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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended October 31, 2023
OR
☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For transition period from                     to                     
Commission File Number: 001-35680
WORKDAY, INC.
(Exact name of registrant as specified in its charter) 
Delaware20-2480422
(State or other jurisdiction of
incorporation or organization)		 (I.R.S Employer
Identification No.)
6110 Stoneridge Mall Road
Pleasanton, California 94588
(Address of principal executive offices, including zip code)
(925) 951-9000
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001WDAYThe Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒ No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No  ☒
As of November 22, 2023, there were approximately 209 million shares of the registrant’s Class A common stock, net of treasury stock, and 54 million shares of the registrant’s Class B common stock outstanding.

Workday, Inc.
  Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Workday, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
October 31, 2023January 31, 2023
Assets
Current assets:
Cash and cash equivalents$1,563,939 $1,886,311 
Marketable securities5,316,045 4,235,083 
Trade and other receivables, net1,224,818 1,570,086 
Deferred costs207,566 191,054 
Prepaid expenses and other current assets261,795 225,690 
Total current assets8,574,163 8,108,224 
Property and equipment, net1,206,564 1,201,254 
Operating lease right-of-use assets265,963 249,278 
Deferred costs, noncurrent432,275 420,988 
Acquisition-related intangible assets, net249,242 305,465 
Goodwill2,846,464 2,840,044 
Other assets351,262 360,985 
Total assets$13,925,933 $13,486,238 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$79,333 $153,751 
Accrued expenses and other current liabilities234,906 260,131 
Accrued compensation420,178 563,548 
Unearned revenue3,196,648 3,559,393 
Operating lease liabilities98,325 91,343 
Total current liabilities4,029,390 4,628,166 
Debt, noncurrent2,978,800 2,975,934 
Unearned revenue, noncurrent62,148 74,540 
Operating lease liabilities, noncurrent198,843 181,799 
Other liabilities31,835 40,231 
Total liabilities7,301,016 7,900,670 
Stockholders’ equity:
Common stock264 259 
Additional paid-in capital9,981,756 8,828,639 
Treasury stock(471,481)(185,047)
Accumulated other comprehensive income (loss)33,207 53,051 
Accumulated deficit(2,918,829)(3,111,334)
Total stockholders’ equity6,624,917 5,585,568 
Total liabilities and stockholders’ equity$13,925,933 $13,486,238 
See Notes to Condensed Consolidated Financial Statements
3
Workday, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Revenues:
Subscription services$1,691,116 $1,432,393 $4,842,964 $4,071,804 
Professional services174,559 166,710 493,789 497,754 
Total revenues1,865,675 1,599,103 5,336,753 4,569,558 
Costs and expenses (1):
Costs of subscription services263,840 259,397 758,551 737,301 
Costs of professional services181,400 176,396 552,233 524,398 
Product development618,736 565,727 1,828,870 1,655,071 
Sales and marketing537,816 470,196 1,580,639 1,358,198 
General and administrative176,028 153,708 512,148 427,832 
Total costs and expenses1,777,820 1,625,424 5,232,441 4,702,800 
Operating income (loss)87,855 (26,321)104,312 (133,242)
Other income (expense), net41,388 4,163 113,652 (48,789)
Income (loss) before provision for (benefit from) income taxes129,243 (22,158)217,964 (182,031)
Provision for (benefit from) income taxes15,534 52,563 25,459 59,021 
Net income (loss)$113,709 $(74,721)$192,505 $(241,052)
Net income (loss) per share, basic$0.43 $(0.29)$0.74 $(0.95)
Net income (loss) per share, diluted$0.43 $(0.29)$0.73 $(0.95)
Weighted-average shares used to compute net income (loss) per share, basic 262,153 255,753 260,747 253,975 
Weighted-average shares used to compute net income (loss) per share, diluted266,377 255,753 264,087 253,975 
(1) Costs and expenses include share-based compensation expenses as follows:
Three Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Costs of subscription services$30,543 $25,598 $89,793 $76,918 
Costs of professional services28,738 26,577 87,532 79,999 
Product development162,025 149,279 493,934 449,764 
Sales and marketing64,805 61,186 211,560 180,233 
General and administrative63,146 51,556 187,810 146,795 
Total share-based compensation expenses$349,257 $314,196 $1,070,629 $933,709 
See Notes to Condensed Consolidated Financial Statements
4
Workday, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
Three Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Net income (loss)$113,709 $(74,721)$192,505 $(241,052)
Other comprehensive income (loss):
Net change in foreign currency translation adjustment(3,851)(3,098)(3,317)(6,005)
Net change in unrealized gains (losses) on available-for-sale debt securities(4,634)(13,232)(16,204)(23,513)
Net change in unrealized gains (losses) on cash flow hedges, net of tax provision of $2,388, $0, $3,942, and $0, respectively
48,472 57,483 (323)125,923 
Other comprehensive income (loss)39,987 41,153 (19,844)96,405 
Comprehensive income (loss)$153,696 $(33,568)$172,661 $(144,647)
See Notes to Condensed Consolidated Financial Statements
5
Workday, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Three Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Common stock:
Balance, beginning of period$263 $255 $259 $251 
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes1 1 5 5 
Settlement of convertible senior notes— 1 — 1 
Balance, end of period264 257 264 257 
Additional paid-in capital:
Balance, beginning of period9,637,303 7,988,096 8,828,639 7,284,174 
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes(4,804)709 82,488 84,997 
Share-based compensation349,257 314,196 1,070,629 933,709 
Exercise of convertible senior notes hedges— 97,794 — 97,916 
Settlement of convertible senior notes— (39)— (40)
Balance, end of period9,981,756 8,400,756 9,981,756 8,400,756 
Treasury stock:
Balance, beginning of period(323,695)(12,588)(185,047)(12,467)
Exercise of convertible senior notes hedges— (97,794)— (97,915)
Common stock repurchases under share repurchase program(147,786)— (286,434)— 
Balance, end of period(471,481)(110,382)(471,481)(110,382)
Accumulated other comprehensive income (loss):
Balance, beginning of period(6,780)62,961 53,051 7,709 
Other comprehensive income (loss)39,987 41,153 (19,844)96,405 
Balance, end of period33,207 104,114 33,207 104,114 
Accumulated deficit:
Balance, beginning of period(3,032,538)(2,910,916)(3,111,334)(2,744,585)
Net income (loss)113,709 (74,721)192,505 (241,052)
Balance, end of period(2,918,829)(2,985,637)(2,918,829)(2,985,637)
Total stockholders’ equity$6,624,917 $5,409,108 $6,624,917 $5,409,108 

Three Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Common stock (in shares):
Balance, beginning of period261,858 255,485 257,991 251,209 
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes1,363 1,198 5,865 5,474 
Settlement of convertible senior notes— 634 — 635 
Purchase of treasury stock from the exercise of convertible senior notes hedges— (634)— (635)
Common stock repurchased(677)— (1,312)— 
Balance, end of period262,544 256,683 262,544 256,683 
See Notes to Condensed Consolidated Financial Statements
6
Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Cash flows from operating activities:
Net income (loss)$113,709 $(74,721)$192,505 $(241,052)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization68,614 91,854 210,470 274,395 
Share-based compensation expenses349,257 314,196 1,070,629 933,709 
Amortization of deferred costs54,450 44,830 155,432 126,515 
Non-cash lease expense24,454 23,359 72,611 68,318 
(Gains) losses on investments9,488 (3,833)16,764 20,746 
Accretion of discounts on marketable debt securities, net(39,379)(13,121)(111,180)(15,797)
Other(10,037)16,372 (19,696)31,170 
Changes in operating assets and liabilities, net of business combinations:
Trade and other receivables, net37,719 61,885 327,647 200,008 
Deferred costs(79,927)(56,552)(183,231)(163,023)
Prepaid expenses and other assets71,644 2,435 78,279 (31,447)
Accounts payable(6,525)18,116 (62,352)20,884 
Accrued expenses and other liabilities(32,159)47,061 (219,470)41,253 
Unearned revenue(110,533)(63,213)(375,053)(302,936)
Net cash provided by (used in) operating activities450,775 408,668 1,153,355 962,743 
Cash flows from investing activities:
Purchases of marketable securities(1,272,864)(2,310,915)(4,746,086)(5,651,005)
Maturities of marketable securities1,124,276 2,181,147 3,595,718 3,767,509 
Sales of marketable securities45,690 19,988 93,368 53,355 
Owned real estate projects(1,424)(181)(3,112)(446)
Capital expenditures, excluding owned real estate projects(58,524)(58,665)(181,053)(286,013)
Business combinations, net of cash acquired(8,517)— (8,517)— 
Purchase of other intangible assets(700)(700)(10,200)(700)
Purchases of non-marketable equity and other investments— (3,250)(10,500)(20,173)
Sales and maturities of non-marketable equity and other investments54 4,513 54 11,674 
Net cash provided by (used in) investing activities(172,009)(168,063)(1,270,328)(2,125,799)
Cash flows from financing activities:
Proceeds from issuance of debt, net of debt discount— — — 2,978,077 
Repayments and extinguishment of debt— (1,149,622)— (1,843,605)
Payments for debt issuance costs— — — (7,220)
Repurchases of common stock(144,686)— (283,333)— 
Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld(4,803)710 82,493 85,002 
Other(69)(161)(474)(538)
Net cash provided by (used in) financing activities(149,558)(1,149,073)(201,314)1,211,716 
Effect of exchange rate changes(787)(920)(698)(1,750)
Net increase (decrease) in cash, cash equivalents, and restricted cash128,421 (909,388)(318,985)46,910 
Cash, cash equivalents, and restricted cash at the beginning of period1,447,834 2,497,043 1,895,240 1,540,745 
Cash, cash equivalents, and restricted cash at the end of period$1,576,255 $1,587,655 $1,576,255 $1,587,655 
See Notes to Condensed Consolidated Financial Statements
7
Three Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Supplemental cash flow data:
Cash paid for interest$55,125 $56,567 $110,254 $59,508 
Cash paid for income taxes, net of refunds3,214 2,093 35,007 9,863 
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid18,094 68,028 18,094 68,028 

As of October 31,
20232022
Reconciliation of cash, cash equivalents, and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows:
Cash and cash equivalents$1,563,939 $1,575,955 
Restricted cash included in Prepaid expenses and other current assets12,316 11,700 
Total cash, cash equivalents, and restricted cash$1,576,255 $1,587,655 
See Notes to Condensed Consolidated Financial Statements
8
Workday, Inc.
Notes to Condensed Consolidated Financial Statements
As used in this report, the terms “Workday,” “registrant,” “we,” “us,” and “our” mean Workday, Inc. and its subsidiaries unless the context indicates otherwise.
Note 1. Overview and Basis of Presentation
Company and Background
Workday delivers applications for financial management, spend management, human capital management, planning, and analytics. With Workday, our customers have a unified system that can help them plan, execute, analyze, and extend to other applications and environments, thereby helping them continuously adapt how they manage their business and operations. We were originally incorporated in March 2005 in Nevada, and in June 2012, we reincorporated in Delaware.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The condensed consolidated financial statements include the results of Workday, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of our management, the information contained herein reflects all adjustments necessary for a fair presentation of Workday’s financial position, results of operations, stockholders’ equity, and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the three and nine months ended October 31, 2023, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2024. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on February 27, 2023.
Certain prior period amounts reported in our unaudited condensed consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires us to make certain estimates, judgements, and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, judgements, and assumptions include, but are not limited to, the identification of distinct performance obligations for revenue recognition, the determination of the period of benefit for deferred commissions, the fair value and useful lives of assets acquired and liabilities assumed through business combinations, and the valuation of non-marketable equity investments. Actual results could differ from those estimates, judgements, and assumptions, and such differences could be material to our condensed consolidated financial statements.
In February 2023, we completed an assessment of the useful lives of our data center equipment, including servers, network equipment, and integrated complete server and network racks. Due to advances in technology, as well as investments in software that increased efficiencies in how we operate our data center equipment, we determined we should increase the estimated useful lives of data center equipment from 3 years to 5 years. This change in accounting estimate was effective beginning fiscal 2024. Based on the carrying amount of data center equipment that was in-service as of January 31, 2023, this change decreased depreciation expense by $22 million and $77 million for the three and nine months ended October 31, 2023, respectively.
Segment Information
We operate in one operating segment, cloud applications. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by a chief operating decision maker (“CODM”) in deciding how to allocate resources and assessing performance. For the nine months ended October 31, 2023, our co-chief executive officers together served as CODM for purposes of segment reporting. Our CODM allocates resources and assesses performance based upon discrete financial information at the consolidated level.
9
Note 2. Significant Accounting Policies and Accounting Standards
Significant Accounting Policies
There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.
Concentrations of Risk and Significant Customers
Our financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, debt securities, and trade and other receivables. Our deposits exceed federally insured limits.
No customer individually accounted for more than 10% of trade and other receivables, net as of October 31, 2023, or January 31, 2023. No customer individually accounted for more than 10% of total revenues during the three and nine months ended October 31, 2023, or 2022.
Other than the United States, no country individually accounted for more than 10% of total revenues during the three and nine months ended October 31, 2023, or 2022.
In order to reduce the risk of disruption of our cloud applications, we have established data centers in various geographic regions. We serve our customers and users from data center facilities operated by third parties, located in the United States, Canada, and Europe. We have internal procedures to restore services in the event of disaster at one of our data center facilities. Even with these procedures for disaster recovery in place, our cloud applications could be significantly interrupted during the implementation of the procedures to restore services.
In addition, we rely upon third-party hosted infrastructure partners globally, including Amazon Web Services (“AWS”), Google LLC, and Microsoft Corporation, to serve customers and operate certain aspects of our services. Given this, any disruption of or interference at our hosted infrastructure partners may impact our operations and our business could be adversely impacted.
We are also exposed to concentration of risk in our equity investments portfolio, which consists of marketable equity investments and non-marketable equity investments measured using the measurement alternative. As of both October 31, 2023, and January 31, 2023, we held one marketable equity investment with a carrying value that was individually greater than 10% of our total equity investments portfolio.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. We are currently evaluating the impacts of the new standard.
Note 3. Investments
Debt Securities
As of October 31, 2023, debt securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
U.S. treasury securities$2,307,535 $51 $(9,121)$2,298,465 
U.S. agency obligations787,767 254 (2,376)785,645 
Corporate bonds1,771,472 355 (21,031)1,750,796 
Commercial paper1,111,886 — (1)1,111,885 
Total debt securities$5,978,660 $660 $(32,529)$5,946,791 
Included in Cash and cash equivalents$659,919 $— $— $659,919 
Included in Marketable securities$5,318,741 $660 $(32,529)$5,286,872 
10
As of January 31, 2023, debt securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
U.S. treasury securities$2,455,739 $77 $(6,765)$2,449,051 
U.S. agency obligations325,664 — (3,874)321,790 
Corporate bonds966,801 1,617 (6,715)961,703 
Commercial paper1,016,641 — (5)1,016,636 
Total debt securities$4,764,845 $1,694 $(17,359)$4,749,180 
Included in Cash and cash equivalents$594,864 $— $(1)$594,863 
Included in Marketable securities$4,169,980 $1,694 $(17,357)$4,154,317 
The contractual maturities of debt securities were as follows (in thousands):
October 31, 2023
Due within 1 year$3,885,682 
Due in 1 year through 5 years2,061,109 
Total debt securities$5,946,791 
We classify our debt securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We consider all debt securities as funds available for use in current operations, including those with maturity dates beyond one year, and therefore classify these securities as current assets on the Condensed Consolidated Balance Sheets. Debt securities included in Marketable securities on the Condensed Consolidated Balance Sheets consist of securities with original maturities at the time of purchase greater than three months, and the remaining securities are included in Cash and cash equivalents.
As of October 31, 2023, and January 31, 2023, the fair values of debt securities in an unrealized loss position were $4.3 billion and $3.1 billion, respectively, the majority of which had been in a continuous unrealized loss position for less than 12 months. We did not recognize any credit or non-credit related losses related to our debt securities during the periods presented.
We sold $24 million and $20 million of debt securities during the three months ended October 31, 2023, and 2022, respectively. We sold $42 million and $48 million of debt securities during the nine months ended October 31, 2023, and 2022, respectively. The realized gains and losses from the sales were immaterial.
Equity Investments
Equity investments consisted of the following (in thousands):
Condensed Consolidated Balance Sheets LocationOctober 31, 2023January 31, 2023
Money market funds Cash and cash equivalents$675,910 $902,226 
Non-marketable equity investments measured using the measurement alternative Other assets250,311 261,922 
Marketable equity investments Marketable securities29,173 80,766 
Total equity investments$955,394 $1,244,914 
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Total realized and unrealized gains and losses associated with our equity investments consisted of the following (in thousands):
Three Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Net realized gains (losses) recognized on equity investments sold (1)
$(807)$4,514 $1,984 $(365)
Net unrealized gains (losses) recognized on equity investments held as of the end of the period(13,562)(155)(23,529)(19,121)
Total net gains (losses) recognized in Other income (expense), net$(14,369)$4,359 $(21,545)$(19,486)
(1)Reflects the difference between the sale proceeds and the carrying value of the equity investments at the beginning of the period.
Non-Marketable Equity Investments Measured Using the Measurement Alternative
Non-marketable equity investments measured using the measurement alternative include investments in privately held companies without readily determinable fair values in which we do not own a controlling interest or exercise significant influence. These investments are recorded at cost and are adjusted for observable transactions for same or similar securities of the same issuer or impairment events. The carrying values for our non-marketable equity investments are summarized below (in thousands):
October 31, 2023January 31, 2023
Total initial cost$207,485 $206,833 
Cumulative net unrealized gains (losses)42,826 55,089 
Carrying value$250,311 $261,922 
During the three months ended October 31, 2023, we recorded impairment losses of $9 million to the carrying value of non-marketable equity investments. During the three months ended October 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $2 million, impairment losses of $2 million, and a gain of $4 million upon exiting a non-marketable equity investment.
During the nine months ended October 31, 2023, we recorded impairment losses of $22 million to the carrying value of non-marketable equity investments. During the nine months ended October 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $8 million, impairment losses of $10 million, and a net loss of $2 million upon exiting a non-marketable equity investment.
Marketable Equity Investments
We hold marketable equity investments with readily determinable fair values over which we do not own a controlling interest or exercise significant influence. The carrying values for our marketable equity investments are summarized below (in thousands):
October 31, 2023January 31, 2023
Total initial cost$14,817 $38,449 
Cumulative net unrealized gains (losses)14,356 42,317 
Carrying value
$29,173 $80,766 
During the three months ended October 31, 2023, we sold marketable equity investments for proceeds of $22 million. We did not sell any marketable equity investments during the three months ended October 31, 2022. During the nine months ended October 31, 2023, and 2022, we sold marketable equity investments for proceeds of $52 million and $5 million, respectively. The realized gains and losses from the sales were immaterial.
For the marketable equity investments held as of the end of each period, we recorded unrealized net losses of $4 million during the three months ended October 31, 2023, no material unrealized net gains or losses during the three months ended October 31, 2022, and unrealized net losses of $2 million and $17 million during the nine months ended October 31, 2023, and 2022, respectively.
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Note 4. Fair Value Measurements
We use a fair value hierarchy that requires that we maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:
Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 — Other inputs that are directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs that are supported by little or no market activity.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of October 31, 2023 (in thousands):
Level 1Level 2Level 3Total
U.S. treasury securities$2,298,465 $— $— $2,298,465 
U.S. agency obligations— 785,645 — 785,645 
Corporate bonds— 1,750,796 — 1,750,796 
Commercial paper— 1,111,885 — 1,111,885 
Money market funds675,910 — — 675,910 
Marketable equity investments29,173 — — 29,173 
Foreign currency derivative assets— 90,536 — 90,536 
Total assets$3,003,548 $3,738,862 $— $6,742,410 
Foreign currency derivative liabilities$— $20,268 $— $20,268 
Total liabilities$— $20,268 $— $20,268 
The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of January 31, 2023 (in thousands):
Level 1Level 2Level 3Total
U.S. treasury securities$2,449,051 $— $— $2,449,051 
U.S. agency obligations— 321,790 — 321,790 
Corporate bonds— 961,703 — 961,703 
Commercial paper— 1,016,636 — 1,016,636 
Money market funds902,226 — — 902,226 
Marketable equity investments80,766 — — 80,766 
Foreign currency derivative assets— 64,824 — 64,824 
Total assets$3,432,043 $2,364,953 $— $5,796,996 
Foreign currency derivative liabilities$— $33,972 $— $33,972 
Total liabilities$— $33,972 $— $33,972 
Non-Marketable Equity Investments Measured at Fair Value on a Non-Recurring Basis
Non-marketable equity investments that have been remeasured due to an observable event or impairment are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold. For further information, see Note 3, Investments.
Fair Value Measurements of Other Financial Instruments
We carry our debt at face value less unamortized debt discount and issuance costs on our Condensed Consolidated Balance Sheets and present the fair value for disclosure purposes only. All of our debt obligations are categorized as Level 2 financial instruments. For further information on the fair values of our debt and the inputs used in the calculations, see Note 10, Debt.
13
Note 5. Deferred Costs
Deferred costs, which consist of deferred sales commissions, were $640 million and $612 million as of October 31, 2023, and January 31, 2023, respectively. Amortization expense for the deferred costs was $54 million and $45 million for the three months ended October 31, 2023, and 2022, respectively, and $155 million and $127 million for the nine months ended October 31, 2023, and 2022, respectively. There was no impairment loss in relation to the costs capitalized for the periods presented.
Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
October 31, 2023January 31, 2023
Computers, equipment, and software$1,348,381 $1,286,540 
Buildings723,164 719,966 
Leasehold improvements216,138 202,101 
Furniture, fixtures, and transportation equipment92,938 90,816 
Land and land improvements81,067 81,083 
Property and equipment, gross2,461,688 2,380,506 
Less accumulated depreciation and amortization(1,255,124)(1,179,252)
Property and equipment, net$1,206,564 $1,201,254 
Depreciation expense totaled $52 million and $69 million for the three months ended October 31, 2023, and 2022, respectively, and $149 million and $207 million for the nine months ended October 31, 2023, and 2022, respectively.
Note 7. Acquisition-Related Intangible Assets, Net
Acquisition-related intangible assets, net consisted of the following (in thousands):
October 31, 2023January 31, 2023
Developed technology$326,800 $342,700 
Customer relationships311,100 311,100 
Backlog15,000 15,000 
Trade name12,500 12,500 
Acquisition-related intangible assets, gross665,400 681,300 
Less accumulated amortization(416,158)(375,835)
Acquisition-related intangible assets, net$249,242 $305,465 
Amortization expense related to acquisition-related intangible assets was $16 million and $21 million for the three months ended October 31, 2023, and 2022, respectively, and $58 million and $64 million for the nine months ended October 31, 2023, and 2022, respectively.
As of October 31, 2023, our future estimated amortization expense related to acquisition-related intangible assets was as follows (in thousands):
Fiscal Period:
Remainder of 2024$16,088 
202562,198 
202656,283 
202731,712 
202827,346 
Thereafter55,615 
Total$249,242 
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Note 8. Other Noncurrent Assets
Other noncurrent assets consisted of the following (in thousands):
October 31, 2023January 31, 2023
Non-marketable equity and other investments$250,311 $263,485 
Derivative assets37,725 21,757 
Technology patents and other intangible assets, net27,175 20,534 
Prepayments for goods and services16,463 23,466 
Net deferred tax assets7,105 12,650 
Deposits6,038 5,819 
Other6,445 13,274 
Total other assets$351,262 $360,985 
Technology patents and other intangible assets with estimable useful lives are amortized on a straight-line basis. As of October 31, 2023, the future estimated amortization expense was as follows (in thousands):
Fiscal Period:
Remainder of 2024$1,059 
20253,715 
20263,366 
20273,018 
20282,774 
Thereafter13,243 
Total$27,175 
Note 9. Derivative Instruments
We conduct business on a global basis in multiple foreign currencies, subjecting Workday to foreign currency exchange risk. To mitigate this risk, we utilize derivative hedging contracts as described below. We do not enter into any derivatives for trading or speculative purposes.
Our foreign currency contracts are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.
Cash Flow Hedges
We enter into foreign currency forward contracts to hedge a portion of our forecasted revenue and expense transactions (“cash flow hedges”). We designate these forward contracts as cash flow hedging instruments since the accounting criteria for such designation has been met.
Cash flow hedges are recorded on the Condensed Consolidated Balance Sheets at fair value. Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows. Gains or losses resulting from changes in the fair value of these hedges are recorded in Accumulated other comprehensive income (loss) (“AOCI”) on the Condensed Consolidated Balance Sheets and are subsequently reclassified to the same line item as the hedged transaction on the Condensed Consolidated Statements of Operations in the same period that the hedged transaction affects earnings. As of October 31, 2023, we estimate that $33 million of net gains recorded in AOCI related to our cash flow hedges will be reclassified into income within the next 12 months.
As of October 31, 2023, and January 31, 2023, the notional values of the cash flow hedges that we held to buy U.S. dollars in exchange for other currencies were $2.2 billion and $1.7 billion, respectively. The notional values of the cash flow hedges that we held to sell U.S. dollars in exchange for other currencies were $369 million and $324 million as of October 31, 2023, and January 31, 2023, respectively. All contracts had maturities of less than 48 months.
15
Non-Designated Hedges
We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities (“non-designated hedges”). These forward contracts are intended to offset foreign currency gains or losses associated with the underlying monetary assets and liabilities and are recorded on the Condensed Consolidated Balance Sheets at fair value. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair value of these forward contracts are recorded in Other income (expense), net on the Condensed Consolidated Statements of Operations. Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows.
As of October 31, 2023, and January 31, 2023, the notional values of the non-designated hedges that we held to buy U.S. dollars in exchange for other currencies were $125 million and $235 million, respectively, and the notional values of the non-designated hedges that we held to sell U.S. dollars in exchange for other currencies were $1 million and $2 million, respectively.
The fair values of outstanding derivative instruments were as follows (in thousands):
Condensed Consolidated Balance Sheets LocationOctober 31, 2023January 31, 2023
Derivative assets:
Cash flow hedgesPrepaid expenses and other current assets$52,123 $42,968 
Cash flow hedgesOther assets37,725 21,757 
Non-designated hedgesPrepaid expenses and other current assets688 99 
Total derivative assets$90,536 $64,824 
Derivative liabilities:
Cash flow hedgesAccrued expenses and other current liabilities$16,644 $13,231 
Cash flow hedgesOther liabilities3,425 15,496 
Non-designated hedgesAccrued expenses and other current liabilities199 5,244 
Non-designated hedgesOther liabilities— 1 
Total derivative liabilities$20,268 $33,972 
The effect of cash flow hedges on the Condensed Consolidated Statements of Operations was as follows (in thousands):
Three Months Ended October 31,
Condensed Consolidated Statements of Operations Location20232022
TotalGains (losses) related to cash flow hedgesTotalGains (losses) related to cash flow hedges
Revenues$1,865,675 $15,625 $1,599,103 $5,647 
Costs and expenses1,777,820 839 1,625,424 (11,852)
Provision for (benefit from) income taxes
15,534 — 52,563 (3,220)
Nine Months Ended October 31,
Condensed Consolidated Statements of Operations Location20232022
TotalGains (losses) related to cash flow hedgesTotalGains (losses) related to cash flow hedges
Revenues$5,336,753 $49,217 $4,569,558 $5,985 
Costs and expenses5,232,441 1,781 4,702,800 (18,636)
Provision for (benefit from) income taxes
25,459 — 59,021 (3,220)
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Pre-tax gains (losses) associated with cash flow hedges were as follows (in thousands):
Condensed Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) LocationsThree Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Gains (losses) recognized in OCINet change in unrealized gains (losses) on cash flow hedges$67,324 $48,058 $54,617 $110,052 
Gains (losses) reclassified from AOCI into income (effective portion)Revenues15,625 5,647 49,217 5,985 
Gains (losses) reclassified from AOCI into income (effective portion)Costs and expenses839 (11,852)1,781 (18,636)
Gains (losses) reclassified from AOCI into income (effective portion)
Provision for (benefit from) income taxes
— (3,220)— (3,220)
Gains (losses) associated with non-designated hedges were as follows (in thousands):
Condensed Consolidated Statements of Operations LocationThree Months Ended October 31, Nine Months Ended October 31,
2023202220232022
Gains (losses) related to non-designated hedgesOther income (expense), net$6,425 $7,187 $7,857 $13,288 
We are subject to netting agreements with all of the counterparties of the foreign exchange contracts, under which we are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is our policy to present the derivatives gross on the Condensed Consolidated Balance Sheets. Our foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. We manage our exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.
As of October 31, 2023, information related to these offsetting arrangements was as follows (in thousands):
Gross Amounts of Recognized AssetsGross Amounts Offset on the Condensed Consolidated Balance SheetsNet Amounts of Assets Presented on the Condensed Consolidated Balance SheetsGross Amounts Not Offset on the Condensed Consolidated Balance SheetsNet Assets Exposed
Financial InstrumentsCash Collateral Received
Derivative assets:
Counterparty A$25,461 $— $25,461 $(1,856)$— $23,605 
Counterparty B20,486 — 20,486 (9,009)— 11,477 
Counterparty C2,015 — 2,015 (228)— 1,787 
Counterparty D37,367 — 37,367 (8,323)— 29,044 
Counterparty E5,207 — 5,207 (852)— 4,355 
Total$90,536 $— $90,536 $(20,268)$— $70,268 
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Gross Amounts of Recognized LiabilitiesGross Amounts Offset on the Condensed Consolidated Balance SheetsNet Amounts of Liabilities Presented on the Condensed Consolidated Balance SheetsGross Amounts Not Offset on the Condensed Consolidated Balance SheetsNet Liabilities Exposed
Financial InstrumentsCash Collateral Pledged
Derivative liabilities:
Counterparty A$1,856 $— $1,856 $(1,856)$— $— 
Counterparty B9,009 — 9,009 (9,009)— — 
Counterparty C228 — 228 (228)— — 
Counterparty D8,323 — 8,323 (8,323)— — 
Counterparty E852 — 852 (852)— — 
Total$20,268 $— $20,268 $(20,268)$— $— 
Note 10. Debt
Outstanding debt consisted of the following (in thousands):
October 31, 2023January 31, 2023
2027 Notes$1,000,000 $1,000,000 
2029 Notes750,000 750,000 
2032 Notes1,250,000 1,250,000 
Total principal amount3,000,000 3,000,000 
Less: unamortized debt discount and issuance costs(21,200)(24,066)
Net carrying amount2,978,800 2,975,934 
Debt, noncurrent$2,978,800 $2,975,934 
As of October 31, 2023, the future principal payments for the outstanding debt were as follows (in thousands):
Fiscal Period:
Remainder of 2024$— 
2025— 
2026— 
2027— 
20281,000,000 
Thereafter2,000,000 
Total principal amount$3,000,000 
Senior Notes
In April 2022, 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 October 31, 2023, we were in compliance with all covenants associated with the Senior Notes.
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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.
As of October 31, 2023, the total estimated fair value of the Senior Notes was $2.6 billion. The estimated fair values of the Senior Notes, which we have classified as Level 2 financial instruments, were determined based on quoted bid prices in an over-the-counter market on the last trading day of the reporting period.
Credit Agreement
In April 2022, we entered into a credit agreement (“2022 Credit Agreement”) which provides for a revolving credit facility in an aggregate principal amount of $1.0 billion. The 2022 Credit Agreement replaced our prior credit agreement entered into in April 2020 (“2020 Credit Agreement”), which provided for a term loan facility in an aggregate original principal amount of $750 million and a revolving credit facility in an aggregate principal amount of $750 million. Concurrently with entering into the 2022 Credit Agreement, we paid off the remaining principal balance of $694 million on the term loan under the 2020 Credit Agreement and terminated the revolving credit facility under the 2020 Credit Agreement, which had no outstanding balance. The modification to our revolving credit facility and extinguishment of the term loan under the 2020 Credit Agreement did not have a material impact to our Condensed Consolidated Statements of Operations for fiscal 2023.
As of October 31, 2023, we had no outstanding revolving loans under the 2022 Credit Agreement. The revolving loans under the 2022 Credit Agreement may be borrowed, repaid, and reborrowed until April 6, 2027, at which time all amounts borrowed must be repaid. The revolving loans under the 2022 Credit Agreement will bear interest, at our option, at a base rate plus a margin of 0.000% to 0.500% or a secured overnight financing rate (“SOFR”) plus 10 basis points, plus a margin of 0.750% to 1.500%, with such margin being determined based on our consolidated leverage ratio or debt rating. We are also obligated to pay an ongoing commitment fee on undrawn amounts.
The 2022 Credit Agreement contains customary representations, warranties, and affirmative and negative covenants, including a financial covenant, events of default, and indemnification provisions in favor of the lenders. The negative covenants include restrictions on the incurrence of liens and indebtedness, certain merger transactions, and other matters, all subject to certain exceptions. The financial covenant, based on a quarterly financial test, requires that we do not exceed a maximum leverage ratio of 3.50:1.00, subject to a step-up to 4.50:1.00 at our election for a certain period following an acquisition. As of October 31, 2023, we were in compliance with all covenants included in the 2022 Credit Agreement.
Convertible Senior Notes
In September 2017, we issued 0.25% convertible senior notes due October 1, 2022, with a principal amount of $1.15 billion (“2022 Notes”). The 2022 Notes were unsecured, unsubordinated obligations, and interest was payable in cash in arrears at a fixed rate of 0.25% on April 1 and October 1 of each year. During the third quarter of fiscal 2023, the 2022 Notes were converted by note holders, and we repaid the $1.15 billion principal balance in cash. We also distributed approximately 0.6 million shares of our Class A common stock to note holders during fiscal 2023, which represented the conversion value in excess of the principal amount.
Notes Hedges
In connection with the issuance of the 2022 Notes, we entered into convertible note hedge transactions (“Purchased Options”) which gave us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the 2022 Notes, approximately 7.8 million shares of our Class A common stock for $147.10 per share. During the third quarter of fiscal 2023, we received approximately 0.6 million shares of our Class A common stock from the exercise of the Purchased Options, which offset the economic dilution to our Class A common stock upon conversion of the 2022 Notes. These shares were recorded as Treasury stock on the Condensed Consolidated Balance Sheets. The Purchased Options were separate transactions and were not part of the terms of the 2022 Notes, and expired on October 1, 2022.
Warrants
In connection with the issuance of the 2022 Notes, we also entered into warrant transactions to sell warrants (“Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 7.8 million shares of our Class A common stock over 60 scheduled trading days beginning in January 2023 at an exercise price of $213.96 per share. During the first quarter of fiscal 2024, the Warrants fully expired without exercise.
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Interest Expense on Debt
The following table sets forth total interest expense recognized related to our debt (in thousands):
Three Months Ended October 31, Nine Months Ended October 31,
20232022