asset recognition (likely releasing a valuation allowance on deferred tax assets). Stripping that out, FY2024 normalized NI ≈ $323M. The real earnings trajectory is: - FY2024 normalized: ~$323M - FY2025 normalized: ~$595M (+84%) - FY2026 normalized: ~$901M (+51%)
This is a strong underlying earnings ramp. Net income CAGR is not meaningful with the FY2023 loss and FY2024 tax distortion.
3. Free Cash Flow (the real story)
| FY | OCF ($M) | CapEx ($M) | FCF ($M) | FCF Margin | YoY Growth |
|---|---|---|---|---|---|
| FY2023 | 1,657 | (365) | 1,292 | 20.8% | — |
| FY2024 | 2,149 | (242) | 1,907 | 26.3% | +47.6% |
| FY2025 | 2,461 | (272) | 2,189 | 25.9% | +14.8% |
| FY2026 | 2,939 | (162) | 2,777 | 29.1% | +26.9% |
| FCF CAGR | Period | Rate |
|---|---|---|
| 3-Year (FY2023→FY2026) | 3 years | 29.1% |
Assessment: This is the crown jewel. FCF has more than doubled in 3 years. FCF margin expanding from 21% to 29% is exceptional for a software company at this scale. CapEx declining (from $365M to $162M) while revenue grows 50%+ is a sign of operating leverage.
FCF vs. Net Income Disconnect: FY2026 FCF of $2.78B dwarfs GAAP net income of $693M. The gap is primarily SBC ($1.63B) and D&A ($347M). This is the critical question for WDAY — see SBC section below.
4. Stock-Based Compensation (SBC) — The Elephant in the Room
| FY | SBC ($M) | SBC as % Revenue | SBC as % FCF | SBC as % OCF |
|---|---|---|---|---|
| FY2023 | 1,295 | 20.8% | 100.2% | 78.2% |
| FY2024 | 1,416 | 19.5% | 74.3% | 65.9% |
| FY2025 | 1,519 | 18.0% | 69.4% | 61.7% |
| FY2026 | 1,626 | 17.0% | 58.6% | 55.3% |
Assessment: SBC is the single biggest risk factor in evaluating WDAY's cash flow quality.
- SBC as % of revenue is declining (21% → 17%) — positive trajectory
- SBC as % of FCF is declining sharply (100% → 59%) — FCF is outgrowing SBC
- But $1.63B in annual SBC is still enormous — it's 2.3x reported net income
- True owner FCF (FCF minus SBC): FY2026 = $2,777M - $1,626M = $1,151M (12.1% margin)
- This "true FCF" is much more modest but still respectable and growing rapidly
The trend is clearly improving. If SBC flattens while revenue grows, this resolves over time.
5. FCF Per Share
| FY | FCF ($M) | Diluted Shares (M) | FCF/Share | True FCF/Share (FCF-SBC) |
|---|---|---|---|---|
| FY2023 | 1,292 | 254.8 | $5.07 | ($0.01) |
| FY2024 | 1,907 | 265.3 | $7.19 | $1.85 |
| FY2025 | 2,189 | 269.2 | $8.13 | $2.49 |
| FY2026 | 2,777 | 268.1 | $10.36 | $4.29 |
FCF/Share 3-Year CAGR: (FY2023→FY2026) = 26.8% True FCF/Share 3-Year CAGR: Not meaningful (FY2023 base ~$0)
Assessment: FCF/share more than doubled in 3 years. True FCF/share (adjusting for SBC dilution cost) went from breakeven to $4.29 — a dramatic improvement. At current price of ~$136, the stock trades at: - 13.1x FCF/share (headline) - 31.7x True FCF/share (SBC-adjusted)
6. Revenue Per Share
| FY | Revenue ($M) | Diluted Shares (M) | Rev/Share |
|---|---|---|---|
| FY2023 | 6,216 | 254.8 | $24.40 |
| FY2024 | 7,259 | 265.3 | $27.36 |
| FY2025 | 8,446 | 269.2 | $31.38 |
| FY2026 | 9,552 | 268.1 | $35.63 |
Rev/Share 3-Year CAGR: 13.4% (slightly below revenue CAGR due to share count increase through FY2025)
7. Shares Outstanding & Buyback Program
| FY End | Shares Issued (M) | Treasury Shares (M) | Ordinary Shares (M) | Diluted Avg (M) |
|---|---|---|---|---|
| FY2023 | 263.9 | 0.0 | 263.9 | 254.8 |
| FY2024 | 266.9 | 3.0 | 263.9 | 265.3 |
| FY2025 | 272.3 | 5.9 | 266.4 | 269.2 |
| FY2026 | 277.8 | 18.7 | 259.1 | 268.1 |
Buyback Activity
| FY | Stock Repurchases ($M) | Avg Price Implied |
|---|---|---|
| FY2023 | 75 | Minimal |
| FY2024 | 423 | ~$200+ |
| FY2025 | 700 | ~$240 |
| FY2026 | 2,895 | ~$227 (est.) |
Assessment: Buyback program has ramped dramatically — from $75M in FY2023 to $2.9B in FY2026. This is a major capital allocation shift. FY2026 buybacks exceeded total FCF ($2.78B) — they spent $2.9B on repurchases, meaning they dipped into the cash balance.
The buybacks are having an effect: ordinary shares outstanding dropped from 266.4M to 259.1M year-over-year. But diluted shares (268.1M) remain high due to options/RSU dilution. The buybacks are essentially fighting SBC dilution — they're running hard to stay in place.
Net Other Financing Charges of -$616M in FY2026 (up from -$636M prior year) likely represents tax withholding payments on vesting RSUs — another hidden SBC cost.
8. Debt-to-Assets
| FY | Total Debt ($M) | Total Assets ($M) | Debt/Assets | Net Debt ($M) |
|---|---|---|---|---|
| FY2023 | 3,249 | 13,486 | 24.1% | 1,090 |
| FY2024 | 3,296 | 16,452 | 20.0% | 968 |
| FY2025 | 3,362 | 17,977 | 18.7% | 1,441 |
| FY2026 | 3,821 | 18,074 | 21.1% | 1,486 |
Debt Breakdown (FY2026)
| Component | Amount ($M) |
|---|---|
| Long-Term Debt (bonds) | 2,987 |
| Capital Lease Obligations (LT) | 704 |
| Capital Lease Obligations (Current) | 130 |
| Total Debt | 3,821 |
| Cash + Short-Term Investments | 5,443 |
| Net Debt | 1,486 (debt minus cash only: 3,821 - 1,501 = 2,320) |
Assessment: Debt levels are manageable. Long-term debt has been flat at ~$2.98B (likely fixed-rate bonds issued in FY2023). The increase in total debt from FY2025 ($3.36B) to FY2026 ($3.82B) is primarily from new capital lease obligations ($704M vs $279M prior year — likely new data center or office leases). Interest expense is steady at $114M/year.
Net debt including all securities: with $5.44B in cash + investments vs $3.82B debt = net cash position of $1.62B. However, cash + investments dropped sharply from $8.0B to $5.4B — the $2.9B buyback consumed most of the liquidity cushion.
Debt/Assets trend: Improved from 24% to 19% through FY2025, then ticked back up to 21% in FY2026 due to new leases. Not concerning.
9. Capital Allocation (FY2026)
| Use | Amount ($M) | % of FCF |
|---|---|---|
| Stock Buybacks | 2,895 | 104.3% |
| Acquisitions (M&A) | 2,079 | 74.9% |
| Capital Expenditure | 162 | 5.8% |
| R&D (income stmt) | 2,679 | 96.5% |
| Debt Repayment | 0 | 0% |
| Dividends | 0 | 0% |
Cash Flow Waterfall (FY2026): - Operating Cash Flow: +$2,939M - CapEx: -$162M - FCF: +$2,777M - Buybacks: -$2,895M (exceeded FCF) - M&A: -$2,079M - Net Investment Sales: +$2,553M (liquidated securities to fund buybacks + M&A) - Stock Option Proceeds: +$192M - Net Other Financing: -$616M (RSU tax withholding) - Net Cash Change: -$47M
Assessment: FY2026 was an aggressive year. Management simultaneously: 1. Spent $2.9B on buybacks (more than entire FCF) 2. Spent $2.1B on acquisitions (goodwill jumped from $3.5B to $5.2B) 3. Funded the gap by liquidating $2.6B in investment securities
This is not sustainable at this rate. They burned through ~$2.6B of their investment portfolio. Cash + investments dropped from $8.0B to $5.4B. They still have ample liquidity, but another year like this would stress the balance sheet.
The $2.1B in M&A is notable — goodwill increased $1.75B and other intangibles increased $316M. Need to monitor whether these acquisitions generate returns.
Historical Capital Allocation
| FY | Buybacks ($M) | M&A ($M) | CapEx ($M) | Debt Chg ($M) |
|---|---|---|---|---|
| FY2023 | 75 | 0 | 365 | +1,134 (net issuance) |
| FY2024 | 423 | 8 | 242 | 0 |
| FY2025 | 700 | 825 | 272 | 0 |
| FY2026 | 2,895 | 2,079 | 162 | 0 |
Clear pivot from organic investment (CapEx declining) toward financial engineering (buybacks) and inorganic growth (M&A).
10. ROIC (Return on Invested Capital)
Invested Capital = Total Equity + Total Debt - Cash & Equivalents
| FY | NOPAT ($M) | Invested Capital ($M) | ROIC |
|---|---|---|---|
| Operating Income × (1 - tax rate) | Equity + Debt - Cash | ||
| FY2023 | -182 × 0.79 = (144) | 5,585 + 3,249 - 1,886 = 6,948 | -2.1% |
| FY2024 | 183 × 0.79 = 145 | 8,082 + 3,296 - 2,012 = 9,366 | 1.5% |
| FY2025 | 499 × 0.825 = 412 | 9,034 + 3,362 - 1,543 = 10,853 | 3.8% |
| FY2026 | 1,024 × 0.687 = 703 | 7,805 + 3,821 - 1,501 = 10,125 | 6.9% |
Tax rates: Used actual effective rates where clean (FY2026: 31.3%, FY2025: 17.6%). For FY2023-FY2024 used 21% statutory due to distorted effective rates.
Assessment: ROIC is improving rapidly but remains low at 6.9%. For a software company, this should be 15%+ to indicate a true competitive moat. The heavy SBC and goodwill accumulation are dragging this metric. The trajectory is encouraging — doubled from 3.8% to 6.9% in one year — but the absolute level is unimpressive.
Note: If you exclude goodwill from invested capital (tangible ROIC), the picture improves significantly: - FY2026 tangible invested capital: $10,125M - $5,229M = $4,896M - Tangible ROIC: $703M / $4,896M = 14.4% — much more respectable
11. Gross Margin
| FY | Revenue ($M) | COGS ($M) | Gross Profit ($M) | Gross Margin |
|---|---|---|---|---|
| FY2023 | 6,216 | 1,710 | 4,506 | 72.5% |
| FY2024 | 7,259 | 1,771 | 5,488 | 75.6% |
| FY2025 | 8,446 | 2,069 | 6,377 | 75.5% |
| FY2026 | 9,552 | 2,321 | 7,231 | 75.7% |
Assessment: Gross margins are stable at ~75.5-75.7% after improving from 72.5% in FY2023. This is solid for enterprise SaaS — indicates pricing power and scale benefits. COGS is growing slower than revenue, which is the right direction. Margin expansion may be limited from here (most SaaS leaders plateau in the 75-80% range).
12. Operating Margin
| FY | Operating Income ($M) | Op Margin | Op Margin (excl. restructuring) |
|---|---|---|---|
| FY2023 | (182) | -2.9% | -2.3% |
| FY2024 | 183 | 2.5% | 2.5% |
| FY2025 | 499 | 5.9% | 6.9% |
| FY2026 | 1,024 | 10.7% | 13.9% |
Assessment: The operating margin expansion is dramatic — from -2.9% to 10.7% in three years. Excluding $303M in restructuring charges, FY2026 operating margin was 13.9%. This reflects the "Rule of 40" improvement narrative: growth is decelerating but margins are expanding rapidly.
Key drivers: - Gross margin improved ~3pp - Operating leverage: opex grew slower than revenue in FY2026 (especially S&M and G&A as % of revenue) - But R&D spend remains high at 28% of revenue (was 36% in FY2023)
13. EBITDA
| FY | EBITDA ($M) | EBITDA Margin | Normalized EBITDA ($M) |
|---|---|---|---|
| FY2023 | 206 | 3.3% | 246 |
| FY2024 | 752 | 10.4% | 752 |
| FY2025 | 1,078 | 12.8% | 1,162 |
| FY2026 | 1,470 | 15.4% | 1,773 |
14. Graham's Number (Manual Calculation)
Graham's Number = √(22.5 × EPS × BVPS)
| Input | Value | Notes |
|---|---|---|
| EPS (Diluted, FY2026) | $2.59 | GAAP, distorted by restructuring + tax |
| BVPS | $7,805M / 259.1M = $30.12 | |
| Graham's Number | √(22.5 × 2.59 × 30.12) = √(1,754.63) | |
| Graham's Number | $41.89 | |
| Current Price | ~$135.87 | |
| Margin of Safety | -69.2% (overvalued by Graham) |
Using normalized EPS (~$901M / 268.1M = $3.36): - Graham's Number = √(22.5 × 3.36 × 30.12) = √(2,276.06) = $47.71 - Still significantly below current price
Assessment: Graham's formula deeply penalizes WDAY because: (a) earnings are suppressed by SBC, (b) book value is modest due to accumulated deficit + buybacks reducing equity. This model is not well-suited for high-growth SaaS — noted for completeness but low weight for this company type.
15. Price History Context
| Date | Price | Event |
|---|---|---|
| Mar 2016 | ~$75 | Starting point (10yr data) |
| Nov 2021 | ~$308 (peak) | All-time high, pandemic SaaS bubble |
| Jun 2022 | ~$135 | Post-bubble trough |
| Feb 2024 | ~$311 | Recovery peak |
| Feb 2026 | ~$118 (52wk low) | Current selloff |
| Mar 2026 | ~$136 | Current |
10-Year Price CAGR: ($75 → $136) = 6.1% — weak for a high-growth tech stock 5-Year (Mar 2021→Mar 2026): ($248 → $136) = -11.3% annualized — significant value destruction 3-Year (Mar 2023→Mar 2026): ($207 → $136) = -13.1% annualized — even worse
The stock is trading near its June 2022 bear market lows despite fundamentally much stronger financials. The market is de-rating WDAY's growth premium.
Summary Health Scorecard
| Metric | Rating | Detail |
|---|---|---|
| Revenue Growth | ●● Good | 15.4% 3yr CAGR, decelerating to 13% |
| FCF Generation | ●●● Excellent | 29% 3yr CAGR, 29% margin, best-in-class |
| FCF Quality (SBC-adj) | ● Caution | SBC = 59% of FCF; true FCF margin = 12% |
| Earnings Quality | ●● Mixed | GAAP noisy (tax benefits, restructuring); normalizing trend positive |
| Gross Margin | ●●● Strong | Stable 75.5-75.7%, improving from 72.5% |
| Operating Margin | ●●● Improving | -2.9% → 10.7% in 3 years; 13.9% excl. restructuring |
| ROIC | ● Weak | 6.9% (14.4% tangible) — below cost of capital |
| Debt/Leverage | ●●● Healthy | Debt/Assets 21%, net cash positive (barely) |
| Share Count | ●● Neutral | Buybacks offsetting SBC dilution; ordinary shares declining |
| Capital Allocation | ●● Aggressive | $2.9B buybacks + $2.1B M&A in FY2026; burned liquid reserves |
| Balance Sheet Liquidity | ● Watch | Cash + investments dropped $2.6B in one year |
Key Flags for Manager
-
SBC remains the central debate. $1.63B annually — 17% of revenue, 59% of FCF. The trend is improving, but it still means >50% of reported FCF is "spoken for" by equity dilution. Any moat/valuation analysis must use SBC-adjusted FCF.
-
Aggressive FY2026 capital deployment. The simultaneous $2.9B buyback + $2.1B M&A while liquidating investments is a notable shift. Either management is extremely confident in the business (buying back stock aggressively near lows) or they're under pressure to show financial engineering. Goodwill now $5.2B — need to validate acquisition quality.
-
Operating leverage inflection is real. The margin expansion from -2.9% to 13.9% (adjusted) in 3 years is genuinely impressive. If this continues, earnings could grow faster than revenue for several years.
-
Stock near multi-year lows despite best-ever fundamentals. FY2026 was Workday's best year by every operational metric (revenue, FCF, margins). The stock is at 2022 trough levels. This disconnect is either a value opportunity or the market pricing in growth deceleration correctly.
-
Restructuring charges ($303M in FY2026, $84M in FY2025). These are real cash and non-cash costs — likely headcount reductions. Could signal efficiency gains OR competitive pressure requiring cost cuts.
-
Missing data: FY2021-FY2022 income statement data not available from Yahoo, limiting 5-year CAGRs. FY2022 balance sheet and cash flow data shows zeros — likely a data coverage issue.