Workday WDAY · USD

Commitments and Contingencies Purchase Obligations Our purchase obligations are primarily related to agreements for third-party hosted infrastructure platforms, data center equipment and software, business technology software and support, and sales and marketing activities. These obligations consist of agreements to purchase goods and services that are enforceable and legally binding, and specify all significant terms and the approximate timing of the payments. For purchase obligations with cancellation provisions, the amounts included in the following table were limited to the non-cancelable portion of the agreement terms or the minimum cancellation fees. Future payments under purchase obligations with a remaining term in excess of one year as of January 31, 2025, were as follows (in millions): Third-Party Hosted Infrastructure Platform Obligations Other Purchase Obligations Fiscal Period: 2026 $ 306 $ 161 2027 358 129 2028 414 108 2029 515 74 2030 0 43 Thereafter 0 35 Total $ 1,593 $ 550 Legal Matters We are a party to various legal proceedings and claims that arise in the ordinary course of business. We make a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular matter. In our opinion, as of January 31, 2025, there was not at least a reasonable possibility that we had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.

Debt Outstanding debt consisted of the following (in millions): As of January 31, 2025 2024 2027 Notes $ 1,000 $ 1,000 2029 Notes 750 750 2032 Notes 1,250 1,250 Total principal amount 3,000 3,000 Less: unamortized debt discount and issuance costs (16) (20) Debt, noncurrent $ 2,984 $ 2,980 As of January 31, 2025, the future principal payments for the outstanding debt were as follows (in millions): Fiscal Period: 2026 $ 0 2027 0 2028 1,000 2029 0 2030 750 Thereafter 1,250 Total principal amount $ 3,000 Senior Notes In fiscal 2023, we issued $3.0 billion aggregate principal amount of senior notes, consisting of $1.0 billion aggregate principal amount of 3.500% notes due April 1, 2027 (“2027 Notes”), $750 million aggregate principal amount of 3.700% notes due April 1, 2029 (“2029 Notes”), and $1.25 billion aggregate principal amount of 3.800% notes due April 1, 2032 (“2032 Notes,” and together with the 2027 Notes and the 2029 Notes, “Senior Notes”). Interest is payable semi-annually in arrears on April 1 and October 1 of each year, which commenced in October 2022. The Senior Notes are unsecured obligations and rank equally with all existing and future unsecured and unsubordinated indebtedness of Workday. We may redeem the Senior Notes in whole or in part at any time or from time to time, at specified redemption dates and prices. In addition, upon the occurrence of certain change of control triggering events, we may be required to repurchase the Senior Notes under specified terms. The indenture governing the Senior Notes also includes covenants (including certain limited covenants restricting our ability to incur certain liens and enter into certain sale and leaseback transactions), events of default, and other customary provisions. As of January 31, 2025, we were in compliance with all covenants associated with the Senior Notes. We incurred debt discount and issuance costs of approximately $27 million in connection with the Senior Notes offering, which were allocated on a pro rata basis to the 2027 Notes, 2029 Notes, and 2032 Notes. The debt discount and issuance costs are amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the contractual term of each arrangement. The effective interest rates on the 2027 Notes, 2029 Notes, and 2032 Notes, which are calculated as the contractual interest rates adjusted for the debt discount and issuance costs, are 3.67%, 3.82%, and 3.90%, respectively.

Income Taxes The components of income (loss) before provision for (benefit from) income taxes were as follows (in millions): Year Ended January 31, 2025 2024 2023 Domestic $ 660 $ 465 $ (59) Foreign (22) (109) (201) Income (loss) before provision for (benefit from) income taxes $ 638 $ 356 $ (260) The provision for (benefit from) income taxes consisted of the following (in millions): Year Ended January 31, 2025 2024 2023 Current: Federal $ 12 $ 2 $ 0 State 45 19 14 Foreign 23 14 97 Total 80 35 111 Deferred: Federal 52 (855) 1 State (20) (207) 1 Foreign 0 2 (6) Total 32 (1,060) (4) Provision for (benefit from) income taxes $ 112 $ (1,025) $ 107 The items accounting for the difference between income taxes computed at the federal statutory income tax rate and the provision for (benefit from) income taxes consisted of the following: Year Ended January 31, 2025 2024 2023 Federal statutory rate 21.0 % 21.0 % 21.0 % Effect of: Foreign income at other than U.S. rates 0.2 % 10.9 % (44.7) % Intercompany transactions (1.0) % (4.3) % 3.5 % Research tax credits (15.4) % (26.3) % 26.5 % State taxes, net of federal benefit 3.1 % 5.1 % (4.7) % Changes in valuation allowance 0.0 % (315.5) % (14.9) % Share-based compensation 8.1 % 19.1 % (26.5) % Permanent difference 1.6 % 1.2 % (0.9) % Other (0.1) % 1.2 % (0.4) % Total 17.5 % (287.6) % (41.1) % The income tax provision for fiscal 2025 was primarily attributable to an increase in our U.S. pretax income and income tax expenses in profitable foreign jurisdictions.

Leases We have entered into operating lease agreements for our office space, data centers, and other property and equipment. Operating lease right-of-use assets were $336 million and $289 million as of January 31, 2025, and 2024, respectively, and operating lease liabilities were $378 million and $316 million as of January 31, 2025, and 2024, respectively. The components of operating lease expense were as follows (in millions): Year Ended January 31, 2025 2024 2023 Operating lease cost $ 123 $ 109 $ 99 Short-term lease cost 1 3 4 Variable lease cost 53 46 45 Total operating lease cost $ 177 $ 158 $ 148 Supplemental cash flow information related to our operating leases was as follows (in millions): Year Ended January 31, 2025 2024 2023 Cash paid for operating lease liabilities $ 111 $ 112 $ 94 Operating lease right-of-use assets obtained in exchange for new operating lease liabilities 158 139 96 Other information related to our operating leases was as follows: As of January 31, 2025 2024 Weighted average remaining lease term (in years) 5 5 Weighted average discount rate 4.20 % 3.95 % As of January 31, 2025, maturities of operating lease liabilities were as follows (in millions): Fiscal Period: 2026 $ 115 2027 92 2028 82 2029 55 2030 30 Thereafter 59 Total lease payments 433 Less imputed interest (55) Total operating lease liabilities $ 378 As of January 31, 2025, we have additional operating leases for data centers and office space that had not yet commenced with total undiscounted lease payments of $52 million.

Business Combinations Evisort Acquisition On October 8, 2024, we acquired all outstanding stock of Evisort Inc. (“Evisort”), a provider of an AI-native document intelligence platform. With Evisort, we intend to add AI-powered document intelligence solutions across our suite of finance and HCM applications. We have included the financial results of Evisort in our consolidated financial statements from the date of acquisition. The total acquisition-date fair value of the purchase consideration was $311 million, which was paid in cash. We recorded developed technology intangible assets of $44 million (to be amortized over an estimated useful life of 6 years), customer relationships intangible assets of $28 million (to be amortized over an estimated useful life of 14 years), and goodwill of $223 million. The goodwill recognized was primarily attributable to the expected synergies from integrating Evisort’s technology into our product portfolio. The goodwill is not deductible for income tax purposes. The fair values of assets acquired and liabilities assumed may be subject to change over the measurement period as additional information is received and certain tax matters are finalized. The measurement period will end no later than one year from the acquisition date. Separate operating results and pro forma results of operations for Evisort have not been presented as the effect of this acquisition was not material to our financial results. HiredScore Acquisition On March 29, 2024, we acquired all outstanding stock of HiredScore, Inc. (“HiredScore”), a provider of AI-powered talent orchestration solutions. With HiredScore, Workday provides customers with a comprehensive, transparent, and intelligent talent acquisition and internal mobility offering, helping them better address their ever-evolving people needs. We have included the financial results of HiredScore in our consolidated financial statements from the date of acquisition. The total acquisition-date fair value of the purchase consideration was $530 million, which was paid in cash. The purchase consideration was preliminarily allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess recorded to goodwill. The fair values of assets acquired and liabilities assumed may be subject to change over the measurement period as additional information is received and certain tax matters are finalized.

Acquisition-Related Intangible Assets, Net Acquisition-related intangible assets, net consisted of the following as of January 31, 2025 (in millions): Gross Carrying Amount Accumulated Amortization Net Book Value Developed technology $ 473 $ (303) $ 170 Customer relationships 362 (171) 191 Backlog 15 (15) 0 Trade name 14 (14) 0 Total $ 864 $ (503) $ 361 Acquisition-related intangible assets, net consisted of the following as of January 31, 2024 (in millions): Gross Carrying Amount Accumulated Amortization Net Book Value Developed technology $ 318 $ (256) $ 62 Customer relationships 311 (140) 171 Backlog 15 (15) 0 Trade name 13 (13) 0 Total $ 657 $ (424) $ 233 Amortization expense related to acquisition-related intangible assets was $79 million, $74 million, and $86 million for fiscal 2025, 2024, and 2023, respectively.

We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats. These risks include, among other things, operational risks; intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy or security laws and other litigation and legal risk; and reputational risks. Our process for identifying and assessing material risks from cybersecurity threats operates alongside our broader overall risk assessment process, covering all company risks. As part of this process appropriate disclosure personnel will collaborate with subject matter specialists, as necessary, to gather insights for identifying and assessing material cybersecurity threat risks, their severity, and potential mitigations. We have implemented a variety of cybersecurity processes, technologies, and controls to aid in our efforts to identify, assess and manage such material risks. Our approach includes: (1) an enterprise risk management program, which includes cybersecurity risks and is periodically refreshed; (2) security and privacy reviews designed to identify risks from many new features, software, and vendors; (3) a vulnerability management program designed to identify hardware and software vulnerabilities; (4) a variety of tools designed to monitor our networks, systems and data for suspicious activity; (5) an internal red team program, which simulates cyber threats, intended to allow us to fix vulnerabilities before threat actors identify them; (6) a threat intelligence program designed to model and research our adversaries; and (7) a variety of privacy, cybersecurity, and incident response trainings and simulations. We leverage industry standard security frameworks, including from the National Institute for Standards in Technology (NIST), the International Organization for Standardization (ISO), and the American Institute of Certified Public Accountants (AICPA), to evaluate our security controls, which vary in maturity across the business and are processes we work to continually improve. We also maintain a privacy and cybersecurity incident response program to prepare for, detect, respond to, and recover from cybersecurity incidents, which include processes to triage, assess severity for, escalate, contain, investigate, and remediate the incident, as well as to comply with potentially applicable legal obligations and mitigate brand and reputational damage.

Investments Debt Securities As of January 31, 2025, debt securities consisted of the following (in millions): Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value U.S. treasury securities $ 2,069 $ 4 $ (1) $ 2,072 U.S. agency obligations 634 2 0 636 Corporate bonds 3,532 11 (3) 3,540 Commercial paper 294 0 0 294 Asset-backed securities 104 0 0 104 Other debt securities 5 0 0 5 Total debt securities $ 6,638 $ 17 $ (4) $ 6,651 Included in Cash and cash equivalents $ 177 $ 0 $ 0 $ 177 Included in Marketable securities $ 6,461 $ 17 $ (4) $ 6,474 As of January 31, 2024, debt securities consisted of the following (in millions): Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value U.S. treasury securities $ 2,072 $ 4 $ (2) $ 2,074 U.S. agency obligations 753 2 (1) 754 Corporate bonds 2,496 9 (5) 2,500 Commercial paper 1,232 0 0 1,232 Total debt securities $ 6,553 $ 15 $ (8) $ 6,560 Included in Cash and cash equivalents $ 759 $ 0 $ 0 $ 759 Included in Marketable securities $ 5,794 $ 15 $ (8) $ 5,801 The fair values of debt securities, by remaining contractual maturity, were as follows (in millions): January 31, 2025 Due within 1 year $ 2,676 Due 1 year through 5 years 3,811 Due 5 years through 10 years 139 Due after 10 years 25 Total debt securities $ 6,651 Actual maturities may differ from contractual maturities because borrowers may have certain prepayment conditions. Interest receivable of $53 million and $35 million is included in Prepaid expenses and other current assets The unrealized losses on our debt securities primarily resulted from changes in market interest rates. We do not intend to sell these debt securities and it is not more likely than not that we will be required to sell the debt securities before recovery of their amortized cost bases, which may be at maturity. We did not recognize any credit-related losses on our debt securities during the periods presented. The following tables summarize the aggregate fair value and gross unrealized losses for all debt securities in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions): As of January 31, 2025 Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss U.S.