Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Form 10-Q
(Mark One)
x☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended OctoberJuly 31, 20172023
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.
WORKDAY, INC.
(Exact name of registrant as specified in its charter)
Delaware20-2480422
(State or other jurisdiction of

incorporation or organization)
(IRSI.R.S Employer

Identification No.)
62306110 Stoneridge Mall Road
Pleasanton, California 94588
(Address of principal executive offices)offices, including zip code)
Telephone Number (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"“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:days. Yes  x☒ No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes  x☒  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“large accelerated filer, accelerated” “accelerated filer, smaller” “smaller reporting company,” and emerging“emerging growth companycompany” in Rule 12b-2 of the Exchange Act.
Large accelerated filerx☒Accelerated filer¨☐
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
☐		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  x☒
As of October 31, 2017,August 22, 2023, there were approximately 210207 million shares of the registrant’s Class A common stock, net of treasury stock, and 55 million shares of the registrant’s Class B common stock outstanding.

Table of Contents
Workday, Inc.
Page No.
PART I. FINANCIAL INFORMATION
Item 1.

Workday, Inc.
Page No.
PART I. FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets as of OctoberJuly 31, 20172023, and January 31, 20172023
3
4
5
6
67
89
Item 2.
2726
Item 3.
4038
Item 4.
4138
PART II. OTHER INFORMATION
Item 1.
4240
Item 1A.
4341
Item 2.
5966
Item 3.
5966
Item 4.
5966
Item 5.
5966
Item 6.
6067
6168
Exhibit Index
62

2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Workday, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
July 31, 2023January 31, 2023
Assets
Current assets:
Cash and cash equivalents$1,435,690 $1,886,311 
Marketable securities5,221,401 4,235,083 
Trade and other receivables, net1,270,936 1,570,086 
Deferred costs198,677 191,054 
Prepaid expenses and other current assets254,990 225,690 
Total current assets8,381,694 8,108,224 
Property and equipment, net1,221,834 1,201,254 
Operating lease right-of-use assets262,140 249,278 
Deferred costs, noncurrent415,687 420,988 
Acquisition-related intangible assets, net263,056 305,465 
Goodwill2,840,044 2,840,044 
Other assets350,860 360,985 
Total assets$13,735,315 $13,486,238 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$88,814 $153,751 
Accrued expenses and other current liabilities259,426 260,131 
Accrued compensation425,911 563,548 
Unearned revenue3,308,998 3,559,393 
Operating lease liabilities98,810 91,343 
Total current liabilities4,181,959 4,628,166 
Debt, noncurrent2,977,845 2,975,934 
Unearned revenue, noncurrent60,463 74,540 
Operating lease liabilities, noncurrent192,138 181,799 
Other liabilities48,357 40,231 
Total liabilities7,460,762 7,900,670 
Stockholders’ equity:
Common stock263 259 
Additional paid-in capital9,637,303 8,828,639 
Treasury stock(323,695)(185,047)
Accumulated other comprehensive income (loss)(6,780)53,051 
Accumulated deficit(3,032,538)(3,111,334)
Total stockholders’ equity6,274,553 5,585,568 
Total liabilities and stockholders’ equity$13,735,315 $13,486,238 
 October 31, 2017 January 31, 2017
  *As Adjusted
Assets   
Current assets:   
Cash and cash equivalents$1,336,984
 $539,923
Marketable securities1,874,139
 1,456,822
Trade and other receivables, net349,309
 409,780
Deferred costs56,304
 51,330
Prepaid expenses and other current assets77,036
 66,590
Total current assets3,693,772
 2,524,445
Property and equipment, net487,234
 365,877
Deferred costs, noncurrent120,173
 117,249
Acquisition-related intangible assets, net34,305
 48,787
Goodwill158,418
 158,354
Other assets70,814
 53,570
Total assets$4,564,716
 $3,268,282
Liabilities and stockholders’ equity   
Current liabilities:   
Accounts payable$35,837
 $26,824
Accrued expenses and other current liabilities108,074
 61,582
Accrued compensation139,668
 110,625
Unearned revenue1,129,031
 1,086,212
Current portion of convertible senior notes, net336,936
 —
Total current liabilities1,749,546
 1,285,243
Convertible senior notes, net1,136,494
 534,423
Unearned revenue, noncurrent100,135
 135,331
Other liabilities38,267
 36,677
Total liabilities3,024,442
 1,991,674
Stockholders’ equity:   
Common stock210
 202
Additional paid-in capital3,195,130
 2,681,200
Accumulated other comprehensive income (loss)(16,310) 2,071
Accumulated deficit(1,638,756) (1,406,865)
Total stockholders’ equity1,540,274
 1,276,608
Total liabilities and stockholders’ equity$4,564,716
 $3,268,282
*See Note 2 for a summary of adjustments.

See Notes to Condensed Consolidated Financial Statements
3

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Workday, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Revenues:
Subscription services$1,623,939 $1,367,335 $3,151,848 $2,639,411 
Professional services162,827 168,463 319,230 331,044 
Total revenues1,786,766 1,535,798 3,471,078 2,970,455 
Costs and expenses (1):
Costs of subscription services255,684 244,982 494,711 477,904 
Costs of professional services192,416 178,103 370,833 348,002 
Product development609,677 547,835 1,210,134 1,089,344 
Sales and marketing524,186 458,701 1,042,823 888,002 
General and administrative168,546 140,255 336,120 274,124 
Total costs and expenses1,750,509 1,569,876 3,454,621 3,077,376 
Operating income (loss)36,257 (34,078)16,457 (106,921)
Other income (expense), net45,555 (32,789)72,264 (52,952)
Income (loss) before provision for (benefit from) income taxes81,812 (66,867)88,721 (159,873)
Provision for (benefit from) income taxes3,152 (2,709)9,925 6,458 
Net income (loss)$78,660 $(64,158)$78,796 $(166,331)
Net income (loss) per share, basic$0.30 $(0.25)$0.30 $(0.66)
Net income (loss) per share, diluted$0.30 $(0.25)$0.30 $(0.66)
Weighted-average shares used to compute net income (loss) per share, basic261,191 254,355 260,026 253,071 
Weighted-average shares used to compute net income (loss) per share, diluted264,435 254,355 262,923 253,071 
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  *As Adjusted  *As Adjusted
Revenues:       
Subscription services$463,568
 $337,910
 $1,297,831
 $924,148
Professional services91,821
 75,612
 262,739
 210,708
Total revenues555,389
 413,522
 1,560,570
 1,134,856
Costs and expenses (1):
       
Costs of subscription services71,898
 54,645
 197,627
 155,224
Costs of professional services91,657
 72,240
 260,834
 198,140
Product development239,588
 185,311
 657,130
 488,975
Sales and marketing176,121
 149,537
 503,782
 412,055
General and administrative56,184
 57,721
 163,085
 144,609
Total costs and expenses635,448
 519,454
 1,782,458
 1,399,003
Operating loss(80,059) (105,932) (221,888) (264,147)
Other income (expense), net(3,742) (3,105) (4,467) (30,136)
Loss before provision for (benefit from) income taxes(83,801) (109,037) (226,355) (294,283)
Provision for (benefit from) income taxes1,745
 1,077
 5,767
 2,147
Net loss$(85,546) $(110,114) $(232,122) $(296,430)
Net loss per share, basic and diluted$(0.41) $(0.55) $(1.12) $(1.50)
Weighted-average shares used to compute net loss per share, basic and diluted209,188
 199,479
 206,715
 197,093
(1) Costs and expenses include share-based compensation expenses as follows:
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Costs of subscription services$29,988 $25,090 $59,250 $51,320 
Costs of professional services28,754 25,838 58,794 53,422 
Product development161,975 147,181 331,909 300,485 
Sales and marketing66,632 59,878 146,755 119,047 
General and administrative64,563 50,020 124,664 95,239 
Total share-based compensation expenses$351,912 $308,007 $721,372 $619,513 
(1)      Costs and expenses include share-based compensation expenses as follows:
    
Costs of subscription services$6,899
 $5,472
 $19,170
 $14,837
Costs of professional services9,956
 7,436
 27,278
 18,698
Product development59,116
 45,968
 167,068
 117,250
Sales and marketing25,517
 22,597
 74,618
 62,443
General and administrative20,991
 24,982
 63,656
 59,684
*See Note 2 for a summary of adjustments.

See Notes to Condensed Consolidated Financial Statements
4

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Workday, Inc.
Condensed Consolidated Statements of Comprehensive LossIncome (Loss)
(in thousands)
(unaudited)
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Net income (loss)$78,660 $(64,158)$78,796 $(166,331)
Other comprehensive income (loss):
Net change in foreign currency translation adjustment1,292 (985)534 (2,907)
Net change in unrealized gains (losses) on available-for-sale debt securities(17,636)(1,357)(11,570)(10,281)
Net change in unrealized gains (losses) on cash flow hedges, net of tax provision of $(523), $0, $1,554, and $0, respectively(33,086)22,194 (48,795)68,440 
Other comprehensive income (loss)(49,430)19,852 (59,831)55,252 
Comprehensive income (loss)$29,230 $(44,306)$18,965 $(111,079)
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  *As Adjusted  *As Adjusted
Net loss$(85,546) $(110,114) $(232,122) $(296,430)
Other comprehensive income (loss), net of tax:       
Net change in foreign currency translation adjustment(504) (322) 462
 111
Net change in unrealized gains (losses) on available-for-sale investments(302) (392) (931) 542
Net change in market value of effective foreign currency forward exchange contracts6,693
 5,924
 (17,912) 1,170
Other comprehensive income (loss), net of tax5,887
 5,210
 (18,381) 1,823
Comprehensive loss$(79,659) $(104,904) $(250,503) $(294,607)
*See Note 2 for a summary of adjustments.

See Notes to Condensed Consolidated Financial Statements
5

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Workday, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Common stock:
Balance, beginning of period$261 $253 $259 $251 
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes2 2 4 4 
Balance, end of period263 255 263 255 
Additional paid-in capital:
Balance, beginning of period9,195,197 7,596,787 8,828,639 7,284,174 
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes90,194 83,300 87,292 84,288 
Share-based compensation351,912 308,007 721,372 619,513 
Exercise of convertible senior notes hedges— 3 — 122 
Settlement of convertible senior notes— (1)— (1)
Balance, end of period9,637,303 7,988,096 9,637,303 7,988,096 
Treasury stock:
Balance, beginning of period(185,047)(12,584)(185,047)(12,467)
Exercise of convertible senior notes hedges— (4)— (121)
Common stock repurchases under share repurchase program(138,648)— (138,648)— 
Balance, end of period(323,695)(12,588)(323,695)(12,588)
Accumulated other comprehensive income (loss):
Balance, beginning of period42,650 43,109 53,051 7,709 
Other comprehensive income (loss)(49,430)19,852 (59,831)55,252 
Balance, end of period(6,780)62,961 (6,780)62,961 
Accumulated deficit:
Balance, beginning of period(3,111,198)(2,846,758)(3,111,334)(2,744,585)
Net income (loss)78,660 (64,158)78,796 (166,331)
Balance, end of period(3,032,538)(2,910,916)(3,032,538)(2,910,916)
Total stockholders’ equity$6,274,553 $5,127,808 $6,274,553 $5,127,808 

Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Common stock (in shares):
Balance, beginning of period260,408 253,679 257,991 251,209 
Issuance of common stock under employee equity plans, net of shares withheld for employee taxes2,085 1,806 4,502 4,276 
Settlement of convertible senior notes— — — 1 
Purchase of treasury stock from the exercise of convertible senior notes hedges— — — (1)
Common stock repurchased(635)— (635)— 
Balance, end of period261,858 255,485 261,858 255,485 
See Notes to Condensed Consolidated Financial Statements
6
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Workday, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months Ended July 31,Six Months Ended July 31,
Three Months Ended October 31, Nine Months Ended October 31,2023202220232022
2017 2016 2017 2016
 *As Adjusted *As Adjusted
Cash flows from operating activities       
Net loss$(85,546) $(110,114) $(232,122) $(296,430)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:       
Cash flows from operating activities:Cash flows from operating activities:
Net income (loss)Net income (loss)$78,660 $(64,158)$78,796 $(166,331)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization34,982
 30,453
 102,380
 83,239
Depreciation and amortization71,415 92,695 141,856 182,541 
Share-based compensation expenses122,479
 100,098
 351,790
 266,555
Share-based compensation expenses351,912 308,007 721,372 619,513 
Amortization of deferred costs14,519
 11,561
 42,165
 32,917
Amortization of deferred costs52,094 42,258 100,982 81,685 
Amortization of debt discount and issuance costs12,257
 6,782
 25,992
 20,071
Gain on sale of cost method investment(194) —
 (720) (65)
Impairment of cost method investment100
 —
 100
 15,000
Non-cash lease expenseNon-cash lease expense24,283 22,911 48,157 44,959 
(Gains) losses on investments(Gains) losses on investments(865)16,499 7,276 24,579 
Other(1,294) 78
 3,317
 1,678
Other(43,872)11,413 (81,460)12,122 
Changes in operating assets and liabilities, net of business combinations:       
Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Trade and other receivables, net19,070
 (20,693) 59,463
 25,289
Trade and other receivables, net(183,387)(324,841)289,928 138,123 
Deferred costs(19,245) (13,040) (50,063) (41,807)Deferred costs(68,509)(64,742)(103,304)(106,471)
Prepaid expenses and other assets(11,355) (3,686) (23,373) (11,368)Prepaid expenses and other assets25,447 (9,885)6,635 (33,882)
Accounts payable(7,383) 2,260
 2,830
 2,080
Accounts payable2,483 (4,142)(55,827)2,768 
Accrued expenses and other liabilities59,171
 30,591
 49,788
 29,619
Accrued expenses and other liabilities36,003 25,065 (187,311)(5,808)
Unearned revenue6,470
 37,266
 7,632
 114,117
Unearned revenue79,600 63,278 (264,520)(239,723)
Net cash provided by (used in) operating activities144,031
 71,556
 339,179
 240,895
Net cash provided by (used in) operating activities425,264 114,358 702,580 554,075 
Cash flows from investing activities       
Cash flows from investing activities:Cash flows from investing activities:
Purchases of marketable securities(930,783) (380,620) (1,829,231) (1,571,756)Purchases of marketable securities(1,585,332)(1,329,471)(3,473,222)(3,340,090)
Maturities of marketable securities372,389
 449,592
 1,185,730
 1,614,495
Maturities of marketable securities1,239,613 984,887 2,471,442 1,586,362 
Sales of available-for-sale securities32,886
 63,340
 222,823
 92,192
Business combinations, net of cash acquired—
 (144,209) —
 (147,879)
Sales of marketable securitiesSales of marketable securities25,495 28,237 47,678 33,367 
Owned real estate projects(27,616) (59,705) (80,151) (85,479)Owned real estate projects(1,366)(245)(1,688)(265)
Capital expenditures, excluding owned real estate projects(36,356) (27,518) (105,477) (88,535)Capital expenditures, excluding owned real estate projects(63,753)(168,598)(122,529)(227,348)
Purchases of cost method investments(5,272) —
 (10,722) (300)
Sale and maturities of cost method investments294
 —
 1,026
 315
Other(1,000) —
 (1,000) (296)
Purchase of other intangible assetsPurchase of other intangible assets— — (9,500)— 
Purchases of non-marketable equity and other investmentsPurchases of non-marketable equity and other investments— (1,900)(10,500)(16,923)
Sales and maturities of non-marketable equity and other investmentsSales and maturities of non-marketable equity and other investments— 95 — 7,161 
Net cash provided by (used in) investing activities(595,458) (99,120) (617,002) (187,243)Net cash provided by (used in) investing activities(385,343)(486,995)(1,098,319)(1,957,736)
Cash flows from financing activities       
Proceeds from borrowings on convertible senior notes, net of issuance costs1,132,101
 —
 1,132,101
 —
Proceeds from issuance of warrants80,805
 —
 80,805
 —
Purchase of convertible senior notes hedges(175,530) —
 (175,530) —
Proceeds from issuance of common stock from employee equity plans1,974
 4,491
 36,501
 33,267
Cash flows from financing activities:Cash flows from financing activities:
Proceeds from issuance of debt, net of debt discountProceeds from issuance of debt, net of debt discount— — — 2,978,077 
Repayments and extinguishment of debtRepayments and extinguishment of debt— (30)— (693,983)
Payments for debt issuance costsPayments for debt issuance costs— — — (7,220)
Repurchases of common stockRepurchases of common stock(138,647)— (138,647)— 
Proceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheldProceeds from issuance of common stock from employee equity plans, net of taxes paid for shares withheld90,196 83,302 87,296 84,292 
Other(36) 435
 (112) 1,006
Other(145)(185)(405)(377)
Net cash provided by (used in) financing activities1,039,314
 4,926
 1,073,765
 34,273
Net cash provided by (used in) financing activities(48,596)83,087 (51,756)2,360,789 
Effect of exchange rate changes(322) (137) 261
 357
Effect of exchange rate changes218 (145)89 (830)
Net increase (decrease) in cash, cash equivalents and restricted cash587,565
 (22,775) 796,203
 88,282
Cash, cash equivalents and restricted cash at the beginning of period750,532
 411,144
 541,894
 300,087
Cash, cash equivalents and restricted cash at the end of period$1,338,097
 $388,369
 $1,338,097
 $388,369
Net increase (decrease) in cash, cash equivalents, and restricted cashNet increase (decrease) in cash, cash equivalents, and restricted cash(8,457)(289,695)(447,406)956,298 
Cash, cash equivalents, and restricted cash at the beginning of periodCash, cash equivalents, and restricted cash at the beginning of period1,456,291 2,786,738 1,895,240 1,540,745 
Cash, cash equivalents, and restricted cash at the end of periodCash, cash equivalents, and restricted cash at the end of period$1,447,834 $2,497,043 $1,447,834 $2,497,043 



See Notes to Condensed Consolidated Financial Statements
6

Table of Contents

 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
Supplemental cash flow data       
Cash paid for interest, net of amounts capitalized$18
 $48
 $64
 $2,704
Cash paid for income taxes651
 655
 3,259
 4,802
Non-cash investing and financing activities:       
Vesting of early exercise stock options$106
 $445
 $670
 $1,365
Property and equipment, accrued but not paid47,055
 25,917
 47,055
 25,917
Non-cash additions to property and equipment649
 67
 1,276
 982
 October 31, 2017 October 31, 2016
  *As Adjusted
Reconciliation of cash, cash equivalents and restricted cash as shown in the statement of cash flows   
Cash and cash equivalents$1,336,984
 $386,557
Restricted cash included in Other assets1,113
 1,712
Restricted cash included in Property and equipment, net—
 100
Total cash, cash equivalents and restricted cash$1,338,097
 $388,369
*    See Note 2 for a summary of adjustments.


See Notes to Condensed Consolidated Financial Statements
7

Table of Contents

Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Supplemental cash flow data:
Cash paid for interest$— $— $55,129 $2,941 
Cash paid for income taxes, net of refunds21,042 3,274 31,793 7,770 
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid41,342 67,447 41,342 67,447 

As of July 31,
20232022
Reconciliation of cash, cash equivalents, and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows:
Cash and cash equivalents$1,435,690 $2,486,540 
Restricted cash included in Prepaid expenses and other current assets12,144 10,503 
Total cash, cash equivalents, and restricted cash$1,447,834 $2,497,043 
See Notes to Condensed Consolidated Financial Statements
8
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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 providesdelivers applications for financial management, spend management, human capital management, planning, and analytics applications designed for the world's largest companies, educational institutions, and government agencies. We offer innovative and adaptable technology focused on the consumer internet experience and cloud delivery model. Our applications are designed for global enterprises to manage complex and dynamic operating environments. We provideanalytics. With Workday, our customers highly adaptable, accessiblehave a unified system that can help them plan, execute, analyze, and reliableextend to other applications toand environments, thereby helping them continuously adapt how they manage criticaltheir business functions that enable them to optimize their financial and human capital resources.operations. We were originally incorporated in March 2005 in Nevada, and in June 2012, we reincorporated in Delaware. As used in this report, the terms "Workday," "registrant," "we," "us," and "our" mean Workday, Inc. and its subsidiaries unless the context indicates otherwise.
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"(“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission ("SEC"(“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, financial positionstockholders’ equity, and cash flows. All such adjustments are of a normal, recurring nature. The results of operations for the quarterthree and six months ended OctoberJuly 31, 20172023, shown in this report are not necessarily indicative of the results to be expected for the full fiscal year ending January 31, 2018.2024. 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, 2017,2023, filed with the SEC on March 20, 2017.February 27, 2023.
Effective February 1, 2017, we adopted the requirements of Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers and ASU No. 2016-18, Statement of Cash Flows, Restricted Cash as discussed in Note 2. All amounts and disclosures set forth in this Form 10-Q have been updated to comply with the new standards, as indicated by the "as adjusted" footnote.
Certain prior period amounts reported in our 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, judgmentsjudgements, 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. TheseSignificant 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, certain assumptions used in the valuation of equity awards, and the fair value and useful lives of assets acquired and liabilities assumed through business combinations.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 positionstatements.
In February 2023, we completed an assessment of the useful lives of our data center equipment, including servers, network equipment, and resultsintegrated 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 operations.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 $25 million and $55 million for the three and six months ended July 31, 2023, respectively.
Segment Information
We operate in oneoperating segment, cloud applications. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by thea chief operating decision maker who is our chief executive officer,(“CODM”) in deciding how to allocate resources and assessing performance. For the six months ended July 31, 2023, our co-chief executive officers together served as CODM for purposes of segment reporting. Our chief operating decision makerCODM allocates resources and assesses performance based upon discrete financial information at the consolidated level.

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Note 2. Significant Accounting Policies and Accounting Standards and
Significant Accounting Policies
Recently Adopted Accounting Pronouncements
ASU No. 2014-09
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers ("Topic 606"). Topic 606 supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition ("Topic 605"), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, we refer to Topic 606 and Subtopic 340-40 as the "new standard."
We early adopted the requirements of the new standard as of February 1, 2017, utilizing the full retrospective method of transition. Adoption of the new standard resulted in changes to our accounting policies for revenue recognition, trade and other receivables, and deferred commissions as detailed below. We applied the new standard using a practical expedient where the consideration allocated to the remaining performance obligations or an explanation of when we expect to recognize that amount as revenue for all reporting periods presented before the date of the initial application is not disclosed.
The impact of adopting the new standard on our fiscal 2017 and fiscal 2016 revenues is not material. The primary impact of adopting the new standard relates to the deferral of incremental commission costs of obtaining subscription contracts. Under Topic 605, we deferred only direct and incremental commission costs to obtain a contract and amortized those costs on a straight-line basis over the term of the related subscription contract, which was generally three years or longer. Under the new standard, we defer all incremental commission costs to obtain the contract. We amortize these costs on a straight-line basis over a period of benefit that we have determined to be five years or the related contractual renewal period, depending on whether the contract is an initial or renewal contract, respectively.
ASU No. 2016-09
In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies the accounting for share-based payment transactions, including accounting for income taxes, forfeitures, and classification in the statement of cash flows. As of February 1, 2017, we adopted the applicable provisions of ASU No. 2016-09 as follows:
The guidance requires excess tax benefits and tax deficiencies to be recorded as income tax benefit or expense in the statement of operations when the awards vest or are settled, and eliminates the requirement to reclassify cash flows related to excess tax benefits from operating activities to financing activities on the statement of cash flows. We adopted the guidance prospectively effective February 1, 2017. Amounts previously recorded to Additional paid-in capital related to windfall tax benefits prior to February 1, 2017 remain in Stockholders' equity.
The guidance eliminates the requirement that excess tax benefits must be realized (through a reduction in income taxes payable) before companies can recognize them. We have applied the modified retrospective transition method upon adoption. The previously unrecognized excess tax effects were recorded as a deferred tax asset in the amount of $448.0 million, of which $447.8 million was fully offset by a valuation allowance, and the remaining $0.2 million resulted in a cumulative-effect adjustment to Accumulated deficit as of February 1, 2017.
ASU No. 2016-18
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows, Restricted Cash (Topic 230), which requires that a statement of cash flows explain the change during the period for the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The guidance is effective for our fiscal year beginning February 1, 2018. We early adopted ASU No. 2016-18 retrospectively, effective February 1, 2017. As a result of including restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on the condensed consolidated statement of cash flows, net cash flows for the three months ended October 31, 2016 decreased by $4 million and net cash flows for the nine months ended October 31, 2016 increased by $2 million.

We adjusted our condensed consolidated financial statements from amounts previously reported due to the adoption of ASU No. 2014-09 and ASU No. 2016-18. Select condensed consolidated balance sheet line items, which reflect the adoption of the new ASU's are as follows (in thousands):
 January 31, 2017
 As Previously Reported Adjustments   As Adjusted
Assets       
Trade and other receivables, net$383,908
 $25,872
 a $409,780
Prepaid expenses and other current assets88,336
 (21,746) a 66,590
Deferred costs27,537
 23,793
 a 51,330
Deferred costs, noncurrent43,310
 73,939
 a 117,249
Liabilities       
Unearned revenue$1,097,417
 $(11,205) a $1,086,212
Unearned revenue, noncurrent135,970
 (639) a 135,331
Select unaudited condensed consolidated statement of operations line items, which reflect the adoption of the new ASUs are as follows (in thousands, except per share data):
 Three Months Ended October 31, 2016
 As Previously Reported Adjustments   As Adjusted
Revenues:       
Subscription services$335,722
 $2,188
 a $337,910
Professional services73,860
 1,752
 a 75,612
Total revenues409,582
 3,940
 a 413,522
Costs and expenses:  

    
Sales and marketing149,549
 (12) a 149,537
Operating loss(109,884) 3,952
 a (105,932)
Net loss$(114,066) $3,952
 a $(110,114)
Net loss per share, basic and diluted$(0.57) $0.02
 a $(0.55)
 Nine Months Ended October 31, 2016
 As Previously Reported Adjustments   As Adjusted
Revenues:       
Subscription services$921,953
 $2,195
 a $924,148
Professional services210,782
 (74) a 210,708
Total revenues1,132,735
 2,121
 a 1,134,856
Costs and expenses:       
Sales and marketing416,217
 (4,162) a 412,055
Operating loss(270,430) 6,283
 a (264,147)
Net loss$(302,713) $6,283
 a $(296,430)
Net loss per share, basic and diluted$(1.54) $0.04
 a $(1.50)

Select unaudited condensed consolidated statement of cash flows line items, which reflect the adoption of the new ASUs are as follows (in thousands):
 Three Months Ended October 31, 2016
 As Previously Reported Adjustments   As Adjusted
Cash flows from operating activities       
Net loss$(114,066) $3,952
 a $(110,114)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:       
Amortization of deferred costs6,507
 5,054
 a 11,561
Changes in operating assets and liabilities:       
Trade and other receivables, net(20,360) (333) a (20,693)
Deferred costs(7,973) (5,067) a (13,040)
Prepaid expenses and other assets(1,425) (2,261) a, b (3,686)
Unearned revenue38,514
 (1,248) a 37,266
Net cash provided by (used in) operating activities71,459
 97
 b 71,556
Change in restricted cash3,900
 (3,900) b —
Net cash provided by (used in) investing activities(95,220) (3,900) b (99,120)
Net increase (decrease) in cash and cash equivalents(18,972) (3,803) b (22,775)
Cash, cash equivalents and restricted cash at the beginning of period405,529
 5,615
 b 411,144
Cash, cash equivalents and restricted cash at the end of period$386,557
 $1,812
 b $388,369
 Nine Months Ended October 31, 2016
 As Previously Reported Adjustments   As Adjusted
Cash flows from operating activities       
Net loss$(302,713) $6,283
 a $(296,430)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:       
Amortization of deferred costs18,520
 14,397
 a 32,917
Changes in operating assets and liabilities:       
Trade and other receivables, net24,695
 594
 a 25,289
Deferred costs(23,247) (18,560) a (41,807)
Prepaid expenses and other assets(14,103) 2,735
 a, b (11,368)
Unearned revenue117,854
 (3,737) a 114,117
Net cash provided by (used in) operating activities239,183
 1,712
 b 240,895
Change in restricted cash(100) 100
 b —
Net cash provided by (used in) investing activities(187,343) 100
 b (187,243)
Net increase (decrease) in cash and cash equivalents86,470
 1,812
 b 88,282
Cash, cash equivalents and restricted cash at the end of period$386,557
 $1,812
 b $388,369
a
Adjusted to reflect the adoption of ASU No. 2014-09, Revenue from Contracts with Customers.
b
Adjusted to reflect the adoption of ASU No. 2016-18, Statement of Cash Flows, Restricted Cash.
Summary of Significant Accounting Policies
Except for the accounting policies for revenue recognition, trade and other receivables, and deferred commissions that were updated as a result of adopting ASU No. 2014-09, thereThere have been no material changes toin our significant accounting policies as described in theour Annual Report on Form 10-K for the fiscal year ended January 31, 2017, filed with2023.
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 July 31, 2023, or January 31, 2023. No customer individually accounted for more than 10% of total revenues during the SEC on March 20, 2017, that have had a material impact on our condensed consolidated financial statementsthree and related notes.six months ended July 31, 2023, or 2022.

Other than the United States, no country individually accounted for more than 10% of total revenues during the three and six months ended July 31, 2023, or 2022.
Revenue Recognition
We derive our revenues primarily from subscription services and professional services. Revenues are recognized when controlIn order to reduce the risk of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We determine revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price
Allocation of the transaction price to the performance obligations in the contract
Recognition of revenue when, or as, we satisfy a performance obligation
Subscription Services Revenues
Subscription services revenues primarily consist of fees that provide customers access to one or moredown-time of our cloud applications, for finance, human resources,we have established data centers in various geographic regions. We serve our customers and analytics, with routine customer support. Revenue is generally recognized over time on a ratable basis overusers from data center facilities operated by third parties, located in the contract term beginning onUnited States, Canada, and Europe. We have internal procedures to restore services in the date that our service is made available to the customer. Our subscription contracts are generally three years or longer in length, billed annually in advance, and non-cancelable.
Professional Services Revenues
Professional services revenues primarily consistevent of fees for deployment and optimization services, as well as training. The majoritydisaster at one of our consulting contracts are billed on a timedata 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 materials basisMicrosoft Corporation, to serve customers and revenue is recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time based on the proportion performed.
Contracts with Multiple Performance Obligations
Someoperate certain aspects of our contractsservices. 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 July 31, 2023, and January 31, 2023, we held one marketable equity investment with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including thecarrying value that was individually greater than 10% of our contracts, the cloud applications sold, customer demographics, geographic locations, and the number and types of users within our contracts.total equity investments portfolio.
Trade and Other Receivables
Trade and other receivables are primarily comprised of trade receivables that are recorded at the invoice amount, net of an allowance for doubtful accounts, which is not material. Other receivables represent unbilled receivables related to subscription and professional services contracts.
Deferred Commissions
Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be five years. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors. Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period. Amortization expense is included in Sales and marketing expenses in the accompanying condensed consolidated statements of operations.
Recently Issued Accounting Pronouncements
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10), which requires entities to carry all investments in equity securities at fair value and recognize any changes in fair value in net income. We expect to elect the measurement alternative, defined as cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The guidance is effective for our fiscal year beginning February 1, 2018. Early adoption is permitted. We plan to adopt the new standard in the first quarter of fiscal 2019. We are evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases under ASC Topic 840 Leases. The guidance is effective for our fiscal year beginning February 1, 2019. Early adoption is permitted. We are evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.
In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (Topic 740), which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Prior to the issuance of this ASU, existing guidance prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset had been sold to an outside party. The guidance is effective for our fiscal year beginning February 1, 2018. Early adoption is permitted. We plan to adopt the new standard in the first quarter of fiscal 2019 and do not expect it to have a material impact on our consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815), which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The guidance is effective for our fiscal year beginning February 1, 2019. Early adoption is permitted. We are evaluating the accounting, transition and disclosure requirements of the standard and cannot currently estimate the financial statement impact of adoption.
Note 3. MarketableInvestments
Debt Securities
At OctoberAs of July 31, 2017, marketable2023, debt securities consisted of the following (in thousands):
Amortized CostUnrealized GainsUnrealized LossesAggregate Fair Value
U.S. treasury securities$2,577,707 $23 $(10,470)$2,567,260 
U.S. agency obligations543,065 283 (2,742)540,606 
Corporate bonds1,649,860 652 (14,982)1,635,530 
Commercial paper1,184,789 1 — 1,184,790 
Total debt securities$5,955,421 $959 $(28,194)$5,928,186 
Included in Cash and cash equivalents$763,088 $— $(1)$763,087 
Included in Marketable securities$5,192,333 $959 $(28,193)$5,165,099 
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 Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value
U.S. agency obligations$837,650
 $1
 $(813) $836,838
U.S. treasury securities698,398
 —
 (447) 697,951
Corporate bonds428,145
 14
 (406) 427,753
Commercial paper500,114
 —
 —
 500,114
Money market funds559,076
 —
 —
 559,076
Certificates of deposit5,000
 —
 —
 5,000
 $3,028,383
 $15
 $(1,666) $3,026,732
Included in cash and cash equivalents$1,152,599
 $—
 $(6) $1,152,593
Included in marketable securities$1,875,784
 $15
 $(1,660) $1,874,139
AtAs of January 31, 2017, marketable2023, 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 
 Amortized Cost Unrealized Gains Unrealized Losses Aggregate Fair Value
U.S. agency obligations$908,874
 $179
 $(535) $908,518
U.S. treasury securities192,028
 48
 (25) 192,051
Corporate bonds290,272
 42
 (429) 289,885
Commercial paper323,106
 —
 —
 323,106
Money market funds24,425
 —
 —
 24,425
 $1,738,705
 $269
 $(989) $1,737,985
Included in cash and cash equivalents$281,163
 $—
 $—
 $281,163
Included in marketable securities$1,457,542
 $269
 $(989) $1,456,822
The contractual maturities of the debt securities were as follows (in thousands):

July 31, 2023
Due within 1 year$3,992,736 
Due in 1 year through 5 years1,935,450 
Total debt securities$5,928,186 
We do not believe the unrealized losses represent other-than-temporary impairments based on our evaluation of available evidence, which includes our intent to hold these investments to maturity as of October 31, 2017. The unrealized losses on marketable securities which have been in a net loss position for 12 months or greater were not material as of October 31, 2017. We classify our marketabledebt securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We consider all marketabledebt 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 inon the accompanying condensed consolidated balance sheets.Condensed Consolidated Balance Sheets. Debt securities included in Marketable securities on the condensed consolidated balance sheetsCondensed Consolidated Balance Sheets consist of securities with original maturities at the time of purchase greater than three months, and the remainderremaining securities are included in Cash and cash equivalents.
As of July 31, 2023, and January 31, 2023, the fair value of debt securities in an unrealized loss position was $4.1 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 $6 million and $18 million of debt securities during the three and six months ended July 31, 2023, respectively. We sold $28 million of debt securities during the three and six months ended July 31, 2022. The realized gains and losses from the sales were immaterial.
Equity Investments
Equity investments consisted of the following (in thousands):
Condensed Consolidated Balance Sheets LocationJuly 31, 2023January 31, 2023
Money market fundsCash and cash equivalents$447,869 $902,226 
Non-marketable equity investments measured using the measurement alternativeOther assets261,506 261,922 
Marketable equity investmentsMarketable securities56,302 80,766 
Total equity investments$765,677 $1,244,914 
Total realized and unrealized gains and losses associated with our equity investments consisted of the following (in thousands):
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Net realized gains (losses) recognized on equity investments sold (1)
$2,421 $95 $1,099 $1,154 
Net unrealized gains (losses) recognized on equity investments held as of the end of the period(1,583)(16,511)(8,275)(24,999)
Total net gains (losses) recognized in Other income (expense), net$838 $(16,416)$(7,176)$(23,845)
(1)Reflects the difference between the sale proceeds and the carrying value of the equity investments at the beginning of the period.
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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 reflected in cash and cash equivalents. We sold $33summarized below (in thousands):
July 31, 2023January 31, 2023
Total initial cost$218,833 $206,833 
Cumulative net unrealized gains (losses)42,673 55,089 
Carrying value$261,506 $261,922 
During the three months ended July 31, 2023, we recorded impairment losses of $10 million to the carrying value of non-marketable equity investments. During the three months ended July 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $3 million and $63no material impairment losses.
During the six months ended July 31, 2023, we recorded impairment losses of $12 million to the carrying value of non-marketable equity investments. During the six months ended July 31, 2022, we recorded upward adjustments to the carrying value of non-marketable equity investments of $6 million and impairment losses of $14 million.
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 securitiesequity investments are summarized below (in thousands):
July 31, 2023January 31, 2023
Total initial cost$24,801 $38,449 
Cumulative net unrealized gains (losses)31,501 42,317 
Carrying value
$56,302 $80,766 
During the three months ended July 31, 2023, we sold marketable equity investments for proceeds of $20 million and net realized gains of $2 million. We did not sell any marketable equity investments during the three months ended OctoberJuly 31, 20172022. During the six months ended July 31, 2023, and 2016, respectively, and $2232022, we sold marketable equity investments for proceeds of $30 million and $92$5 million, respectively, with corresponding net realized gains of our marketable securities during$1 million and $1 million, respectively.
During the ninethree months ended OctoberJuly 31, 20172023, and 2016, respectively. The realized2022, we recorded unrealized net gains fromof $8 million and net losses of $20 million, respectively, on marketable equity investments held as of the sales are immaterial.end of each period. During the six months ended July 31, 2023, and 2022, we recorded unrealized net gains of $4 million and net losses of $17 million, respectively, on marketable equity investments held as of the end of each period.
Note 4. Fair Value Measurements
We measure our financial assets and liabilities at fair value at each reporting period usinguse 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.
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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 OctoberJuly 31, 20172023 (in thousands):
Level 1Level 2Level 3Total
DescriptionLevel 1 Level 2 Level 3 Total
U.S. treasury securitiesU.S. treasury securities$2,567,260 $— $— $2,567,260 
U.S. agency obligations$—
 $836,838
 $—
 $836,838
U.S. agency obligations— 540,606 — 540,606 
U.S. treasury securities697,951
 —
 —
 697,951
Corporate bonds—
 427,753
 —
 427,753
Corporate bonds— 1,635,530 — 1,635,530 
Commercial paper—
 500,114
 —
 500,114
Commercial paper— 1,184,790 — 1,184,790 
Money market funds559,076
 —
 —
 559,076
Money market funds447,869 — — 447,869 
Certificates of deposit—
 5,000
 —
 5,000
Marketable equity investmentsMarketable equity investments56,302 — — 56,302 
Foreign currency derivative assets—
 2,880
 —
 2,880
Foreign currency derivative assets— 47,191 — 47,191 
Total assets$1,257,027
 $1,772,585
 $—
 $3,029,612
Total assets$3,071,431 $3,408,117 $— $6,479,548 
Foreign currency derivative liabilities$—
 $15,172
 $—
 $15,172
Foreign currency derivative liabilities$— $38,943 $— $38,943 
Total liabilities$—
 $15,172
 $—
 $15,172
Total liabilities$— $38,943 $— $38,943 
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, 20172023 (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 $— $33,972 
Non-Marketable Equity Investments Measured at Fair Value on a Non-Recurring Basis
DescriptionLevel 1 Level 2 Level 3 Total
U.S. agency obligations$—
 $908,518
 $—
 $908,518
U.S. treasury securities192,051
 —
 —
 192,051
Corporate bonds—
 289,885
 —
 289,885
Commercial paper—
 323,106
 —
 323,106
Money market funds24,425
 —
 —
 24,425
Foreign currency derivative assets—
 7,909
 —
 7,909
Total assets$216,476
 $1,529,418
 $—
 $1,745,894
Foreign currency derivative liabilities$—
 $2,127
 $—
 $2,127
Total liabilities$—
 $2,127
 $—
 $2,127
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
The following table presentsWe carry our debt at face value less unamortized debt discount and issuance costs on our Condensed Consolidated Balance Sheets and present the carrying amounts and estimatedfair 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 financial instruments that are not recorded at fair valuedebt and the inputs used in the condensed consolidated balance sheets (in thousands): calculations, see Note 10, Debt.
 October 31, 2017 January 31, 2017
 Net Carrying Amount Before Unamortized Debt Issuance Costs 
Estimated
Fair Value
 Net Carrying Amount Before Unamortized Debt Issuance Costs 
Estimated
Fair Value
0.75% Convertible senior notes$337,930
 $475,230
 $325,620
 $402,259
1.50% Convertible senior notes220,512
 367,425
 213,180
 310,470
0.25% Convertible senior notes931,866
 1,166,100
 —
 —
The difference between the principal amount of the notes, $350 million for the 0.75% convertible senior notes, $250 million for the 1.50% convertible senior notes, and $1.15 billion for the 0.25% convertible senior notes, and the net carrying amount before unamortized debt issuance costs represents the unamortized debt discount (see Note 10). The estimated fair value of the convertible senior notes, which we have classified as Level 2 financial instruments, was determined based on the quoted bid price of the convertible senior notes in an over-the-counter market on the last trading day of each reporting period.
Based on the closing price of our common stock of $110.99 on October 31, 2017, the if-converted values of the 0.75% convertible senior notes and the 1.50% convertible senior notes were greater than their respective principal amounts, and the if-converted value of the 0.25% convertible senior notes was less than the respective principal amount.
Note 5. Deferred Costs
Deferred costs, which primarily consist of deferred sales commissions, were $176commissions, were $614 million and $169$612 million as of OctoberJuly 31, 20172023, and January 31, 2017,2023, respectively. Amortization expense for the deferred costs was $14$52 million and $12$43 million for the three months ended OctoberJuly 31, 20172023, and 2016,2022, respectively, and $42$101 million and $33$82 million for the ninesix months ended OctoberJuly 31, 20172023, and 2016,2022, respectively. There was no impairment loss in relation to the costs capitalized for the periods presented.
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Note 6. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
July 31, 2023January 31, 2023
Computers, equipment, and software$1,344,434 $1,286,540 
Buildings721,589 719,966 
Leasehold improvements212,576 202,101 
Furniture, fixtures, and transportation equipment90,940 90,816 
Land and land improvements80,994 81,083 
Property and equipment, gross2,450,533 2,380,506 
Less accumulated depreciation and amortization(1,228,699)(1,179,252)
Property and equipment, net$1,221,834 $1,201,254 
 October 31, 2017 January 31, 2017
Land$7,353
 $6,592
Buildings216,562
 115,302
Computers, equipment and software373,995
 323,311
Computers, equipment and software acquired under capital leases14,358
 18,298
Furniture and fixtures32,729
 24,462
Leasehold improvements122,881
 108,673
Property and equipment, gross (1)
767,878
 596,638
Less accumulated depreciation and amortization(280,644) (230,761)
Property and equipment, net$487,234
 $365,877
(1)
Property and equipment, gross includes construction-in-progress for owned real estate projects of $137 million and $115 million that have not yet been placed in service as of October 31, 2017 and January 31, 2017, respectively.
DepreciationDepreciation expense totaled $30$49 million and $23$71 million for the three months ended OctoberJuly 31, 20172023, and 2016,2022, respectively, and $85$97 million and $67$138 million for the ninesix months ended OctoberJuly 31, 20172023, and 2016,2022, respectively. Interest costs capitalized to property and equipment totaled $3 million and $1 million for the three months ended October 31, 2017 and 2016, respectively, and $6 million and $2 million for the nine months ended October 31, 2017 and 2016, respectively.

Note 7. Acquisition-relatedAcquisition-Related Intangible Assets, Net
Acquisition-related intangible assets, net consisted of the following (in thousands):
July 31, 2023January 31, 2023
October 31, 2017 January 31, 2017
Acquired developed technology$64,900
 $64,900
Customer relationship assets1,000
 1,000
65,900
 65,900
Developed technologyDeveloped technology$342,700 $342,700 
Customer relationshipsCustomer relationships311,100 311,100 
BacklogBacklog15,000 15,000 
Trade nameTrade name12,500 12,500 
Acquisition-related intangible assets, grossAcquisition-related intangible assets, gross681,300 681,300 
Less accumulated amortization(31,595) (17,113)Less accumulated amortization(418,244)(375,835)
Acquisition-related intangible assets, net$34,305
 $48,787
Acquisition-related intangible assets, net$263,056 $305,465 
Amortization expense related to acquired developed technology and customer relationshipacquisition-related intangible assets was $4$21 million and $5$21 million for the three months ended OctoberJuly 31, 20172023, and 2016,2022, respectively, and $14$42 million and $8$43 million for the ninesix months ended OctoberJuly 31, 20172023, and 2016,2022, respectively.
As of OctoberJuly 31, 2017,2023, our future estimated amortization expense related to acquired developed technology and customer relationshipacquisition-related intangible assets iswas as follows (in thousands):
Fiscal Period:
Remainder of 2024$31,909 
202561,663 
202655,748 
202731,177 
202826,944 
Thereafter55,615 
Total$263,056 
14
Fiscal Period: 
2018$4,804
201918,904
202010,281
2021316
Total$34,305
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Note 8. Other Assets
Other noncurrent assets consisted of the following (in thousands):
July 31, 2023January 31, 2023
Non-marketable equity and other investments$261,506 $263,485 
Technology patents and other intangible assets, net27,538 20,534 
Prepayments for goods and services19,913 23,466 
Derivative assets14,676 21,757 
Net deferred tax assets9,859 12,650 
Deposits6,332 5,819 
Other11,036 13,274 
Total other assets$350,860 $360,985 
Technology patents and other intangible assets with estimable useful lives are amortized on a straight-line basis. As of July 31, 2023, the future estimated amortization expense was as follows (in thousands):
Fiscal Period:
Remainder of 2024$2,097 
20253,639 
20263,290 
20272,942 
20282,697 
Thereafter12,873 
Total$27,538 
 October 31, 2017 January 31, 2017
Cost method investments$24,320
 $14,004
Acquired land leasehold interest, net9,596
 9,676
Deposits4,101
 3,488
Net deferred tax assets1,820
 4,336
Other30,977
 22,066
Total$70,814
 $53,570
Our cost method investments include investments in private companies in which we do not have the ability to exert significant influence. The investments are tested for impairment at least annually, and more frequently upon the occurrence of certain events.
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 are exposed to foreign currency fluctuations resulting from customer contracts denominated in foreign currencies. We have a hedging program in which we enter into foreign currency forward contracts related to certain customer contracts.hedge a portion of our forecasted revenue and expense transactions (“cash flow hedges”). We designate these forward contracts as cash flow hedging instruments assince the accounting criteria for such designation havehas been met. The effective portion
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 gainsCondensed Consolidated Statements of Cash Flows. Gains or losses resulting from changes in the fair value of these hedges isare recorded in Accumulated other comprehensive income (loss) ("OCI"(“AOCI”) on the condensed consolidated balance sheetsCondensed Consolidated Balance Sheets and will beare subsequently reclassified to the related revenuesame line item as the hedged transaction on the condensed consolidated statementsCondensed Consolidated Statements of operationsOperations in the same period that the underlying revenues are earned. The changeshedged transaction affects earnings. As of July 31, 2023, we estimate that $41 million of net gains recorded in value of these contracts resulting from changes in forward points are excluded fromAOCI related to our cash flow hedges will be reclassified into income within the assessment of hedge effectiveness and are recorded as incurred in Other income (expense), net on the condensed consolidated statements of operations. Cash flows from such forward contracts are classified as operating activities.next 12 months.
As of OctoberJuly 31, 20172023, and January 31, 2017, we had outstanding foreign currency forward contracts designated as2023, the notional values of the cash flow hedges with totalthat we held to buy U.S. dollars in exchange for other currencies were $2.1 billion and $1.7 billion, respectively. The notional values of $470the cash flow hedges that we held to sell U.S. dollars in exchange for other currencies were $350 million and $252$324 million as of July 31, 2023, and January 31, 2023, respectively. All contracts havehad maturities not greaterof less than 3548 months. The notional value represents the amount that will be bought or sold upon maturity
15
Table of the forward contract.Contents
Foreign Currency Forward Contracts not Designated asNon-Designated Hedges
We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities.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 thethese forward contracts are recorded in Other income (expense), net on the condensed consolidated statementsCondensed Consolidated Statements of operations. These forward contracts are intended to offset the foreign currency gains or losses associated with the underlying monetary assets and liabilities.Operations. Cash flows from suchthe settlement of these forward contracts are classified as operating activities.activities on the Condensed Consolidated Statements of Cash Flows.
As of OctoberJuly 31, 20172023, and January 31, 2017, we had outstanding forward contracts with total2023, the notional values of $51 million.

the non-designated hedges that we held to buy U.S. dollars in exchange for other currencies were $138 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 $19 million and $2 million, respectively.
The fair values of outstanding derivative instruments were as follows (in thousands):
Condensed Consolidated Balance Sheets LocationJuly 31, 2023January 31, 2023
Derivative assets:
Cash flow hedgesPrepaid expenses and other current assets$32,135 $42,968 
Cash flow hedgesOther assets14,676 21,757 
Non-designated hedgesPrepaid expenses and other current assets380 99 
Total derivative assets$47,191 $64,824 
Derivative liabilities:
Cash flow hedgesAccrued expenses and other current liabilities$16,600 $13,231 
Cash flow hedgesOther liabilities21,469 15,496 
Non-designated hedgesAccrued expenses and other current liabilities872 5,244 
Non-designated hedgesOther liabilities2 1 
Total derivative liabilities$38,943 $33,972 
  Condensed Consolidated Balance Sheets Location October 31, 2017 January 31, 2017
Derivative Assets:      
Foreign currency forward contracts designated as cash flow hedges
 Prepaid expenses and other current assets and Other assets $2,535
 $7,149
Foreign currency forward contracts not designated as hedges Prepaid expenses and other current assets 345
 760
Derivative Liabilities:      
Foreign currency forward contracts designated as cash flow hedges
 Accrued expenses and other current liabilities and Other liabilities $13,424
 $1,605
Foreign currency forward contracts not designated as hedges Accrued expenses and other current liabilities 1,748
 522
Gains (losses) associated with foreign currency forward contracts designated asThe effect of cash flow hedges wereon the Condensed Consolidated Statements of Operations was as follows (in thousands):
Three Months Ended July 31,
Condensed Consolidated Statements of Operations Location20232022
TotalGains (losses) related to cash flow hedgesTotalGains (losses) related to cash flow hedges
Revenues$1,786,766 $17,266 $1,535,798 $1,495 
Costs and expenses1,750,509 1,640 1,569,876 (5,955)
Six Months Ended July 31,
Condensed Consolidated Statements of Operations Location20232022
TotalGains (losses) related to cash flow hedgesTotalGains (losses) related to cash flow hedges
Revenues$3,471,078 $33,592 $2,970,455 $338 
Costs and expenses3,454,621 942 3,077,376 (6,784)
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  Condensed Consolidated Statement of Operations and Statement of Comprehensive Loss Locations Three Months Ended October 31, Nine Months Ended October 31,
   2017 2016 2017 2016
Gains (losses) recognized in OCI (effective portion) (1)
 Net change in market value of effective foreign currency forward exchange contracts $7,372
 $6,107
 $(16,526) $1,606
Gains (losses) reclassified from OCI into income (effective portion) Revenues 679
 183
 1,386
 436
Gains (losses) recognized in income (amount excluded from effectiveness testing and ineffective portion) Other income (expense), net 350
 517
 1,740
 833
(1)
Of the total effective portion of foreign currency forward contracts designated as cash flow hedges as of October 31, 2017, net losses of $3 million are expected to be reclassified out of OCI within the next 12 months.
GainsPre-tax gains (losses) associated with foreign currency forward contracts not designated as cash flow hedges were as follows (in thousands):
Condensed Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) LocationsThree Months Ended July 31,Six Months Ended July 31,
2023202220232022
Gains (losses) recognized in OCINet change in unrealized gains (losses) on cash flow hedges$(14,703)$17,734 $(12,707)$61,994 
Gains (losses) reclassified from AOCI into income (effective portion)Revenues17,266 1,495 33,592 338 
Gains (losses) reclassified from AOCI into income (effective portion)Costs and expenses1,640 (5,955)942 (6,784)
  Condensed Consolidated Statement of Operations Location Three Months Ended October 31, Nine Months Ended October 31,
Derivative Type  2017 2016 2017 2016
Foreign currency forward contracts not designated as hedges Other income (expense), net $829
 $1,195
 $(1,796) $654
Gains (losses) associated with non-designated hedges were as follows (in thousands):
Condensed Consolidated Statements of Operations LocationThree Months Ended July 31,Six Months Ended July 31,
2023202220232022
Gains (losses) related to non-designated hedgesOther income (expense), net$(1,002)$2,135 $1,432 $6,101 
We are subject to master netting agreements with certainall 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 inon the condensed consolidated balance sheets.Condensed Consolidated Balance Sheets. Our foreign currency forward contracts are not subject to any credit contingent features or collateral requirementsrequirements. We manage our exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and we do not believe we are subject to significant counterparty concentration risk given the short-term nature, volume, and size of the derivative contracts outstanding.by actively monitoring outstanding positions.

As of OctoberJuly 31, 2017,2023, 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$14,550 $— $14,550 $(8,966)$— $5,584 
Counterparty B8,420 — 8,420 (7,219)— 1,201 
Counterparty C2,099 — 2,099 (301)— 1,798 
Counterparty D19,769 — 19,769 (19,876)— (107)
Counterparty E2,353 — 2,353 (2,581)— (228)
Total$47,191 $— $47,191 $(38,943)$— $8,248 
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$8,966 $— $8,966 $(8,966)$— $— 
Counterparty B7,219 — 7,219 (7,219)— — 
Counterparty C301 — 301 (301)— — 
Counterparty D19,876 — 19,876 (19,876)— — 
Counterparty E2,581 — 2,581 (2,581)— — 
Total$38,943 $— $38,943 $(38,943)$— $— 
17
  Gross Amounts of Recognized Assets Gross Amounts Offset in the Condensed Consolidated Balance Sheets Net Amounts of Assets Presented in the Condensed Consolidated Balance Sheets Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets Net Assets Exposed
     Financial Instruments Cash Collateral Received 
Derivative Assets:            
Counterparty A $1,781
 $—
 $1,781
 $(1,781) $—
 $—
Counterparty B 236
 —
 236
 (236) —
 —
Counterparty C 863
 —
 863
 (863) —
 —
Total $2,880
 $—
 $2,880
 $(2,880) $—
 $—
  Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Condensed Consolidated Balance Sheets Net Amounts of Liabilities Presented in the Condensed Consolidated Balance Sheets Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets Net Liabilities Exposed
     Financial Instruments Cash Collateral Pledged 
Derivative Liabilities:            
Counterparty A $2,916
 $—
 $2,916
 $(1,781) $—
 $1,135
Counterparty B 11,088
 —
 11,088
 (236) —
 10,852
Counterparty C 1,154
 —
 1,154
 (863) —
 291
Counterparty D 14
 —
 14
 —
 —
 14
Total $15,172
 $—
 $15,172
 $(2,880) $—
 $12,292
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Note 10. ConvertibleDebt
Outstanding debt consisted of the following (in thousands):
July 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(22,155)(24,066)
Net carrying amount2,977,845 2,975,934 
Debt, noncurrent$2,977,845 $2,975,934 
As of July 31, 2023, the future principal payments for the outstanding debt were as follows (in thousands):
Fiscal Period:
Remainder of 2024$— 
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 Netare 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 July 31, 2023, 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.
As of July 31, 2023, the total estimated fair value of the Senior Notes was $2.8 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.
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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 July 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 July 31, 2023, we were in compliance with all covenants.
Convertible Senior Notes
In June 2013, we issued 0.75% convertible senior notes due July 15, 2018 ("2018 Notes") with a principal amount of $350 million. The 2018 Notes are unsecured, unsubordinated obligations, and interest is payable in cash in arrears at a fixed rate of 0.75% on January 15 and July 15 of each year. The 2018 Notes mature on July 15, 2018 unless repurchased or converted in accordance with their terms prior to such date. We cannot redeem the 2018 Notes prior to maturity.
Concurrently, we issued 1.50% convertible senior notes due July 15, 2020 ("2020 Notes") with a principal amount of $250 million. The 2020 Notes are unsecured, unsubordinated obligations, and interest is payable in cash in arrears at a fixed rate of 1.50% on January 15 and July 15 of each year. The 2020 Notes mature on July 15, 2020 unless repurchased or converted in accordance with their terms prior to such date. We cannot redeem the 2020 Notes prior to maturity.
In September 2017, we issued 0.25% convertible senior notes due October 1, 2022, ("2022 Notes") with a principal amount of $1.15 billion (together with the 2018 Notes and 2020 Notes, referred to as "the Notes"(“2022 Notes”). The 2022 Notes arewere unsecured, unsubordinated obligations, and interest iswas payable in cash in arrears at a fixed rate of 0.25% on April 1 and October 1 of each year. The 2022 Notes mature on October 1, 2022 unless repurchased or converted in accordance with their terms prior to such date. We cannot redeemDuring the third quarter of fiscal 2023, the 2022 Notes prior to maturity.
The termswere converted by note holders, and we repaid the $1.15 billion principal balance in cash. We also distributed approximately 0.6 million shares of the Notes are governed by Indentures by and between us and Wells Fargo Bank, National Association, as Trustee ("the Indentures"). Upon conversion, holders of the Notes will receive cash, shares ofour Class A common stock or a combination of cash and shares of Class A common stock, at our election.
For the 2018 Notes, the initial conversion rate is 12.0075 shares of Class A common stock per $1,000 principal amount,to note holders during fiscal 2023, which is equal to an initial conversion price of approximately $83.28 per share of Class A common stock, subject to adjustment. Prior to the close of business on March 14, 2018,represented the conversion is subject to the satisfaction of certain conditions as described below. For the 2020 Notes, the initial conversion rate is 12.2340 shares of Class A common stock per $1,000 principal amount, which is equal to an initial conversion price of approximately $81.74 per share of Class A common stock, subject to adjustment. Prior to the close of business on March 13, 2020, the conversion is subject to the satisfaction of certain conditions, as described below. For the 2022 Notes, the initial conversion rate is 6.7982 shares of Class A common stock per $1,000 principal amount, which is equal to an initial conversion price of approximately $147.10 per share of Class A common stock, subject to adjustment. Prior to the close of business on May 31, 2022, the conversion is subject to the satisfaction of certain conditions, as described below.

Holders of the Notes who convert their Notesvalue in connection with certain corporate events that constitute a make-whole fundamental change (as defined in the Indentures) are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a corporate event that constitutes a fundamental change (as defined in the Indentures), holders of the Notes may require us to repurchase all or a portion of their Notes at a price equal to 100%excess of the principal amount of the Notes, plus any accrued and unpaid interest.
Holders of the Notes may convert all or a portion of their Notes prior to the close of business on March 14, 2018 for the 2018 Notes, March 13, 2020 for the 2020 Notes, and May 31, 2022 for the 2022 Notes in multiples of $1,000 principal amount, only under the following circumstances:
if the last reported sale price of Class A common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the respective Notes on each applicable trading day. This circumstance is effective for the 2022 Notes during any fiscal quarter commencing after the fiscal quarter ending on January 31, 2018;
during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of the respective Notes for each day of that five day consecutive trading day period was less than 98% of the product of the last reported sale price of Class A common stock and the conversion rate of the respective Notes on such trading day; or
upon the occurrence of specified corporate events, as noted in the Indentures.
In accounting for the issuance of the Notes, we separated each of the Notes into liability and equity components. The carrying amounts of the liability components were calculated by measuring the fair value of similar liabilities that do not have associated convertible features. The carrying amount of the equity components representing the conversion option were determined by deducting the fair value of the liability components from the par value of the respective Notes. These differences represent debt discounts that are amortized to interest expense over the respective terms of the Notes using the effective interest rate method. The equity components are not remeasured as long as they continue to meet the conditions for equity classification.
In accounting for the issuance costs related to the Notes, we allocated the total amount of issuance costs incurred to liability and equity components based on their relative values. Issuance costs attributable to the liability components are being amortized on a straight-line basis, which approximates the effective interest rate method, to interest expense over the respective terms of the Notes. The issuance costs attributable to the equity components were netted against the respective equity components in Additional paid-in capital. For the 2018 Notes, we recorded liability issuance costs of $7 million and equity issuance costs of $2 million. Amortization expense for the liability issuance costs was $0.4 million and $1 million for each of the three and nine month periods ended October 31, 2017 and 2016, respectively. For the 2020 Notes, we recorded liability issuance costs of $5 million and equity issuance costs of $2 million. Amortization expense for the liability issuance costs was $0.2 million and $0.5 million for each of the three and nine month periods ended October 31, 2017 and 2016, respectively. For the 2022 Notes, we recorded liability issuance costs of $14 million and equity issuance costs of $4 million. Amortization expense for the liability issuance costs was $0.4 million for each of the three and nine month periods ended October 31, 2017.
The Notes, net consisted of the following (in thousands):
 October 31, 2017 January 31, 2017
 2018 Notes 2020 Notes 2022 Notes 2018 Notes 2020 Notes 2022 Notes
Principal amounts:           
    Principal$350,000
 $250,000
 $1,150,000
 $350,000
 $250,000
 $—
    Unamortized debt discount(12,070) (29,488) (218,134) (24,380) (36,820) —
Net carrying amount before unamortized debt issuance costs337,930
 220,512
 931,866
 325,620
 213,180
 —
    Unamortized debt issuance costs(994) (1,824) (14,060) (2,050) (2,327) —
Net carrying amount$336,936
 $218,688
 $917,806
 $323,570
 $210,853
 $—
Carrying amount of the equity component (1)
$74,892
 $66,007
 $219,702
 $74,892
 $66,007
 $—
(1)
Included in the condensed consolidated balance sheets within Additional paid-in capital, net of $2 million, $2 million, and $4 million for the 2018 Notes, 2020 Notes, and 2022 Notes, respectively, in equity issuance costs.
As of October 31, 2017, the 2018 Notes have a remaining life of approximately 8 months and are classified as current on the condensed consolidated balance sheet. The 2020 Notes and the 2022 Notes have a remaining life of 32 months and 59 months, respectively, and are classified as non-current on the condensed consolidated balance sheet.

The effective interest rates of the liability components of the 2018 Notes, 2020 Notes, and 2022 Notes are 5.75%, 6.25%, and 4.60% respectively. These interest rates were based on the interest rates of similar liabilities at the time of issuance that did not have associated convertible features. The following table sets forth total interest expense recognized related to the Notes (in thousands):
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
 2018 Notes 2020 Notes 2022 Notes 2018 Notes 2020 Notes 2022 Notes 2018 Notes 2020 Notes 2022 Notes 2018 Notes 2020 Notes 2022 Notes
Contractual interest expense$656
 $938
 $367
 $656
 $938
 $—
 $1,969
 $2,813
 $367
 $1,969
 $2,813
 $—
Interest cost related to amortization of debt issuance costs352
 168
 365
 352
 167
 —
 1,056
 503
 365
 1,056
 504
 —
Interest cost related to amortization of the debt discount4,162
 2,482
 5,042
 3,930
 2,333
 —
 12,310
 7,332
 5,042
 11,622
 6,889
 —
We capitalized interest costs related to the Notes of $3 million and $1 million for the three months ended October 31, 2017 and 2016, respectively, and $6 million and $2 million for the nine months ended October 31, 2017 and 2016, respectively.amount.
Notes Hedges
In connection with the issuance of the 2022 Notes, we entered into convertible note hedge transactions with respect to our Class A common stock ("(“Purchased Options"Options”). The Purchased Options relating to the 2018 Notes give which gave us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the Notes, approximately 4.2 million shares of our Class A common stock for $83.28 per share, exercisable upon conversion of the Notes. The Purchased Options relating to the 2020 Notes give us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the Notes, approximately 3.1 million shares of our Class A common stock for $81.74 per share, exercisable upon conversion of the Notes. The Purchased Options relating to the 2022 Notes give us the option to purchase, subject to anti-dilution adjustments substantially identical to those in the Notes, approximately 7.8 million shares of our Class A common stock for $147.10 per share, exercisable upon conversionshare. 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 Notes. The Purchased Options, will expire in 2018 forwhich offset the 2018 Notes, in 2020 for the 2020 Notes, and in 2022 for the 2022 Notes, if not exercised earlier. The Purchased Options are intended to offset potential economic dilution to our Class A common stock upon any conversion of the 2022 Notes. These shares were recorded as Treasury stock on the Condensed Consolidated Balance Sheets. The Purchased Options arewere separate transactions and arewere not part of the terms of the Notes.
We paid an aggregate amount of $144 million for the Purchased Options relating to the 20182022 Notes, and 2020 Notes, and $176 million for the Purchased Options relating to the 2022 Notes. The amount paid for the Purchased Options is included in Additional paid-in capital in the condensed consolidated balance sheets.expired on October 1, 2022.
Warrants
In connection with the issuance of the 2022 Notes, we also entered into warrant transactions to sell warrants ("the Warrants"(“Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 4.27.8 million shares over 60 scheduled trading days beginning in October 2018, 3.1 million shares over 60 scheduled trading days beginning in October 2020, and 7.8 million sharesof our Class A common stock over 60 scheduled trading days beginning in January 2023 of our Class A common stock at an exercise price of $107.96, $107.96, and $213.96 per share, respectively. Ifshare. During the first quarter of fiscal 2024, the Warrants are not exercisedfully expired without exercise.
Interest Expense on their exercise dates, they will expire. If the market value per shareDebt
The following table sets forth total interest expense recognized related to our debt (in thousands):
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Contractual interest expense$27,563 $28,281 $55,126 $39,666 
Interest cost related to amortization and write-off of debt discount and issuance costs956 1,842 1,911 4,443 
Total interest expense$28,519 $30,123 $57,037 $44,109 
19
Table of our Class A common stock exceeds the applicable exercise price of the Warrants, the Warrants will have a dilutive effect on our earnings per share assuming that we are profitable. The Warrants are separate transactions, and are not part of the terms of the Notes or the Purchased Options.Contents
Note 11. Leases
We received aggregate proceedshave entered into operating lease agreements for our office space, data centers, and other property and equipment. Operating lease right-of-use assets were $262 million and $249 million as of $93July 31, 2023, and January 31, 2023, respectively, and operating lease liabilities were $291 million from the saleand $273 million as of the WarrantsJuly 31, 2023, and January 31, 2023, respectively. We have also entered into finance lease agreements for other property and equipment. As of July 31, 2023, and January 31, 2023, finance leases were not material.
The components of operating lease expense were as follows (in thousands):
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Operating lease cost$26,620 $24,773 $55,080 $48,417 
Short-term lease cost740 922 1,642 2,147 
Variable lease cost10,850 10,410 21,998 20,183 
Total operating lease cost$38,210 $36,105 $78,720 $70,747 
Supplemental cash flow information related to the 2018 Notes and the 2020 Notes, and $81 million from the sale of the Warrantsour operating leases was as follows (in thousands):
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Cash paid for operating lease liabilities$25,399$19,538$53,809$45,196
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities31,52957,89963,75586,480
Other information related to the 2022 Notes. The proceedsour operating leases was as follows:
July 31, 2023January 31, 2023
Weighted average remaining lease term (in years)55
Weighted average discount rate3.25 %2.79 %
As of July 31, 2023, maturities of operating lease liabilities were as follows (in thousands):
Fiscal Period:
Remainder of 2024$54,890 
202592,565 
202660,337 
202741,822 
202833,017 
Thereafter41,034 
Total lease payments323,665 
Less imputed interest(32,717)
Total operating lease liabilities$290,948 
As of July 31, 2023, we have additional operating leases for data centers and office space that had not yet commenced with total undiscounted lease payments of $63 million. These operating leases will commence in fiscal 2024 and fiscal 2025, with lease terms ranging from the sale of the Warrants are recorded in Additional paid-in capital in the condensed consolidated balance sheets.five to six years.

Note 11.12. Commitments and Contingencies
Facility and Computing Infrastructure-related Commitments
We have entered into non-cancelablePurchase Obligations
Our purchase obligations are primarily related to agreements for certain of our offices and data centers with various expiration dates. Certain of our office leases are with an affiliate of our Chairman, David Duffield, who is also a significant stockholder (see Note 17). Our operating lease agreements generally provide for rental payments on a graduated basis and for options to renew, which could increase future minimum lease payments if exercised. This includes payments for office andthird-party hosted infrastructure platforms, data center square footage, as well as data center power capacity for certain data centers. We generally recognize these expensesequipment and software, business technology software and support, and sales and marketing activities. During the six months ended July 31, 2023, there were no material changes outside the ordinary course of business to our non-cancelable purchase obligations disclosed in our Annual Report on a straight-line basis over the period in which we benefit from the lease and we have accrued for rent expense incurred but not paid. Total rent expense was $21 million and $19 millionForm 10-K for the three monthsfiscal year ended OctoberJanuary 31, 2017 and 2016, respectively, and $60 million and $53 million for the nine months ended October 31, 2017 and 2016, respectively.2023.
In January 2014, we entered into a 95-year lease for a 6.9-acre parcel
20
Table of vacant land in Pleasanton, California, under which we paid $2 million for base rent from commencement through December 31, 2020. Annual rent payments of $0.2 million plus increases based on increases in the consumer price index begin on January 1, 2021 and continue through the end of the lease.Contents
Additionally, we have entered into a non-cancelable agreement with a computing infrastructure vendor that expires on October 31, 2024.
Legal Matters
We are a party to various legal proceedings and claims whichthat 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 OctoberJuly 31, 2017,2023, there was not at least a reasonable possibility that we had incurred or will incur a material loss, or a material loss in excess of a recorded accrual, with respect to such loss contingencies.
Note 12. Common Stock and13. Stockholders’ Equity
Common Stock
As of OctoberJuly 31, 2017,2023, there were 137207 million shares of Class A common stock, net of treasury stock, and 7355 million shares of Class B common stock outstanding. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to 10 votes per share. Each share of Class B common stock can be converted into a share of Class A common stock at any time at the option of the holder.
Share Repurchase Program
In November 2022, our Board of Directors authorized the repurchase of up to $500 million of our outstanding shares of Class A common stock (the “Share Repurchase Program”). We may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions. The timing and total amount of stock repurchases will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The Share Repurchase Program has a term of 18 months, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock.
During the six months ended July 31, 2023, we repurchased approximately 0.6 million shares of Class A common stock for approximately $139 million at an average price per share of $218.33. All repurchases were made in open market transactions. As of July 31, 2023, we were authorized to purchase a remaining $287 million of our outstanding shares of Class A common stock under the Share Repurchase Program.
Employee Equity Plans
Our 2012In June 2022, our stockholders approved the 2022 Equity Incentive Plan ("EIP"(“2022 Plan”), with a reserve of 30 million shares for issuance. The 2022 Plan serves as the successor to our 2005 Stock2012 Equity Incentive Plan (together(“2012 Plan” and, together with the EIP,2022 Plan, “Stock Plans”). Awards that are granted on or after the "Stock Plans"). Pursuanteffective date of the 2022 Plan will be granted pursuant to and subject to the terms and provisions of the EIP,2022 Plan. Prior awards granted under the share reserve increased by 10 million shares in March 2017,2012 Plan continue to be subject to the terms and asprovisions of Octoberthe 2012 Plan. As of July 31, 2017,2023, we had approximately 6121 million shares of Class A common stock available for future grants.
We also have aIn June 2022, our stockholders approved the Amended and Restated 2012 Employee Stock Purchase Plan ("ESPP"(“ESPP”). Under the ESPP, eligible employees are granted options to purchase shares at the lower of 85% of the fair market value of the stock at the time of grant or 85% of the fair market value at the time of exercise. Options to purchase shares are granted twice yearly on or about June 1 and December 1, and are exercisable on or about the succeeding November 30 and May 31, respectively, of each year. Pursuant to the terms of the ESPP, the share reserve increased by 2 million shares in March 2017.respectively. As of OctoberJuly 31, 2017, 72023, 4 million shares of Class A common stock were available for issuance under the ESPP.

21
Stock Options
The Stock Plans provide for the issuanceTable of incentive and nonstatutory options to employees and non-employees. Options issued under the Stock Plans generally are exercisable for periods not to exceed 10 years and generally vest over five years. A summary of information related to stock option activity during the nine months ended October 31, 2017 is as follows:Contents
 
Outstanding
Stock
Options
 
Weighted-
Average
Exercise
Price
 
Aggregate
Intrinsic
Value (in millions)
Balance as of January 31, 20179,096,592
 $4.34
 $716
Stock options granted—
 —
  
Stock options exercised(2,016,123) 4.60
  
Stock options canceled(9,975) 7.77
  
Balance as of October 31, 20177,070,494
 $4.26
 $755
Vested and expected to vest as of October 31, 20177,070,356
 $4.26
 $755
Exercisable as of October 31, 20177,068,894
 $4.26
 $754
As of October 31, 2017, there was a total of $0.3 million in unrecognized compensation cost related to unvested stock options which is expected to be recognized over a weighted-average period of approximately three months.
Restricted Stock Units
The Stock Plans provide for the issuance of restricted stock units ("RSUs"(“RSUs”) to employees.employees and non-employees. RSUs generally vest over four years. A summary of information related to RSU activity during the ninesix months ended OctoberJuly 31, 2017 is2023, was as follows:follows (in thousands, except per share data): 
Number of SharesWeighted-Average Grant Date Fair Value
Number of  Shares 
Weighted-Average
Grant Date Fair Value
Balance as of January 31, 201711,502,721
 $78.45
Balance as of January 31, 2023Balance as of January 31, 202314,099 $206.38 
RSUs granted7,011,426
 87.22
RSUs granted7,865 191.17 
RSUs vested(4,445,556) 78.02
RSUs vested(3,822)204.93 
RSUs forfeited(807,255) 78.46
RSUs forfeited(780)206.81 
Balance as of October 31, 201713,261,336
 $83.23
Balance as of July 31, 2023Balance as of July 31, 202317,362 199.79 
As of OctoberJuly 31, 2017,2023, there was a total of $1.0$2.6 billion in unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately three years.
Performance-basedMarket-Based Restricted Stock Units
During fiscal 2017,In December 2022, 0.3 million shares of performance-based restricted stock units ("PRSUs")market-based RSUs were granted to all employees other than executive managementour newly appointed Co-CEO that vest based on appreciation of the price of our Class A common stock over a multi-year period and included bothupon continued service conditions(“PVU Award”). We estimated the fair value of the PVU Award on the grant date using the Monte Carlo simulation model with the following assumptions: (i) expected volatility of 40%, (ii) risk-free interest rate of 4%, and (iii) total performance conditions related to company-wide goals . These performance conditions were met andperiod of six years. The weighted-average grant date fair value of the PRSUs vested on March 15, 2017. DuringPVU Award was $124.80 per share. We recognize expense for the nine months ended October 31, 2017, wePVU Award over the requisite service period of five years using the accelerated attribution method. Provided that the requisite service is rendered, the total fair value of the PVU Award at the date of grant is recognized $6 million inas compensation cost related to these PRSUs.
Additionally, during fiscal 2018, 0.4 million shares of PRSUs were granted to all employees other than executive management and included both service conditions and performance conditions related to company-wide goals. We expect to grant additional shares related to this program for employees hired in fiscal 2018. These PRSU awards will vestexpense even if the performance conditions are achieved formarket condition is not achieved. However, the fiscal year ended Januarynumber of shares that ultimately vest can vary significantly with the achievement of the specified market criteria.
As of July 31, 2018 and if the individual employee continues to provide service through the vesting date of March 15, 2018. During the three and nine months ended October 31, 2017, we recognized $12 million and $18 million, respectively, in compensation cost related to these PRSUs, and2023, there iswas a total of $19$27 million in unrecognized compensation cost related to the PVU Award, which is expected to be recognized over a weighted-average periodapproximately four years.
Stock Options
The Stock Plans provide for the issuance of approximatelyincentive and nonstatutory stock options to employees and non-employees. Stock options issued under the Stock Plans generally are exercisable for periods not to exceed ten years and generally vest over five months.years. Stock option activity during the six months ended July 31, 2023, was as follows (in thousands, except aggregate intrinsic value, which is reflected in millions and per share data):
Outstanding Stock OptionsWeighted-Average Exercise PriceAggregate Intrinsic Value
Balance as of January 31, 2023115 $30.36 $17 
Stock options exercised(14)36.51 
Stock options canceled— — 
Balance as of July 31, 2023101 29.53 21 
Vested and expected to vest as of July 31, 2023101 29.53 21 
Exercisable as of July 31, 2023101 29.53 21 
As of July 31, 2023, there was no unrecognized compensation cost related to unvested stock options.
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Table of Contents
Note 13.14. Unearned Revenue and Performance Obligations
$421 millionSubscription services revenues of $1.3 billion and $308 million of subscription services revenue was$1.2 billion were recognized during the three months ended OctoberJuly 31, 20172023, and 2016,2022, respectively, that waswere included in the unearned revenue balances at the beginningas of the respective periods. $1.2April 30, 2023, and 2022, respectively. Subscription services revenues of $2.4 billion and $841 million of subscription services revenue was$2.0 billion were recognized during the ninesix months ended OctoberJuly 31, 20172023, and 2016,2022, respectively, that waswere included in the unearned revenue balances at the beginningas of the respective periods.January 31, 2023, and 2022, respectively. Professional services revenuerevenues recognized in the same periods from unearned revenue balances at the beginning of the respective periods waswere not material.

Transaction Price Allocated to the Remaining Performance Obligations
As of OctoberJuly 31, 2017,2023, approximately $4.5$17.8 billion of revenue isrevenues are expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize revenuerevenues on approximately two thirds$10.3 billion of these remaining performance obligations over the next 24 months, with the balance recognized thereafter. RevenueRevenues from remaining performance obligations for professional services contracts as of OctoberJuly 31, 2017 was2023, were not material.
Note 14.15. Other Income (Expense), Net
Other income (expense), net consisted of the following (in thousands):
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Interest income$71,569 $15,214 $134,264 $19,221 
Interest expense (1)
(28,536)(30,160)(57,082)(44,178)
Other (2)
2,522 (17,843)(4,918)(27,995)
Total other income (expense), net$45,555 $(32,789)$72,264 $(52,952)
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
Interest income$6,394
 $2,805
 $15,474
 $7,916
Interest expense (1)
(12,285) (7,206) (26,111) (23,151)
Gain from sale of cost method investment194
 —
 720
 65
Impairment of cost method investment(100) —
 (100) (15,000)
Other income (expense)2,055
 1,296
 5,550
 34
Other income (expense), net$(3,742) $(3,105) $(4,467) $(30,136)
(1)Interest expense primarily includes the contractual interest expense of our debt obligations, and the related non-cash interest expense attributable to amortization of the debt discount and issuance costs. For further information, see Note 10, Debt.
(2)Other primarily includes the net gains (losses) from our equity investments. For further information, see Note 3, Investments.
(1)
Interest expense includes the contractual interest expense related to the 2018 Notes, 2020 Notes and 2022 Notes and non-cash interest related to amortization of the debt discount and debt issuance costs, net of capitalized interest costs (see Note 10).
Note 15.16. Income Taxes
We compute the year-to-datereported an income tax provision by applying the estimated annual effective tax rate to the year-to-date pre-tax income or loss and adjust for discrete tax items in the period. We reported a tax expense of $6$10 million and $2$6 million for the ninesix months ended OctoberJuly 31, 20172023, and 2016,2022, respectively. The income tax provision for the ninesix months ended OctoberJuly 31, 20172023, was primarily attributable to state taxes and income tax expenses in profitable foreign jurisdictions. The income tax provision for the nine months ended October 31, 2016 was primarily attributable to $3 million in state taxes and income tax expenses in profitable foreign jurisdictions partially offset by $1 millionand capitalized research and development expenditures in the U.S. The income tax benefitsprovision for the six months ended July 31, 2022, was primarily attributable to a taxable gain recognized from the valuation allowance release relatedintegrating intellectual property, income tax expenses in profitable foreign jurisdictions, and an increase in state taxes due to certain acquired intangible assets from a business acquisition.capitalized research and development expenditures.
We are subject to income tax audits in the U.S. and foreign jurisdictions. We record liabilities related to uncertain tax positions and believe that we have provided adequate reserves for income tax uncertainties in all open tax years. Due to our history of tax losses, all years remain open to tax audit.
We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. We may release all or a portion of our valuation allowance if there is sufficient positive evidence that outweighs the negative evidence. As of OctoberJuly 31, 2017,2023, we continue to maintain a full valuation allowance on our deferred tax assets except forin certain jurisdictions.
Note 16.17. Net LossIncome (Loss) Per Share
Basic net lossincome (loss) per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholdersincome (loss) by the weighted-average number of shares of common stock outstanding during the period.period, net of treasury stock. Diluted net lossincome (loss) per share is computed by giving effect to all potentialpotentially dilutive shares of common stock, including our outstanding stock options, outstanding warrants, common stock related to unvested early exercised stock options, common stock related to unvested restricted stock units and awards and convertible senior notes, outstanding warrants related to the extent dilutive,issuance of the convertible senior notes, and common stock issuable pursuant to the ESPP. Basicoutstanding share-based awards consisting primarily of unvested RSUs and diluted net loss per share was the same for each period presented, as the inclusion of all potential common shares outstanding would have been anti-dilutive.ESPP obligations.
The net lossincome (loss) per share attributable to common stockholders is allocated based on the contractual participation rights of the Class A common shares and Class B common shares as if the lossincome (loss) for the yearperiod had been distributed. As the liquidation and dividend rights are identical, the net loss attributable to common stockholdersincome (loss) is allocated on a proportionate basis.
We consider shares issued upon the early exercise
23
Table of options subject to repurchaseContents
Basic and unvested restricted stock awards to be participating securities because holders of such shares have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares. In future periods, to the extent we are profitable, we will subtract earnings allocated to these participating securities fromdiluted net income to determine(loss) per share was the same for the three and six months ended July 31, 2023, and 2022. For the three and six months ended July 31, 2022, potentially dilutive securities were excluded from the computation of diluted net income attributable to common stockholders.

(loss) per share calculations because the impact of including them would have been anti-dilutive.
The following table presents the calculation of basic and diluted net loss attributable to common stockholdersincome (loss) per share (in thousands, except per share data):
Three Months Ended July 31,Six Months Ended July 31,
2023202220232022
Class AClass BClass AClass BClass AClass BClass AClass B
Net income (loss) per share, basic:
Numerator:
Net income (loss)$62,207 $16,453 $(50,282)$(13,876)$62,241 $16,555 $(130,088)$(36,243)
Denominator:
Weighted-average shares outstanding, basic206,559 54,632 199,342 55,013 205,393 54,633 197,928 55,143 
Net income (loss) per share, basic$0.30 $0.30 $(0.25)$(0.25)$0.30 $0.30 $(0.66)$(0.66)
Net income (loss) per share, diluted:
Numerator:
Net income (loss)$62,207 $16,453 $(50,282)$(13,876)$62,241 $16,555 $(130,088)$(36,243)
Reallocation of net income as a result of conversion of Class B to Class A common stock16,453 — — — 16,555 — — — 
Reallocation of net income to Class B common stock— (202)— — — (182)— — 
Net income (loss) for diluted calculation78,660 16,251 (50,282)(13,876)78,796 16,373 (130,088)(36,243)
Denominator:
Weighted-average shares outstanding, basic206,559 54,632 199,342 55,013 205,393 54,633 197,928 55,143 
Conversion of Class B to Class A common stock54,632 — — — 54,633 — — — 
Dilutive effect of share-based awards3,244 — — — 2,897 — — — 
Weighted-average shares outstanding, diluted264,435 54,632 199,342 55,013 262,923 54,633 197,928 55,143 
Net income (loss) per share, diluted$0.30 $0.30 $(0.25)$(0.25)$0.30 $0.30 $(0.66)$(0.66)
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  * As Adjusted  * As Adjusted
 Class A Class B Class A Class B Class A Class B Class A Class B
Net loss per share, basic and diluted:               
Numerator:               
Allocation of distributed net loss$(55,592) $(29,954) $(68,192) $(41,922) $(149,179) $(82,943) $(181,470) $(114,960)
Denominator:               
Weighted-average common shares outstanding135,941
 73,247
 123,534
 75,945
 132,851
 73,864
 120,658
 76,435
Basic and diluted net loss per share$(0.41) $(0.41) $(0.55) $(0.55) $(1.12) $(1.12) $(1.50) $(1.50)
*
Adjusted to reflect adoption of ASU No. 2014-09, Revenue from Contracts with Customers. For further information, see Note 2.
The anti-dilutive securities excluded fromcomputation of diluted net income (loss) per share does not include the effect of the following potentially outstanding weighted-average shares used to calculateof common stock. The effects of these potentially outstanding shares were not included in the calculation of diluted net lossincome (loss) per common share were as followsbecause the effect would have been anti-dilutive (in thousands):
 Three Months Ended July 31,Six Months Ended July 31,
 2023202220232022
Shares related to outstanding share-based awards2,531 16,599 3,220 15,127 
Shares related to the convertible senior notes— 7,815 — 7,816 
Shares subject to warrants related to the issuance of convertible senior notes— 7,818 — 7,818 
Total2,531 32,232 3,220 30,761 
24
 As of October 31,
 2017 2016
Outstanding common stock options7,070
 9,694
Shares subject to repurchase15
 236
Unvested restricted stock awards, units, and PRSUs13,680
 12,761
Shares related to the convertible senior notes15,079
 7,261
Shares subject to warrants related to the issuance of convertible senior notes15,079
 7,261
Shares issuable pursuant to the ESPP375
 359
 51,298
 37,572
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Note 17. Related Party Transactions
We currently lease certain office space from an affiliate of our Chairman, Mr. Duffield, adjacent to our corporate headquarters in Pleasanton, California under various lease agreements. The average term of the agreements is 10 years and the total rent due under the agreements is $9 million for the fiscal year ended January 31, 2018, and $101 million in total. Rent expense under these agreements was $2 million for each of the three month periods ended October 31, 2017 and 2016, and $6 million for each of the nine month periods ended October 31, 2017 and 2016.

Note 18. Geographic Information
Disaggregation of RevenueRevenues
We sell our subscription contracts and related services in two primary geographical markets: to customers located in the United States and to customers located outside of the United States. RevenueRevenues by geography isare generally based on the address of the customer as specified in our mastercustomer subscription agreement. The following table sets forth revenuerevenues by geographic area (in thousands):
 Three Months Ended July 31,Six Months Ended July 31,
 2023202220232022
United States$1,344,571 $1,152,362 $2,608,536 $2,227,407 
Other countries442,195 383,436 862,542 743,048 
Total revenues$1,786,766 $1,535,798 $3,471,078 $2,970,455 
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  *As Adjusted  *As Adjusted
United States$439,794
 $335,592
 $1,242,431
 $929,031
Other countries115,595
 77,930
 318,139
 205,825
Total$555,389
 $413,522
 $1,560,570
 $1,134,856
*
Adjusted to reflect adoption of ASU No. 2014-09, Revenue from Contracts with Customers. For further information, see Note 2.
No single country other than the United States had revenues greater than 10% of total revenues for the three and nine months ended October 31, 2017 and 2016. No customer individually accounted for more than 10% of our trade and other receivables, net as of October 31, 2017 or January 31, 2017.
Long-Lived Assets
We attribute ourOur long-lived assets, which primarily consist of property and equipment and operating lease right-of-use assets, are attributed to a country based on the physical location of the assets. The following table sets forth propertyAggregate Property and equipment, net and Operating lease right-of-use assets by geographic area was as follows (in thousands):
 July 31, 2023January 31, 2023
United States$1,175,181 $1,206,486 
Ireland217,654 159,337 
Other countries91,139 84,709 
Total long-lived assets$1,483,974 $1,450,532 
25
 October 31, 2017 January 31, 2017
United States$428,040
 $321,442
Ireland46,797
 35,720
Other countries12,397
 8,715
Total$487,234
 $365,877

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements.statements, which are subject to safe harbor protection under the Private Securities Litigation Reform Act of 1995. All statements contained in this report other than statements of historical fact, including statements regarding our future results of operationsfinancial condition and financial position, ouroperating results, business strategy and plans, and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "seek," "plan,"“believe,”“may,”“will,”“estimate,”“continue,”“anticipate,”“intend,”“expect,”“seek,”“plan,” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations, beliefs, and projections about future events, conditions, and trends that we believe may affect our financial condition, operating results, of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, assumptions, and assumptions,changes in circumstances that are difficult to predict and many of which are outside of our control, such as those arising from the impact of recent macroeconomic events, including inflation, increased interest rates, instability in the global banking system, and the remaining effects of the coronavirus (“COVID-19”) pandemic, as well as those described in the "Risk Factors" section.“Risk Factors” section, which we encourage you to read carefully. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
In light of these risks, uncertainties, assumptions, and assumptions,potential changes in circumstances, the future events, conditions, and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied by the forward-looking statements.
You Accordingly, you should not rely upon any forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur.statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activities, performance, or achievements. We are under no duty to update any of these forward-looking statements after the date of this report or to conform these statements to actual results or revised expectations.expectations, except as required by applicable law. If we do update any forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 elsewhere in Part I, Item 1 of this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this report, as well as in the section entitled "Risk Factors."
Overview
Workday providesWorkday delivers applications for financial management, spend management, human capital management, planning, and analytics applications designed for the world's largest companies, educational institutions, and government agencies. We offer innovative and adaptable technology focused on the consumer Internet experience and cloud delivery model. Our applications are designed for global enterprises to manage complex and dynamic operating environments. We provideanalytics. With Workday, our customers highly adaptable, accessiblehave a unified system that can help them plan, execute, analyze, and reliableextend to other applications toand environments, thereby helping them continuously adapt how they manage criticaltheir business functions that enable them to optimize their financial and human capital resources.
We were founded in 2005 to deliver cloud applications to global enterprises. Our applications are designed around the way people work today—in an environment that is global, collaborative, fast-paced and mobile. Our cycle of frequent updates has facilitated rapid innovation and the introduction of new applications throughout our history. We began offering our Human Capital Management ("HCM") application in 2006, and our Financial Management application in 2007. Since then we have continued to invest in innovation and have consistently introduced new services to our customers.
We offer Workday applications to our customers on an enterprise-wide subscription basis, typically with three-year or longer terms and with subscription fees largely based on the size of the customer’s workforce. We generally recognize revenues from subscription fees ratably over the term of the contract. We currently derive a substantial majority of our subscription services revenues from subscriptions to our HCM application. We market our applications through our direct sales force.
operations. Our diverse customer base includes medium-sized and large, global companies. organizations within numerous industry categories, including professional and business services, financial services, healthcare, education, government, technology, media, retail, and hospitality.
We have achieved significant growth since our inception in a relatively short period of time with a substantial amount of our growth coming from new customers.2005. Our current financial focus is on growing our revenues and expanding both our customer base.base and our footprint within our existing customers. While we are incurringhave a history of GAAP operating losses, today, we strive to invest in a disciplined manner across all of our functional areas to sustain continued near-term revenue growth and support our long-term initiatives. Our operatingWe expect our product development, sales and marketing, and general and administrative expenses have increased significantly in absolute dollars in recent periods, primarily dueas a percentage of total revenues will decrease over the longer term as we grow our revenues, and we anticipate that we will gain economies of scale by increasing our customer base without direct incremental development costs.
We plan to thereinvest a significant growthportion of our employee population. We had approximately 7,900 and approximately 6,400 employees as of October 31, 2017 and 2016, respectively.

We intendincremental revenues in future periods to continue investing for long-term growth.grow our business. We have invested and expect to continue to invest heavily in our applicationproduct development efforts to deliver additional compelling applications, enhance existing applications, and to address customers’ evolving needs. In addition, we plan to continue to expand our ability to sell our applications globally, particularly in Europe and Asia,the Asia-Pacific region, by investing in product development and customer support to address the business needs of targeted local markets, increasing our sales organization and marketing organizations,programs, acquiring building and/orand leasing additional office space, and expanding our ecosystem of service partners to support local deployments. We expect to make further significant investments in our data center capacity and equipment and third-party hosted infrastructure platforms as we plan for future growth. We are also investing in personnel to servicesupport our growing customer base. These
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We regularly evaluate acquisition and investment opportunities in complementary businesses, employee teams, services, technologies, and intellectual property rights in an effort to expand our product and service offerings, and expect to continue making acquisitions and investments in the future. While we remain focused on improving operating margin, these acquisitions and investments will increase our costs on an absolute basis in the near-term.near term. Many of these investments will occur in advance of experiencing any direct benefit from them and willcould make it difficult to determine if we are allocating our resources efficiently. We expect our product development, sales and marketing, and general and administrative expenses as a percentage of total revenues to decrease over time as we grow our revenues, and we anticipate that we will gain economies of scale by increasing our customer base without direct incremental development costs and by utilizing more of the capacity of our data centers.
Since inception, we have also invested heavily in our professional services organization to help ensure that customers successfully deploy and adopt our applications. Additionally, we continue to expand our professional serviceservices partner ecosystem to further support our customers. We believe our investment in professional services, as well as partners building consulting practices around Workday and helping to deliver additional innovation and solutions, will drive additional customer subscriptions and continued growth in revenues. Due to our ability to leverage the expanding partner ecosystem, we expect that the rate of professional services revenue growth willto decline over time and continue to be lower than subscription revenue growth.
Impact of Current Economic Conditions
Recent macroeconomic events including higher inflation, the U.S. Federal Reserve raising interest rates, instability in the global banking system, as well as geopolitical factors and the remaining effects of the COVID-19 pandemic, have negatively impacted the global economy, disrupted global supply chains, and created continued uncertainty, volatility, and disruption of financial markets. Despite this, we are confident in the long-term overall health of our business, the strength of our product offerings, and our ability to continue to execute on our strategy and help our customers on their human resources and finance digital transformation journeys. Demand for our products remains strong and we continue to achieve solid new subscription bookings.
Our near-term revenues are relatively predictable as a result of our subscription-based business model. We have experienced, and may continue to experience, the lengthening of certain sales cycles and revenue growth rates, particularly within net new opportunities. If the economic uncertainty continues, we may also experience a negative impact on customer renewals, customer collections, sales and marketing efforts, customer deployments, product development, or other financial metrics. Any of these factors could harm our business, financial condition, and operating results. For further discussion of the potential impacts of recent macroeconomic events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.

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Financial Results Overview
The following table provides an overview of our key metrics (in thousands, except percentages, basis points, and headcount data):
 Three Months Ended July 31,Six Months Ended July 31,
 20232022Change20232022Change
Total revenues$1,786,766 $1,535,798 16 %$3,471,078 $2,970,455 17 %
Subscription services revenues$1,623,939 $1,367,335 19 %$3,151,848 $2,639,411 19 %
GAAP operating income (loss)$36,257 $(34,078)206 %$16,457 $(106,921)115 %
Non-GAAP operating income (1)
$421,432 $301,552 40 %$817,376 $590,110 39 %
GAAP operating margin2.0 %(2.2)%420 bps0.5 %(3.6)%410 bps
Non-GAAP operating margin (1)
23.6 %19.6 %400 bps23.5 %19.9 %360 bps
Operating cash flows$425,264 $114,358 272 %$702,580 $554,075 27 %
As of July 31,
20232022% Change
Total subscription revenue backlog$17,846,858 $13,469,639 32 %
24-month subscription revenue backlog$10,271,617 $8,373,761 23 %
Cash, cash equivalents, and marketable securities$6,657,091 $6,292,967 6 %
Headcount17,887 16,918 6 %
(1)See “Non-GAAP Financial Measures” below for further information.
Components of Results of Operations
Revenues
We primarily derive our revenues from subscription services and professional services. Subscription services revenues primarily consist of fees that give our customers access to our cloud applications, which include related customer support. Professional services revenues include fees includefor deployment services, optimization services, and training.
Subscription services revenues accounted for 83%approximately 91% of our total revenues duringfor the three and ninesix months ended OctoberJuly 31, 20172023, and represented 96% of our total unearned revenue as of OctoberJuly 31, 2017.2023. 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.
The mix of the applications to which aeach customer subscribes can affect our financial performance due to price differentials in our applications. Pricing for our applications varies based on many factors, including the complexity and maturity of the application and its acceptance in the marketplace. New products or services offerings by competitors in the future could also impact the mix and pricing of our offerings.
Subscription services revenues are recognized over time as theyservices are delivered and consumed concurrently over the contractual term, beginning on the date our service is made available to the customer. Our subscription contracts typically have a term of three years or longer and are generally non-cancelable.noncancelable. We generally invoice our customers annually in advance. Amounts that have been invoiced are initially recorded as unearned revenue.
The majority
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Our consulting engagements are billed on a time and materials basis or a fixed price basis. For contracts billed on a time and materials basis, revenues are typically recognized over time as the professional services are performed. For contracts billed on a fixed price basis, revenues are recognized over time based on the proportion of the professional services performed. In some cases, we supplement our consulting teams by subcontracting resources from our service partners and deploying them on customer engagements. As our professional services organization and the Workday-related consulting practices of our partner firms continuecontinues to develop, we expect thethese partners to increasingly contract directly with our subscription customers. As a result of this trend, and the increase of our
Subscription Revenue Backlog
Our subscription revenue backlog, which is also referred to as remaining performance obligations for subscription contracts, represents contracted subscription services revenues we expect professional services revenues asthat have not yet been recognized and includes billed and unbilled amounts. Subscription revenue backlog may fluctuate from period to period due to a percentagenumber of total revenues to decline over time.factors, including the timing of renewals and overall renewal rates, new business growth, average contract duration, and seasonality.
Costs and Expenses
Costs of subscription services revenues. Costs of subscription services revenues consist primarily of employee-related expenses related toassociated with hosting our applications and providing customer support, the costs ofexpenses related to data center capacity,centers and computing infrastructure operated by third parties, and depreciation of computer equipment and software.
Costs of professional services revenues. Costs of professional services revenues consist primarily of employee-related expenses associated with these services, the cost of subcontractorssubcontractor expenses, and travel.travel expenses.
Product development expenses. Product development expenses consist primarily of employee-related costs. We continueexpenses associated with our efforts to focus our product development efforts on addingadd new features and applications, increasing theincrease functionality, and enhancingenhance the ease of use of our cloud applications.

Sales and marketing.marketing expenses. Sales and marketing expenses consist primarily of employee-related costs,expenses, sales commissions, marketing programs, and travel.travel expenses. Marketing programs consist of advertising, events, corporate communications, brand buildingawareness, brand ambassador campaigns, and product marketing activities. Sales commissions are considered incremental costs of obtaining a contract with a customer and are deferred and amortized.customer. Sales commissions for initialnew revenue contracts are deferredcapitalized and then amortized on a straight-line basis over a period of benefit that we have determined to be five years. Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period.
General and administrative expenses. General and administrative expenses consist of employee-related costsexpenses for finance and accounting, legal, human resources, and management information systems personnel, professional fees, and other corporate expenses.
Results of Operations
Revenues
Our total revenues for the three and ninesix months ended OctoberJuly 31, 20172023, and 20162022, were as follows (in thousands, except percentages):
 Three Months Ended July 31, Six Months Ended July 31, 
 20232022% Change20232022% Change
Subscription services$1,623,939 $1,367,335 19 %$3,151,848 $2,639,411 19 %
Professional services162,827 168,463 (3)%319,230 331,044 (4)%
Total revenues$1,786,766 $1,535,798 16 %$3,471,078 $2,970,455 17 %
 Three Months Ended October 31,   Nine Months Ended October 31,  
 2017 2016 % Change 2017 2016 % Change
  *As Adjusted   *As Adjusted 
Revenues:           
Subscription services$463,568
 $337,910
 37% $1,297,831
 $924,148
 40%
Professional services91,821
 75,612
 21% 262,739
 210,708
 25%
Total revenues$555,389
 $413,522
 34% $1,560,570
 $1,134,856
 38%
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.
Total revenues were $555 million$1.8 billion for the three months ended OctoberJuly 31, 2017,2023, compared to $414 million during the prior year period, an increase of $141 million, or 34%. Subscription services revenues were $464 million for the three months ended October 31, 2017, compared to $338 million$1.5 billion for the prior year period, an increase of $126$251 million, or 37%16%. The increase in subscriptionSubscription services revenues was due primarily to an increased number of customer contracts as compared to the prior year period. Professional services revenues were $92 million for the three months ended October 31, 2017, compared to $76 million for the prior year period, an increase of $16 million, or 21%. The increase in professional services revenues was due primarily to the addition of new customers and a greater number of customers requesting deployment and integration services.
Total revenues were $1.6 billion for the nine months ended October 31, 2017, compared to $1.1 billion during the prior year period, an increase of $426 million, or 38%. Subscription services revenues were $1.3 billion for the nine months ended October 31, 2017, compared to $924 million for the prior year period, an increase of $374 million, or 40%. The increase in subscription services revenues was due primarily to an increased number of customer contracts as compared to the prior year period. Professional services revenues were $263 million for the nine months ended October 31, 2017, compared to $211 million for the prior year period, an increase of $52 million, or 25%. The increase in professional services revenues was due primarily to the addition of new customers and a greater number of customers requesting deployment and integration services.
Operating Expenses
GAAP operating expenses were $635 million for the three months ended OctoberJuly 31, 2017, compared to $519 million for the prior year period, an increase of $116 million, or 22%. The increase was primarily due to increases of $83 million in employee-related costs driven by higher headcount, $8 million in service contracts expense to expand data center capacity, $7 million in depreciation and amortization expense, and $6 million in facility and IT-related expenses.
GAAP operating expenses were $1.8 billion for the nine months ended October 31, 2017,2023, compared to $1.4 billion for the prior year period, an increase of $0.4 billion,$257 million, or 27%19%. The increase in subscription services revenues was primarily due to increasesan increased number of $0.3 billion in employee-related costs driven by higher headcountnew customers, expansion of our product offerings provided to existing customers, and $0.1 billion in expenses related to depreciation, amortization, service contracts to expand data center capacity, facilitiesstrong customer renewals, with gross and IT.

We use the non-GAAP financial measure of non-GAAP operating expenses to understandnet retention rates over 95% and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate our financial performance and the ability of operations to generate cash. We believe that non-GAAP operating expenses reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business, as they exclude expenses that are not reflective of ongoing operating results. We also believe that non-GAAP operating expenses provide useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.
Non-GAAP operating expenses are calculated by excluding share-based compensation expenses, and certain other expenses, which consist of employer payroll tax-related items on employee stock transactions and amortization of acquisition-related intangible assets.
Non-GAAP operating expensesover 100%, respectively. Professional services revenues were $505$163 million for the three months ended OctoberJuly 31, 2017,2023, compared to $406$168 million for the prior year period, a decrease of $6 million, or 3%. The decrease in professional services revenues was primarily due to variation in project size and mix of deployment and integration services provided and continuing to expand and leverage our service partners.
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Total revenues were $3.5 billion for the six months ended July 31, 2023, compared to $3.0 billion for the prior year period, an increase of $99$501 million, or 24%17%. Subscription services revenues were $3.2 billion for the six months ended July 31, 2023, compared to $2.6 billion for the prior year period, an increase of $512 million, or 19%. The increase in subscription services revenues was primarily due to an increased number of new customers, expansion of our product offerings provided to existing customers, and strong customer renewals, with gross and net retention rates over 95% and over 100%, respectively. Professional services revenues were $319 million for the six months ended July 31, 2023, compared to $331 million for the prior year period, a decrease of $12 million, or 4%. The decrease in professional services revenues was primarily due to variation in project size and mix of deployment and integration services provided and continuing to expand and leverage our service partners.
Subscription Revenue Backlog
As of July 31, 2023, our total subscription revenue backlog was $17.8 billion, with $10.3 billion expected to be recognized in revenues over the next 24 months. As of July 31, 2022, our total subscription revenue backlog was $13.5 billion, with $8.4 billion expected to be recognized in revenues over the next 24 months. The increase in subscription revenue backlog was primarily driven by the addition of new customers, duration of customer contracts, expansion of our product offerings with existing customers, and the timing of renewals.
Operating Expenses
GAAP operating expenses were $1.8 billion for the three months ended July 31, 2023, compared to $1.6 billion for the prior year period, an increase of $181 million, or 12%. The increase in GAAP operating expenses included increases of $66$164 million in employee-related costs driven byexpenses, including share-based compensation, primarily due to higher headcount, $8$20 million in service contracts expense to expandthird-party expenses for hardware maintenance and data center capacity, $7and $15 million in facilities and IT-related expenses, offset by a decrease of $24 million in depreciation and amortization expense and $6related to equipment in our data centers primarily due to the change in estimated useful lives of our data center equipment from 3 years to 5 years.
GAAP operating expenses were $3.5 billion for the six months ended July 31, 2023, compared to $3.1 billion for the prior year period, an increase of $377 million, or 12%. The increase in GAAP operating expenses included increases of $320 million in facilityemployee-related expenses, including share-based compensation, primarily due to higher headcount, $40 million in third-party expenses for hardware maintenance and data center capacity, and $35 million in facilities and IT-related expenses.expenses, offset by a decrease of $47 million in depreciation expense related to equipment in our data centers primarily due to the change in estimated useful lives of our data center equipment from 3 years to 5 years.
Non-GAAP operating expenses were $1.4 billion for the ninethree months ended OctoberJuly 31, 2017,2023, compared to $1.1$1.2 billion for the prior year period, an increase of $0.3 billion,$131 million, or 26%11%. The increase wasin non-GAAP operating expenses included increases of $114 million in employee-related expenses primarily due to increases of $0.2 billion in employee-related costs driven by higher headcount, and $0.1 billion$20 million in third-party expenses related to service contracts to expandfor hardware maintenance and data center capacity, depreciation, amortization,and $15 million in facilities and IT.IT-related expenses, offset by a decrease of $24 million in depreciation expense related to equipment in our data centers primarily due to the change in estimated useful lives of our data center equipment from 3 years to 5 years.
Non-GAAP operating expenses were $2.7 billion for the six months ended July 31, 2023, compared to $2.4 billion for the prior year period, an increase of $273 million, or 11%. The increase in non-GAAP operating expenses included increases of $215 million in employee-related expenses primarily due to higher headcount, $40 million in third-party expenses for hardware maintenance and data center capacity, and $35 million in facilities and IT-related expenses, offset by a decrease of $47 million in depreciation expense related to equipment in our data centers primarily due to the change in estimated useful lives of our data center equipment from 3 years to 5 years.
Reconciliations of our GAAP to non-GAAP operating expenses were as follows (in thousands):
Three Months Ended October 31, 2017 Three Months Ended July 31, 2023
GAAP
Operating
Expenses
 
Share-Based
Compensation
Expenses (1)
 
Other
Operating
Expenses (2)
 
Non-GAAP
Operating
Expenses (3)
 GAAP Operating ExpensesShare-Based Compensation Expenses
Other Operating Expenses (1)
Non-GAAP Operating Expenses (2)
Costs of subscription services$71,898
 $(6,899) $(2,468) $62,531
Costs of subscription services$255,684 $(29,988)$(14,688)$211,008 
Costs of professional services91,657
 (9,956) (200) 81,501
Costs of professional services192,416 (28,754)(1,425)162,237 
Product development239,588
 (59,116) (3,780) 176,692
Product development609,677 (161,975)(4,543)443,159 
Sales and marketing176,121
 (25,517) (598) 150,006
Sales and marketing524,186 (66,632)(11,035)446,519 
General and administrative56,184
 (20,991) (683) 34,510
General and administrative168,546 (64,563)(1,572)102,411 
Total costs and expenses$635,448
 $(122,479) $(7,729) $505,240
Total costs and expenses$1,750,509 $(351,912)$(33,263)$1,365,334 
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Three Months Ended October 31, 2016
GAAP
Operating
Expenses
*As Adjusted
 
Share-Based
Compensation
Expenses (1)
 
Other
Operating
Expenses (2)
 
Non-GAAP
Operating
Expenses (3)
Three Months Ended July 31, 2022
 *As AdjustedGAAP Operating ExpensesShare-Based Compensation Expenses
Other Operating Expenses (1)
Non-GAAP Operating Expenses (2)
Costs of subscription services$54,645
 $(5,472) $(118) $49,055
Costs of subscription services$244,982 $(25,090)$(14,596)$205,296 
Costs of professional services72,240
 (7,436) (171) 64,633
Costs of professional services178,103 (25,838)(775)151,490 
Product development185,311
 (45,968) (5,792) 133,551
Product development547,835 (147,181)(2,236)398,418 
Sales and marketing149,537
 (22,597) (661) 126,279
Sales and marketing458,701 (59,878)(9,388)389,435 
General and administrative57,721
 (24,982) (713) 32,026
General and administrative140,255 (50,020)(628)89,607 
Total costs and expenses$519,454
 $(106,455) $(7,455) $405,544
Total costs and expenses$1,569,876 $(308,007)$(27,623)$1,234,246 
 Six Months Ended July 31, 2023
 GAAP Operating ExpensesShare-Based Compensation Expenses
Other Operating Expenses (1)
Non-GAAP Operating Expenses (2)
Costs of subscription services$494,711 $(59,250)$(30,360)$405,101 
Costs of professional services370,833 (58,794)(4,440)307,599 
Product development1,210,134 (331,909)(15,800)862,425 
Sales and marketing1,042,823 (146,755)(24,784)871,284 
General and administrative336,120 (124,664)(4,163)207,293 
Total costs and expenses$3,454,621 $(721,372)$(79,547)$2,653,702 
Nine Months Ended October 31, 2017 Six Months Ended July 31, 2022
GAAP
Operating
Expenses
 
Share-Based
Compensation
Expenses (1)
 
Other
Operating
Expenses (2)
 
Non-GAAP
Operating
Expenses (3)
 GAAP Operating ExpensesShare-Based Compensation Expenses
Other Operating Expenses (1)
Non-GAAP Operating Expenses (2)
Costs of subscription services$197,627
 $(19,170) $(3,222) $175,235
Costs of subscription services$477,904 $(51,320)$(30,922)$395,662 
Costs of professional services260,834
 (27,278) (1,485) 232,071
Costs of professional services348,002 (53,422)(4,674)289,906 
Product development657,130
 (167,068) (19,344) 470,718
Product development1,089,344 (300,485)(15,247)773,612 
Sales and marketing503,782
 (74,618) (3,398) 425,766
Sales and marketing888,002 (119,047)(23,434)745,521 
General and administrative163,085
 (63,656) (2,755) 96,674
General and administrative274,124 (95,239)(3,241)175,644 
Total costs and expenses$1,782,458
 $(351,790) $(30,204) $1,400,464
Total costs and expenses$3,077,376 $(619,513)$(77,518)$2,380,345 

(1)Other operating expenses include amortization of acquisition-related intangible assets of $21 million and $22 million for the three months ended July 31, 2023, and 2022, respectively, and $42 million and $43 million for the six months ended July 31, 2023, and 2022, respectively. In addition, other operating expenses include employer payroll tax-related items on employee stock transactions of $12 million and $6 million for the three months ended July 31, 2023, and 2022, respectively, and $37 million and $34 million for the six months ended July 31, 2023, and 2022, respectively.
(2)See “Non-GAAP Financial Measures” below for further information.
 Nine Months Ended October 31, 2016
 
GAAP
Operating
Expenses
*As Adjusted
 
Share-Based
Compensation
Expenses (1)
 
Other
Operating
Expenses (2)
 
Non-GAAP
Operating
Expenses (3)
    *As Adjusted
Costs of subscription services$155,224
 $(14,837) $(570) $139,817
Costs of professional services198,140
 (18,698) (887) 178,555
Product development488,975
 (117,250) (12,152) 359,573
Sales and marketing412,055
 (62,443) (2,458) 347,154
General and administrative144,609
 (59,684) (2,449) 82,476
Total costs and expenses$1,399,003
 $(272,912) $(18,516) $1,107,575
(1)
Share-based compensation expenses were $122 million and $106 million for the three months ended October 31, 2017 and 2016, respectively, and $352 million and $273 million for the nine months ended October 31, 2017 and 2016, respectively. The increase in share-based compensation expenses was primarily due to grants of RSUs to existing and new employees.
(2)
Other operating expenses include employer payroll tax-related items on employee stock transactions of $3 million for each of the three month periods ended October 31, 2017 and 2016, respectively, and $16 million and $11 million for the nine months ended October 31, 2017 and 2016, respectively. In addition, other operating expenses included amortization of acquisition-related intangible assets of $4 million and $5 million for the three months ended October 31, 2017 and 2016, respectively, and $14 million and $8 million for the nine months ended October 31, 2017 and 2016, respectively.
(3)
See "Non-GAAP Financial Measures" below for further information.
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.
Costs of Subscription Services
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in costs of subscription services were $72$256 million for the three months ended OctoberJuly 31, 2017,2023, compared to $55$245 million for the prior year period, an increase of $11 million, or 4%. The increase in costs of subscription services included increases of $15 million in employee-related expenses, including share-based compensation, primarily due to higher headcount, $13 million in third-party expenses for hardware maintenance and data center capacity, and $4 million in facilities and IT-related expenses, offset by a decrease of $23 million in depreciation expense related to equipment in our data centers primarily due to the change in estimated useful lives of our data center equipment from 3 years to 5 years.
GAAP operating expenses in costs of subscription services were $495 million for the six months ended July 31, 2023, compared to $478 million for the prior year period, an increase of $17 million, or 31%4%. The increase wasin costs of subscription services included increases of $27 million in third-party expenses for hardware maintenance and data center capacity, $22 million in employee-related expenses, including share-based compensation, primarily due to increaseshigher headcount, and $9 million in facilities and IT-related expenses, offset by a decrease of $7$46 million in depreciation expense related to equipment in our data centers $6 million in employee-related costs driven by higher headcount, and $2 million in facility and IT-related expenses.
GAAP operating expenses in costs of subscription services were $198 million for the nine months ended October 31, 2017, compared to $155 million for the prior year period, an increase of $43 million or 28%. The increase was primarily due to increasesthe change in estimated useful lives of $16 million in depreciation expense related to our data centers, $16 million in employee-related costs driven by higher headcount, and $7 million in facility and IT-related expenses.center equipment from 3 years to 5 years.
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Non-GAAP operating expenses in costs of subscription services were $63$211 million for the three months ended OctoberJuly 31, 2017,2023, compared to $49$205 million for the prior year period, an increase of $14$6 million, or 29%3%. The increase wasin costs of subscription services included increases of $13 million in third-party expenses for hardware maintenance and data center capacity, $9 million in employee-related expenses primarily due to increaseshigher headcount, and $4 million in facilities and IT-related expenses, offset by a decrease of $5$23 million in depreciation expense related to equipment in our data centers $4 millionprimarily due to the change in employee-related costs driven by higher headcount, and $2 million in facility and IT-related expenses.estimated useful lives of our data center equipment from 3 years to 5 years.
Non-GAAP operating expenses in costs of subscription services were $175$405 million for the ninesix months ended OctoberJuly 31, 2017,2023, compared to $140$396 million for the prior year period, an increase of $35$9 million, or 25%2%. The increase wasin costs of subscription services included increases of $27 million in third-party expenses for hardware maintenance and data center capacity, $14 million in employee-related expenses primarily due to increaseshigher headcount, and $9 million in facilities and IT-related expenses, offset by a decrease of $14$46 million in depreciation expense related to equipment in our data centers $11 millionprimarily due to the change in employee-related costs driven by higher headcount, and $7 million in facility and IT-related expenses.estimated useful lives of our data center equipment from 3 years to 5 years.
We expect that GAAP and non-GAAP operating expenses in costs of subscription services will continue to increase in absolute dollars as we improve and expand our technical operations infrastructure, including our data center capacitycenters and operations.computing infrastructure operated by third parties.
Costs of Professional Services
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in costs of professional services were $92$192 million for the three months ended OctoberJuly 31, 2017,2023, compared to $72$178 million for the prior year period, an increase of $20$14 million, or 28%8%. The increase wasin costs of professional services included an increase of $17 million in employee-related expenses, including share-based compensation, primarily due to additional costs of $16 million to staff our deployment and integration engagements and $2 million in facility and IT-related expenseshigher headcount.
GAAP operating expenses in costs of professional services were $261$371 million for the ninesix months ended OctoberJuly 31, 2017,2023, compared to $198$348 million for the prior year period, an increase of $63$23 million, or 32%7%. The increase was primarily due to additional costs of $52 million to staff our deployment and integration engagements and $5 million in facility and IT-related expenses.

Non-GAAP operating expenses in costs of professional services were $82 million for the three months ended October 31, 2017, compared to $65 million for the prior year period,included an increase of $17$29 million or 26%. The increase wasin employee-related expenses, including share-based compensation, primarily due to additional costshigher headcount, offset by a decrease of $13 million to staff our deployment and integration engagements and $2$7 million in facilityprofessional services and IT-relatedsubcontractor expenses.
Non-GAAP operating expenses in costs of professional services were $232$162 million for the ninethree months ended OctoberJuly 31, 2017,2023, compared to $179$151 million for the prior year period, an increase of $53$11 million, or 30%7%. The increase wasin costs of professional services included an increase of $14 million in employee-related expenses primarily due to additionalhigher headcount.
Non-GAAP operating expenses in costs of $43professional services were $308 million for the six months ended July 31, 2023, compared to staff our deployment and integration engagements and $5$290 million for the prior year period, an increase of $18 million, or 6%. The increase in costs of professional services included an increase of $24 million in facilityemployee-related expenses primarily due to higher headcount, offset by a decrease of $7 million in professional services and IT-relatedsubcontractor expenses.
Going forward, weWe expect GAAP and non-GAAP costs of professional services as a percentage of total revenues to continue to decline as we increasinglycontinue to rely on our service partners to deploy our applications and as the number of our customers continues to grow. For fiscal 2018, we anticipate GAAP and non-GAAP professional services margins to be lower than fiscal 2017 as we invest in programs to ensure ongoing customer success.
Product Development
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in product development were $240$610 million for the three months ended OctoberJuly 31, 2017,2023, compared to $185$548 million for the prior year period, an increase of $55$62 million, or 30%11%. The increase wasin product development expenses included an increase of $49 million in employee-related expenses, including share-based compensation, primarily due to increases of $43 million in employee-related costs driven by higher headcount and $8 million in facility and IT-related expenses.headcount.
GAAP operating expenses in product development were $657$1.2 billion for the six months ended July 31, 2023, compared to $1.1 billion for the prior year period, an increase of $121 million, or 11%. The increase in product development expenses included an increase of $97 million in employee-related expenses, including share-based compensation, primarily due to higher headcount.
Non-GAAP operating expenses in product development were $443 million for the ninethree months ended OctoberJuly 31, 2017,2023, compared to $489$398 million for the prior year period, an increase of $168$45 million, or 34%11%. The increase wasin product development expenses included an increase of $31 million in employee-related expenses primarily due to increases of $131 million in employee-related costs driven by higher headcount and $22 million in facility and IT-related expenses.headcount.
Non-GAAP operating expenses in product development were $177$862 million for the threesix months ended OctoberJuly 31, 2017,2023, compared to $134$774 million for the prior year period, an increase of $43$89 million, or 32%11%. The increase wasin product development expenses included an increase of $65 million in employee-related expenses primarily due to increases of $29 million in employee-related costs driven by higher headcount and $8 million in facility and IT-related expenses.
Non-GAAP operating expenses in product development were $471 million for the nine months ended October 31, 2017, compared to $360 million for the prior year period, an increase of $111 million, or 31%. The increase was primarily due to increases of $78 million in employee-related costs driven by higher headcount and $22 million in facility and IT-related expenses.headcount.
We expect that GAAP and non-GAAP product development expenses will continue to increase in absolute dollars as we improve and expandextend our applications and develop new technologies.
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Sales and Marketing
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in sales and marketing were $176$524 million for the three months ended OctoberJuly 31, 2017,2023, compared to $150$459 million for the prior year period, an increase of $26$65 million, or 17%14%. The increase wasin sales and marketing expenses included increases of $58 million in employee-related expenses, including share-based compensation, primarily due to increases of $18 million in employee-related costs driven by higher headcount and higher commissionable sales volume, $5 million in advertising, marketing and event costs, and $3 million in facility and IT-related expenses.headcount.
GAAP operating expenses in sales and marketing were $504 million$1.0 billion for the ninesix months ended OctoberJuly 31, 2017,2023, compared to $412$888 million for the prior year period, an increase of $92$155 million, or 22%17%. The increase wasin sales and marketing expenses included increases of $121 million in employee-related expenses, including share-based compensation, primarily due to increases of $69 million in employee-related costs driven by higher headcount and higher commissionable sales volume, $11$16 million in advertising,related to marketing and event costs, and $7 million in facility and IT-related expenses.programs.
Non-GAAP operating expenses in sales and marketing were $150$447 million for the three months ended OctoberJuly 31, 2017,2023, compared to $126$389 million for the prior year period, an increase of $24$57 million, or 19%15%. The increase wasin sales and marketing expenses included increases of $49 million in employee-related expenses primarily due to increases of $15 million in employee-related costs driven by higher headcount and higher commissionable sales volume, $5 million in advertising, marketing and event costs, and $3 million in facility and IT-related expenses.headcount.
Non-GAAP operating expenses in sales and marketing were $426$871 million for the ninesix months ended OctoberJuly 31, 2017,2023, compared to $347$746 million for the prior year period, an increase of $79$126 million, or 23%17%. The increase wasin sales and marketing expenses included increases of $92 million in employee-related expenses primarily due to increases of $56 million in employee-related costs driven by higher headcount and higher commissionable sales volume, $11$16 million in advertising,related to marketing and event costs, and $7 million in facility and IT-related expenses.programs.
We expect that GAAP and non-GAAP sales and marketing expenses will continue to increase in absolute dollars as we continue to invest in the expansion of our domestic and international selling and marketing activities to buildexpand awareness of our brand awareness and product offerings to attract new and existing customers.

General and Administrative
See the table above for a reconciliation of GAAP to non-GAAP operating expenses.
GAAP operating expenses in general and administrative were $56$169 million for the three months ended OctoberJuly 31, 2017,2023, compared to $58$140 million for the prior year period, a decreasean increase of $2$28 million, or 3%20%. The decrease wasincrease in general and administrative expenses included an increase of $26 million in employee-related expenses, including share-based compensation, primarily due to a one-time acquisition expense of $6 million recorded in the third quarter of fiscal 2017 for which there was no corresponding amount in fiscal 2018, offset by $5 million in additional employee-related costs driven by higher headcount and $2 million in higher professional fees.headcount.
GAAP operating expenses in general and administrative were $163$336 million for the ninesix months ended OctoberJuly 31, 2017,2023, compared to $145$274 million for the prior year period, an increase of $18$62 million, or 12%23%. The increase was primarily due to $20 million in additional employee-related costs driven by higher headcount and $5 million in higher professional fees, offset by a one-time acquisition expense of $6 million recorded in the third quarter of fiscal 2017.
Non-GAAP operating expenses in general and administrative were $35 million for the three months ended October 31, 2017, compared to $32 million for the prior year period,expenses included an increase of $3$51 million or 9%. The increase wasin employee-related expenses, including share-based compensation, primarily due to $3 million in additional employee-related costs driven by higher headcount.
Non-GAAP operating expenses in general and administrative were $97$102 million for the ninethree months ended OctoberJuly 31, 2017,2023, compared to $82$90 million for the prior year period, an increase of $15$13 million, or 14%. The increase in general and administrative expenses included an increase of $10 million in employee-related expenses primarily due to higher headcount.
Non-GAAP operating expenses in general and administrative were $207 million for the six months ended July 31, 2023, compared to $176 million for the prior year period, an increase of $32 million, or 18%. The increase wasin general and administrative expenses included an increase of $21 million in employee-related expenses primarily due to $10 million in additional employee-related costs driven by higher headcount and $5 million in higher professional fees.headcount.
We expect GAAP and non-GAAP general and administrative expenses will continue to increase in absolute dollars as we further invest in our infrastructure and support our global expansion.
Operating MarginsMargin
GAAP operating marginsmargin improved from (26)(2.2)% for the three months ended OctoberJuly 31, 20162022, to (14)%2.0% for the three months ended OctoberJuly 31, 2017. The improvements2023, primarily due to an increase in revenues, the moderation of operating expenses, and a decrease in depreciation expense related to equipment in our data centers primarily due to the change in estimated useful lives of our data center equipment from 3 years to 5 years.
GAAP operating marginsmargin improved from (3.6)% for the six months ended July 31, 2022, to 0.5% for the six months ended July 31, 2023, primarily due to an increase in revenues, the moderation of operating expenses, and a decrease in depreciation expense related to equipment in our data centers primarily due to the change in estimated useful lives of our data center equipment from 3 years to 5 years.
Non-GAAP operating margin improved from 19.6% for the three months ended OctoberJuly 31, 2017 were2022, to 23.6% for the three months ended July 31, 2023, primarily due to higher subscription servicesan increase in revenues, higher professional services revenues,offset by the moderation of operating expenses and improvementsa decrease in operating leverage.
GAAP operating margins improved from (23)% for the nine months ended October 31, 2016depreciation expense related to (14)% for the nine months ended October 31, 2017. The improvementsequipment in our GAAP operating margins in the nine months ended October 31, 2017 weredata centers primarily due to the change in estimated useful lives of our data center equipment from 3 years to 5 years.
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Non-GAAP operating margin improved from 19.9% for the six months ended July 31, 2022, to 23.5% for the six months ended July 31, 2023, primarily due to an increase in revenues, offset by the moderation of operating expenses and a decrease in depreciation expense related to equipment in our data centers primarily due to the change in estimated useful lives of our data center equipment from 3 years to 5 years.
Reconciliations of our GAAP to non-GAAP operating income (loss) and operating margin were as follows (in thousands, except percentages):
 Three Months Ended July 31, 2023
 GAAPShare-Based Compensation ExpensesOther Operating Expenses
Non-GAAP (1)
Operating income (loss)$36,257 $351,912 $33,263 $421,432 
Operating margin2.0 %19.7 %1.9 %23.6 %
Three Months Ended July 31, 2022
GAAPShare-Based Compensation ExpensesOther Operating Expenses
Non-GAAP (1)
Operating income (loss)$(34,078)$308,007 $27,623 $301,552 
Operating margin(2.2)%20.1 %1.7 %19.6 %
 Six Months Ended July 31, 2023
 GAAPShare-Based Compensation ExpensesOther Operating Expenses
Non-GAAP (1)
Operating income (loss)$16,457 $721,372 $79,547 $817,376 
Operating margin0.5 %20.8 %2.2 %23.5 %
 Six Months Ended July 31, 2022
 GAAPShare-Based Compensation ExpensesOther Operating Expenses
Non-GAAP (1)
Operating income (loss)$(106,921)$619,513 $77,518 $590,110 
Operating margin(3.6)%20.9 %2.6 %19.9 %
(1)See “Non-GAAP Financial Measures” below for further information.
Other Income (Expense), Net
We had other income (expense), net of $46 million and $(33) million for the three months ended July 31, 2023, and 2022, respectively, and other income (expense), net of $72 million and $(53) million for the six months ended July 31, 2023, and 2022, respectively.
Other income, net for the three months ended July 31, 2023, primarily consisted of interest income of $70 million on our marketable securities from higher subscription services revenues,investment balances and rising interest rates, offset by contractual interest expense of $28 million on our debt primarily related to the Senior Notes.
Other expense, net for the three months ended July 31, 2022, primarily consisted of contractual interest expense of $28 million on our debt primarily related to the Senior Notes and net losses of $16 million on our equity investments, offset by interest income of $15 million on our marketable securities.
Other income, net for the six months ended July 31, 2023, primarily consisted of interest income of $132 million on our marketable securities from higher professional services revenues,investment balances and improvementsrising interest rates, offset by contractual interest expense of $55 million on our debt primarily related to the Senior Notes and net losses of $7 million on our equity investments.
Other expense, net for the six months ended July 31, 2022, primarily consisted of contractual interest expense of $37 million on our debt primarily related to the Senior Notes and net losses of $24 million on our equity investments, offset by interest income of $19 million on our marketable securities.
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Non-GAAP Financial Measures
Regulation S-K Item 10(e), “Use of non-GAAP financial measures in Commission filings,” defines and prescribes the conditions for use of non-GAAP financial information. Our measures of non-GAAP operating leverage.expenses, non-GAAP operating income (loss), and non-GAAP operating margin meet the definition of non-GAAP financial measures.
Non-GAAP Operating Expenses, Non-GAAP Operating Income (Loss), and Non-GAAP Operating Margin
We use the non-GAAP financial measures of non-GAAP operating marginsexpenses, non-GAAP operating income (loss), and non-GAAP operating margin to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate our financial performance and the ability of operations to generate cash.performance. We believe that these non-GAAP operating marginsmeasures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business, as they exclude expenses that are not reflective of ongoing operating results. We also believe that non-GAAP operating margins provide useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management and in comparing financial results across accounting periods and to those of peer companies.business.
Non-GAAP operating margins are calculated using GAAP revenues and non-GAAP operating expenses. See "Non-GAAP Financial Measures" below for further information.
Non-GAAP operating margins improved from 2% for the three months ended October 31, 2016 to 9% for the three months ended October 31, 2017. The improvements in our non-GAAP operating margins in the three months ended October 31, 2017 were primarily due to higher subscription services revenues, higher professional services revenues, and improvements in operating leverage.
Non-GAAP operating margins improved from 2% for the nine months ended October 31, 2016 to 10% for the nine months ended October 31, 2017. The improvements in our non-GAAP operating margins in the nine months ended October 31, 2017 were primarily due to higher subscription services revenues, higher professional services revenues, and improvements in operating leverage.

Reconciliations of our GAAP to non-GAAP operating margins were as follows:
 Three Months Ended October 31, 2017
 
GAAP
Operating
Expenses
 
Share-Based
Compensation
Expenses
 
Other
Operating
Expenses
 
Non-GAAP
Operating
Expenses (1)
Operating margin(14.4)% 22.1% 1.3% 9.0%
 Three Months Ended October 31, 2016
 
GAAP
Operating
Expenses
*As Adjusted
 
Share-Based
Compensation
Expenses
 
Other
Operating
Expenses
 
Non-GAAP
Operating
Expenses (1)

    *As Adjusted
Operating margin(25.6)% 25.7% 1.8% 1.9%
 Nine Months Ended October 31, 2017
 
GAAP
Operating
Expenses
 
Share-Based
Compensation
Expenses
 
Other
Operating
Expenses
 
Non-GAAP
Operating
Expenses (1)
Operating margin(14.2)% 22.5% 2.0% 10.3%
 Nine Months Ended October 31, 2016
 
GAAP
Operating
Expenses
*As Adjusted
 
Share-Based
Compensation
Expenses
 
Other
Operating
Expenses
 
Non-GAAP
Operating
Expenses (1)

    *As Adjusted
Operating margin(23.3)% 24.0% 1.7% 2.4%
(1)
See "Non-GAAP Financial Measures" below for further information.
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.
Other Income (Expense), Net
Other expense, net, increased $1 million for the three months ended October 31, 2017 as compared to the prior year period. The increase was primarily due to interest expense of $5 million related to the 0.25% convertible senior notes issued in the current fiscal quarter, offset by an increase in interest income of $4 million.
Other income, net increased $26 million for the nine months ended October 31, 2017 as compared to the prior year period. The increase was primarily a result of a $15 million impairment of a cost method investment recorded in the second quarter of fiscal 2017 for which there was no corresponding amount in fiscal 2018, and an increase in interest income of $8 million.
Liquidity and Capital Resources
As of October 31, 2017, our principal sources of liquidity were cash, cash equivalents and marketable securities totaling $3.2 billion, which were held for working capital purposes. Our cash equivalents and marketable securities are comprised primarily of U.S. agency obligations, U.S. treasury securities, corporate bonds, commercial paper, money market funds, and certificates of deposit.
We have financed our operations primarily through sales of equity securities, customer payments, and issuance of debt. Our future capital requirements will depend on many factors, including our customer growth rate, subscription renewal activity, the timing of construction of facilities in Pleasanton, California and the acquisition of additional facilities, the timing and extent of development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced services offerings, the continuing market acceptance of our services, and acquisition activities. We may enter into arrangements to acquire or invest in complementary businesses, services and technologies or intellectual property rights in the future. We also may choose to seek additional equity or debt financing.

Our cash flows for the three and nine months ended October 31, 2017 and 2016 were as follows (in thousands):
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  *As Adjusted  *As Adjusted
Net cash provided by (used in):       
Operating activities$144,031
 $71,556
 $339,179
 $240,895
Investing activities(595,458) (99,120) (617,002) (187,243)
Financing activities1,039,314
 4,926
 1,073,765
 34,273
Effect of exchange rate changes(322) (137) 261
 357
Net increase (decrease) in cash, cash equivalents and restricted cash$587,565
 $(22,775) $796,203
 $88,282
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.
Operating Activities
Cash provided by operating activities was $144 million and $72 million for the three months ended October 31, 2017 and 2016, respectively. The improvement in cash flow provided by operating activities was primarily due to increases in sales and the related cash collections, partially offset by higher operating expenses driven by increased headcount.
Cash provided by operating activities was $339 million and $241 million for the nine months ended October 31, 2017 and 2016, respectively. The improvement in cash flow provided by operating activities was primarily due to increases in sales and the related cash collections, partially offset by higher operating expenses driven by increased headcount.
Investing Activities
Cash used in investing activities for the three months ended October 31, 2017 was $595 million, which was primarily the result of the timing of purchases and maturities of marketable securities, capital expenditures for owned real estate projects, including construction of our new customer briefing and development center ("development center") of $28 million, capital expenditures for data center and office space projects of $36 million, and the purchase of cost method investments of $5 million. These payments were partially offset by proceeds of $33 million from the sale of available-for-sale securities.
Cash used in investing activities for the three months ended October 31, 2016 was $99 million, which was primarily the result of timing of purchase and maturities of marketable securities, a net cash outflow of $144 million related to an acquisition, the purchase of an office building and land in Pleasanton, California for $47 million, capital expenditures for owned real estate projects (including construction of our development center) of $13 million, and capital expenditures for data center and office space projects of $28 million. These payments were partially offset by proceeds of $63 million from the sale of available-for-sale securities.
Cash used in investing activities for the nine months ended October 31, 2017 was $617 million, which was primarily the result of the timing of purchases and maturities of marketable securities, capital expenditures for owned real estate projects (including construction of our development center) of $80 million, capital expenditures for data center and office space projects of $105 million, and the purchase of cost method investments of $11 million. These payments were partially offset by proceeds of $223 million from the sale of available-for-sale securities.
Cash used in investing activities for the nine months ended October 31, 2016 was $187 million, which was primarily the result of timing of purchase and maturities of marketable securities, a net cash outflow of $148 million related to acquisitions, purchases of office buildings and land in Pleasanton, California for $62 million, capital expenditures for owned real estate projects (including construction of our development center) of $23 million, and capital expenditures for data center and office space projects of $89 million. These payments were partially offset by proceeds of $92 million from the sale of available-for-sale securities.

We expect capital expenditures related to owned real estate projects, including construction of our development center, will be approximately $130 million for fiscal 2018. We expect capital expenditures, excluding owned real estate projects, will be approximately $160 million for fiscal 2018. We expect that these capital outlays will largely be used to expand the infrastructure of our data centers and to build out additional office space to support our growth.
Financing Activities
Cash provided by financing activities for the three months ended October 31, 2017 was $1.0 billion, which wasprimarily due to the issuance of $1.15 billion principal amount of 0.25% convertible senior notes due October 1, 2022, net of issuance costs of $18 million, and the related sale of warrants for $81 million and purchase of note hedges for $176 million. For further information, see Note 10 of the notes to condensed consolidated financial statements. In addition, cash flows from financing activities included $2 million of proceeds from the issuance of common stock from employee equity plans.
Cash provided by financing activities for the three months ended October 31, 2016 was $5 million, which was primarily due to proceeds from the issuance of common stock from employee equity plans.
Cash provided by financing activities for the nine months ended October 31, 2017 was $1.1 billion, which wasprimarily due to the issuance of $1.15 billion principal amount of 0.25% convertible senior notes due October 1, 2022, net of issuance costs of $18 million, and the related sale of warrants for $81 million and purchase of note hedges for $176 million. For further information, see Note 10 of the notes to condensed consolidated financial statements. In addition, cash flows from financing activities included $37 million of proceeds from the issuance of common stock from employee equity plans.
Cash provided by financing activities for the nine months ended October 31, 2016 was $34 million, which was primarily due to proceeds from the issuance of common stock from employee equity plans.
Free Cash Flows
In evaluating our performance internally, we focus on long-term, sustainable growth in free cash flows. We define free cash flows, a non-GAAP financial measure, as net cash provided by (used in) operating activities minus capital expenditures (excluding owned real estate projects). See "Non-GAAP Financial Measures" below for further information.
Free cash flows improved by $64 million to $108 million for the three months ended October 31, 2017, compared to $44 million for the prior year period. The improvement was primarily due to increases in sales and the related cash collections, partially offset by increases in capital expenditures (excluding owned real estate projects) and higher operating expenses driven by increased headcount.
Free cash flows improved by $82 million to $234 million for the nine months ended October 31, 2017, compared to $152 million for the prior year period. The improvement was primarily due to increases in sales and the related cash collections, partially offset by increases in capital expenditures (excluding owned real estate projects) and higher operating expenses driven by increased headcount.
Reconciliations of Net cash provided by (used in) operating activities to free cash flows were as follows (in thousands):
 Three Months Ended October 31, Nine Months Ended October 31,
 2017 2016 2017 2016
  *As Adjusted  *As Adjusted
Net cash provided by (used in) operating activities$144,031
 $71,556
 $339,179
 $240,895
Capital expenditures, excluding owned real estate projects(36,356) (27,518) (105,477) (88,535)
Free cash flows$107,675
 $44,038
 $233,702
 $152,360
        
        
 Trailing Twelve Months Ended October 31,    
 2017 2016    
  *As Adjusted    
Net cash provided by (used in) operating activities$448,910
 $339,386
    
Capital expenditures, excluding owned real estate projects(137,755) (130,520)    
Free cash flows$311,155
 $208,866
    
*See Note 2 of the notes to condensed consolidated financial statements for a summary of adjustments.

Non-GAAP Financial Measures
Regulation S-K Item 10(e), "Use of non-GAAP financial measures in Commission filings," defines and prescribes the conditions for use of non-GAAP financial information. Our measures of non-GAAP operating expenses, non-GAAP operating margin and free cash flows each meet the definition of a non-GAAP financial measure.
Non-GAAP Operating Expensesincome (loss), and non-GAAP Operating Margins
We define non-GAAP operating expenses as our total operating expenses excludingmargin exclude the following components which we believe are not reflective of our ongoing operational expenses. Similarly, the same components are also excluded from the calculation of non-GAAP operating margins. In each case, forlisted below. For the reasons set forth below, management believeswe believe that excluding the componentthese components provides useful information to investors and others in understanding and evaluating our operating results and future prospects in the same manner as management, in comparing financial results across accounting periods and to those of peer companies, and to better understand the long-term performance of our core business.
•Share-Based Compensation Expenses. Although share-based compensation is an important aspect of the compensation of our employees and executives, management believeswe believe it is useful to exclude share-based compensation expenses in order to better understand the long-term performance of our core business and to facilitate comparison of our results to those of peer companies. For restrictedShare-based compensation expenses are determined using a number of factors, including our stock unit awards, the amount ofprice, volatility, and forfeiture rates that are beyond our control and generally unrelated to operational decisions and performance in any particular period. Further, share-based compensation expenses isare not reflective of the value ultimately received by the grant recipients. Moreover, determining the fair value of certain of the share-based instruments we utilize involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the vesting or future exercise of the related share-based awards. Unlike cash compensation, the value of stock options and shares offered under the ESPP, which are elements of our ongoing share-based compensation expenses, is determined using a complex formula that incorporates factors, such as market volatility and forfeiture rates, that are beyond our control.
•Other Operating Expenses. Other operating expenses includeincludes employer payroll tax-related items on employee stock transactions and amortization of acquisition-related intangible assets. The amount of employer payroll tax-related items on employee stock transactions is dependent on our stock price and other factors that are beyond our control and do not correlate to the operation of the business. For business combinations, we generally allocate a portion of the purchase price to intangible assets. The amount of the allocation is based on estimates and assumptions made by management and is subject to amortization. The amount of purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition and thus we do not believe it is reflective of our ongoing operations.
Free Cash Flows
We define free cash flows Although we exclude the amortization of acquisition-related intangible assets from these non-GAAP measures, we believe that it is important for investors to understand that such intangible assets were recorded as net cash provided by (used in) operating activities minus capital expenditures (excluding owned real estate projects). Capital expenditures deducted from cash flows from operations do not include purchasespart of landpurchase accounting and buildings, and construction costs of our new development center and of other owned buildings. We exclude these owned real estate projects as they are infrequent in nature. For the current fiscal year, these costs primarily represent the construction of our new development center, which is anticipatedcontribute to be completed in fiscal 2020. We use free cash flows as a measure of financial progress in our business, as it balances operating results, cash management and capital efficiency. We believe information regarding free cash flows provides investors and others with an important perspective on the cash available to make strategic acquisitions and investments, to fund ongoing operations and to fund other capital expenditures.revenue generation.
Limitations on the Use of Non-GAAP Financial Measures
A limitation of our non-GAAP financial measures of non-GAAP operating expenses, non-GAAP operating marginincome (loss), and free cash flowsnon-GAAP operating margin is that they do not have uniform definitions. Our definitions will likely differ from the definitions used by other companies, including peer companies, and therefore comparability may be limited. Thus, our non-GAAP financial measures of non-GAAP operating expenses, non-GAAP operating margin and free cash flows should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP. Additionally, in the case of share-based compensation, if we did not pay out a portion of compensation in the form of share-based compensation and related employer payroll tax-related items, the cash salary expense included in costs of revenues and operating expenses would be higher, which would affect our cash position. Further, the non-GAAP financial measure of non-GAAP operating expenses has certain limitations because it does not reflect all items of expense that affect our operations and are reflected in the GAAP financial measure of total operating expenses.

In the case of share-based compensation, if we did not pay out a portion of compensation in the form of share-based compensation and related employer payroll tax-related items, the cash salary expense included in operating expenses would be higher, which would affect our cash position.
We compensate for these limitations by reconciling GAAP tothe non-GAAP financial measures and reviewing these measures in conjunction withto the most comparable GAAP financial information.measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. 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“Results of Operations—Operating ExpensesExpenses” and Results“Results of Operations—Operating MarginsMargin” for reconciliations from the most directly comparable GAAP financial measures of GAAP operating expenses, GAAP operating income (loss), and GAAP operating margins,margin, to the non-GAAP financial measures of non-GAAP operating expenses, non-GAAP operating income (loss), and non-GAAP operating margins,margin, for the three and ninesix months ended OctoberJuly 31, 20172023, and 2016.2022.
See
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Liquidity and Capital Resources—Free Cash FlowsResources
As of July 31, 2023, our principal sources of liquidity were cash, cash equivalents, and marketable securities totaling $6.7 billion, which were primarily held for a reconciliationworking capital purposes. Our cash equivalents and marketable securities are composed of, in order from the most comparable GAAP financial measure, Netlargest to smallest, U.S. treasury securities, corporate bonds, commercial paper, U.S. agency obligations, money market funds, and marketable equity investments. 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 (used in) operating activities, unbilled amounts related to the non-GAAP financial measure, freeremaining 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, and debt repayment needs over the next 12 months.
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, the timing and costs associated with the construction or acquisition of additional facilities, and our investment and acquisition activities. As part of our strategy, we may choose to seek additional debt or equity financing.
Our cash flow,flows for the three and ninesix months ended OctoberJuly 31, 20172023, and 2016.2022, were as follows (in thousands):
 Three Months Ended July 31,Six Months Ended July 31,
 2023202220232022
Net cash provided by (used in):
Operating activities$425,264 $114,358 $702,580 $554,075 
Investing activities(385,343)(486,995)(1,098,319)(1,957,736)
Financing activities(48,596)83,087 (51,756)2,360,789 
Effect of exchange rate changes218 (145)89 (830)
Net increase (decrease) in cash, cash equivalents, and restricted cash$(8,457)$(289,695)$(447,406)$956,298 
Operating Activities
Cash provided by operating activities was $425 million and $114 million for the three months ended July 31, 2023, and 2022, respectively. The improvement in cash flow provided by operating activities was primarily due to increases in sales, the related cash collections, and interest income, partially offset by cash operating expenses.
Cash provided by operating activities was $703 million and $554 million for the six months ended July 31, 2023, and 2022, respectively. The improvement in cash flow provided by operating activities was primarily due to increases in sales, the related cash collections, and interest income. The improvement was offset by the first full-year payout of our performance-based cash bonus program, an interest payment on our Senior Notes that did not occur in the first quarter of fiscal 2023, due to the timing of our debt offering, and payments related to the workforce realignment announced in the fourth quarter of fiscal 2023.
Investing Activities
Cash used in investing activities for the three months ended July 31, 2023, was $385 million, which primarily resulted from a cash outflow from the timing of purchases and maturities of marketable securities of $346 million and capital expenditures for data center and office space projects of $64 million, offset by proceeds of $25 million from sales of marketable securities.
Cash used in investing activities for the three months ended July 31, 2022, was $487 million, which primarily resulted from a cash outflow from the timing of purchases and maturities of marketable securities of $345 million and capital expenditures for data center and office space projects of $169 million, offset by proceeds of $28 million from sales of marketable securities.
Cash used in investing activities for the six months ended July 31, 2023, was $1.1 billion, which primarily resulted from a cash outflow from the timing of purchases and maturities of marketable securities of $1.0 billion and capital expenditures for data center and office space projects of $123 million, offset by proceeds of $48 million from sales of marketable securities.
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Cash used in investing activities for the six months ended July 31, 2022, was $2.0 billion, which primarily resulted from purchases of marketable securities, net of maturities, of $1.8 billion using the proceeds from the Senior Notes offering, capital expenditures for data center and office space projects of $227 million, and purchases of non-marketable equity and other investments of $17 million. These payments were partially offset by proceeds of $33 million from sales of marketable securities and $7 million from sales and maturities of non-marketable securities.
We expect capital expenditures will be approximately $300 million in fiscal 2024. This includes investments in our office facilities, corporate IT infrastructure, and customer data centers to support our continued growth.
Financing Activities
Cash used in financing activities was $49 million for the three months ended July 31, 2023, which was primarily due to repurchases of common stock under the Share Repurchase Program of $139 million, offset by $90 million in proceeds from the issuance of common stock from employee equity plans.
Cash provided by financing activities was $83 million for the three months ended July 31, 2022, which was primarily due to proceeds of $83 million from the issuance of common stock from employee equity plans.
Cash used in financing activities was $52 million for the six months ended July 31, 2023, which was primarily due to due to repurchases of common stock under the Share Repurchase Program of $139 million, offset by $87 million in proceeds from the issuance of common stock from employee equity plans.
Cash provided by financing activities was $2.4 billion for the six months ended July 31, 2022, which was primarily due to proceeds of $3.0 billion from borrowings on the Senior Notes, net of debt discount of $22 million, and $84 million from the issuance of common stock from employee equity plans, offset by the repayment of the term loan under the 2020 Credit Agreement of $694 million and payments for debt issuance costs of $7 million.
Share Repurchase Program
In November 2022, our Board of Directors authorized the repurchase of up to $500 million of our outstanding shares of Class A common stock. The Share Repurchase Program has a term of 18 months, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock. For further information, see Note 13, Stockholders’ Equity, of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Contractual Obligations
Our contractual obligations primarily consist of borrowings under our convertible senior notes, as well as obligations underSenior Notes, leases for office space and co-location facilities for data center capacity, and a computingagreements for third-party hosted infrastructure platformplatforms for business operations. Asoperations, and other purchase obligations entered into in the ordinary course of October 31, 2017,business. There have been no material changes outside the future non-cancelable minimum payments under operating leases and computing infrastructure agreements were $370 million. Duringordinary course of business to our contractual obligations disclosed in our Annual Report on Form 10-K for the remainder of thefiscal year ended January 31, 2018, we anticipate leasing additional office space near our headquarters and in various other locations around the world to support our growth. In addition, our existing lease agreements often provide us with options to renew. We expect our future operating lease obligations will increase as we expand our operations.2023.
We are not required to make principal payments under the Notes prior to maturity. If the Notes are not converted to Class A common stock prior to their maturity dates, we are required to repay $350 million in principal on July 15, 2018, $250 million in principal on July 15, 2020, and $1.15 billion in principal on October 1, 2022. We are also required to make interest payments on a semi-annual basis at the interest rates described in Note 10 of the notes to condensed consolidated financial statements.
In January 2014, we entered into a 95-year lease for a 6.9-acre parcel of land in Pleasanton, California, under which we paid $2 million for base rent from commencement through December 31, 2020. Annual rent payments of $0.2 million plus increases based on increases in the consumer price index begin on January 1, 2021 and continue through the end of the lease. Our new development center, consisting of approximately 410,000 square feet of office space, is being constructed on this property.
We do not consider outstanding purchase orders to be contractual obligations as they represent authorizations to purchase rather than binding agreements.
Off-Balance Sheet Arrangements
Through October 31, 2017, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make certain estimates, judgements, and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates, judgements, and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
ExceptWe believe that the following critical accounting policies involve a high degree of judgement and complexity, and are the most critical to aid in fully understanding and evaluating our financial condition and operating results:
•Revenue recognition
•Deferred commissions
•Business combinations, goodwill, and acquisition-related intangible assets
•Non-marketable equity investments
For a further discussion of our critical accounting policies, refer to our Annual Report on Form 10-K for the accounting policies for revenue recognitionfiscal year ended January 31, 2023. During the three and deferred commissions thatsix months ended July 31, 2023, there were updated as a result of adopting ASU No. 2014-09, there have been no significant changes to our critical accounting policies and estimates, other than the change in useful lives of our data center equipment as described in the Annual Report on Form 10-K for the year ended January 31, 2017, filed with the SecuritiesNote 1. Overview and Exchange Commission ("SEC") on March 20, 2017, that have had a material impact on our condensed consolidated financial statements and related notes.
Revenue Recognition
We derive our revenues primarily from subscription services and professional services. Revenues are recognized when controlBasis of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We determine revenue recognition through the following steps:
IdentificationPresentation, of the contract, or contracts, with a customer
Identification of the performance obligations in the contract
Determination of the transaction price

Allocation of the transaction priceNotes to the performance obligations in the contract
Recognition of revenue when, or as, we satisfy a performance obligation
Subscription Services Revenues
Subscription services revenues primarily consist of fees that provide customers access to one or more of our cloud applications for finance, human resources, and analytics, with routine customer support. Revenue is generally recognized over time on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Our subscription contracts are generally three years or longer in length, billed annually in advance, and non-cancelable.
Professional Services Revenues
Professional services revenues primarily consist of fees for deployment and optimization services, as well as training. The majority of our consulting contracts are billed on a time and materials basis and revenue is recognized over time as the services are performed. For contracts billed on a fixed price basis, revenue is recognized over time based on the proportion performed.
Contracts with Multiple Performance Obligations
Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the cloud applications sold, customer demographics, geographic locations, and the number and types of users within our contracts.
Deferred Commissions
Sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial contracts are deferred and then amortized on a straight-line basis over a period of benefit that we have determined to be five years. We determined the period of benefit by taking into consideration our customer contracts, our technology and other factors. Sales commissions for renewal contracts are deferred and then amortized on a straight-line basis over the related contractual renewal period. Amortization expense isCondensed Consolidated Financial Statements included in Sales and marketing expenses in the accompanying condensed consolidated statementsPart I, Item 1 of operations.this report.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Recent macroeconomic events have resulted in negative impacts on global economies and financial markets, which may increase our foreign currency exchange risk and interest rate risk. For further discussion of the potential impacts of these events on our business, financial condition, and operating results, see “Risk Factors” included in Part II, Item 1A of this report.
Foreign Currency Exchange Risk
We transact business globally in multiple currencies. As a result, our operating results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. As of OctoberJuly 31, 2017 and 2016,2023, our most significant currency exposures were the Euro,euro, British pound, AustralianCanadian dollar, and CanadianAustralian dollar.
We have a hedging program designedDue to identify material foreign currency exposures, manage these exposures and reduce the potential effects of currency fluctuations through the purchase ofour exposure to market risks that may result from changes in foreign currency exchange contracts.rates, we enter into foreign currency derivative hedging transactions to mitigate these risks. For further information, see Note 9, Derivative Instruments, of the notesNotes to condensed consolidated financial statements.Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.
Interest Rate SensitivityRisk on our Investments
We had cash, cash equivalents, and marketable securities totaling $3.2$6.7 billion and $6.1 billion as of OctoberJuly 31, 2017,2023, and $2.0 billion as of January 31, 2017.2023, respectively. Cash equivalents and marketable securities were invested primarily in U.S. treasury securities, U.S. agency obligations, U.S. treasury securities, corporate bonds, commercial paper, money market funds, and certificates of deposit.marketable equity investments. The cash, cash equivalents, and marketable securities are held primarily for working capital purposes. Our investment portfolios are managed to preserve capital and meet liquidity needs. We do not enter into investments for trading or speculative purposes.
Our cash equivalents and our portfolio of marketabledebt securities are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classifyFurther, since our marketable securities as "available for sale," no gains or losses are recognized due to changes in interest rates unless suchdebt securities are sold prior to maturity or declines inclassified as “available-for-sale,” if the fair value are determinedof the security declines below its amortized cost basis, then any portion of that decline attributable to credit losses, to the extent expected to be other-than-temporary.nonrecoverable before the sale of the impaired security, is recognized on the Condensed Consolidated Statements of Operations.
An immediate increase or decrease of 100-basis100 basis points in interest rates would have resulted in a $10 million and $9$46 million market value reduction or increase in our investment portfolio as of OctoberJuly 31, 2017 and January 31, 2017, respectively.2023. An immediate increase or decrease of 100-basis100 basis points in interest rates would have increased theresulted in a $29 million market value by $10 million and $8 millionreduction or increase in our investment portfolio as of October 31, 2017 and January 31, 2017, respectively.2023. This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur. Fluctuations in the value of
Interest Rate Risk on our investment securities caused by a change in interest rates (gains or losses on the carrying value) are recorded in other comprehensive income, and are realized only if we sell the underlying securities before maturity.Debt
Market Risk and Market Interest Risk
In June 2013, we issued $350 million of 0.75% convertible senior notes due July 15, 2018 ("2018 Notes") and $250 million of 1.50% convertible senior notes due July 15, 2020 ("2020 Notes"). In September 2017, we issued $1.15 billion of 0.25% convertible senior notes due October 1, 2022 ("2022 Notes" and together with the 2018 Notes and 2020 Notes, referred to as "the Notes"). Holders may convert the Notes prior to maturity upon the occurrence of certain circumstances. Upon conversion, holders of the Notes will receive cash, shares of Class A common stock or a combination of cash and shares of Class A common stock, at our election.
Concurrently with the issuance of the Notes, we entered into separate note hedge and warrant transactions. These separate transactions were completed to reduce the potential economic dilution from the conversion of the Notes.
OurThe Senior Notes have fixed annual interest rates, at 0.75%, 1.50%, and 0.25%, and therefore we do not have economic interest rate exposure on our Notes.these debt obligations. However, the fair values of the Senior Notes are exposed to interest rate risk. Generally, the fair market valuevalues of our fixed interest ratethe Senior Notes will increase as interest rates fall and decrease as interest rates rise. In addition, the fair values
Borrowings under our 2022 Credit Agreement will bear interest, at our option, at a base rate plus a margin of the Notes are affected by our stock price. The carrying values0.000% to 0.500% or a SOFR plus 10 basis points, plus a margin of our 2018 Notes, 2020 Notes, and 2022 Notes were $337 million, $219 million, and $918 million, respectively, as of October 31, 2017. These represent the liability component of the principal balance of our Notes as of October 31, 2017. The total estimated fair values of the 2018 Notes, 2020 Notes, and 2022 Notes at October 31, 2017 were $475 million, $367 million, and $1.2 billion, respectively. The fair values were0.750% to 1.500%, with such margin being determined based on our consolidated leverage ratio or debt rating. Because the quoted bid pricesinterest rates applicable to borrowings under the 2022 Credit Agreement are variable, we are exposed to market risk from changes in the underlying index rates, which affect our cost of the Notes in an over-the-counter market as of the last day of trading for the three months ended at October 31, 2017, which were $135.78, $146.97, and $101.40, respectively. borrowing.
For further information, see Note 10, Debt, of the notesNotes to condensed consolidated financial statements.Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officerofficers and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, ("the Exchange Act"), as of the end of the period covered by this report.
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In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgmentjudgement in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our principal executive officerofficers and principal financial officer concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officerofficers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
(b) Changes in Internal Control Over Financial Reporting
Under the supervision and with the participation of our management, including our principal executive officerofficers and principal financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officerofficers and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, weWe are regularly involved with claims, suits, purported class or representative actions, and may be involved in various legal proceedings arising from the normal course of business including matters related to alleged infringement of third-party patentsregulatory and government investigations and other proceedings, involving competition, intellectual property, rights,data security and privacy, bankruptcy, tax and related compliance, labor and employment, commercial employmentdisputes, and other claims. We are not presently a party to any litigation the outcome of which we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition. Defending suchmatters. Such claims, suits, actions, regulatory and government investigations, and other proceedings is costly and can impose a significant burden on management and employees, we may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained. The resolution of legal matters could prevent us from offering one or more of our applications, services, or features to others, could require us to change our technology or business practices, payor could result in monetary damages, fines, civil or enter into short-criminal penalties, reputational harm, or long-term royaltyother adverse consequences.
These claims, suits, actions, regulatory and government investigations, and other proceedings may include speculative, substantial, or licensing agreements, or could otherwiseindeterminate monetary amounts. We record a liability when we believe that it is probable that a liability has been incurred and the amount can be materialreasonably estimated. Significant judgement is required to determine both the likelihood of there being a liability and the estimated amount of a liability related to such matters. With respect to our outstanding matters, based on our current knowledge, we believe that the amount or range of reasonably possible liability will not, either individually or in aggregate, have a material adverse effect on our business, financial condition, operating results, or cash flows, or both, or adversely affect our operating results.flows. However, the outcome of such matters is inherently unpredictable and subject to significant uncertainties.

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ITEM 1A. RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider carefully the risks and uncertainties described below, together with all of the other information in this report, including the condensed consolidated financial statements and the related notes included elsewhere in this report, before making an investment decision. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that materially and adversely affect our business. If any of the following risks actually occurs, our business operations, financial condition, operating results, of operations, and prospects could be materially and adversely affected. The market price of our securities could decline due to the materialization of these or any other risks, and you could lose part or all of your investment.
Summary of Risk Factors Related
The below summary risks provide an overview of the material risks we are exposed to Our Business
Ifin the normal course of our security measures are breached or unauthorized access to customer data is otherwise obtained, our applicationsbusiness activities. The below summary risks do not contain all of the information that may be perceived as not being secure, customers may reduceimportant to you, and you should read these together with the usemore detailed discussion of or stop using our applications and we may incur significant liabilities.
Our applications involve the storage and transmission of our customers’ sensitive and proprietary information, including personal or identifying information regarding their employees, customers and suppliers,risks set forth following this section, as well as their financeelsewhere in this report under the heading “Management’s Discussion and payroll data. As a result, unauthorized accessAnalysis of Financial Condition and Results of Operations.” Additional risks beyond those summarized below, or usediscussed elsewhere in “Risk Factors” and “Management’s Discussion and Analysis of this data could resultFinancial Condition and Results of Operations,” may apply to our activities or operations as currently conducted or as we may conduct them in the lossfuture, or destruction of information, litigation, indemnity obligations and other liabilities. Whileto the markets in which we have security measurescurrently operate or may in place designedthe future operate. Consistent with the foregoing, we are exposed to protect the integrity of customer information and prevent data loss, misappropriation and other security breaches, if these measures are compromised as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise, and someone obtains unauthorized access to or use of our customers’ data, our reputation could be damaged, our business may suffer and we could incur significant liabilities. Cyber security challenges, including threats to our own IT infrastructure or those of our customers or third-party providers, are often targeted at companies such as ours, and may take a variety of forms ranging from individualrisks, including those associated with the following:
•any compromise of our information technology systems or security measures (including of our critical suppliers and groups of hackers to sophisticated organizations. Key cyber security risks range from viruses, worms and other malicious software programs to "mega breaches" targeted against cloud services and other hosted software, any of which can result in disclosure of confidential information and intellectual property, defective products, production downtimes, supply shortages and compromised data. Becauseservice partners), or the techniques used to obtain unauthorized access of customer or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any or all of these issues could negatively affect user data;
•our ability to attract new customers, cause existing customers to elect to terminate or not renew their subscriptions, result in reputational damage, cause us to pay remediation costs and/or issue service credits or refunds to customers for prepaid and unused subscription services, or result in lawsuits, regulatory fines or other action or liabilities, which could adversely affectproperly manage our operating results.
We depend ontechnical operations infrastructure, including our data centers and computing infrastructure operated by third parties, and any disruption in these operations could adversely affect our business.
We host our applications and serve our customers from data centers located in Ashburn, Virginia; Atlanta, Georgia; Portland, Oregon; Dublin, Ireland; Amsterdam, the Netherlands; and Toronto, Canada. While we control and have access to our servers and all of the components of our network that are located in our external data centers, we do not control the operation of these facilities. The owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if one of our data center operators is acquired or ceases business, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so.
In addition, we rely upon third parties, which we refer to as our hosted infrastructure partners, to operate certain aspects of our services, such as environments for development testing, training and sales demonstrations, as well as others. For example, Amazon Web Services ("AWS") provides a distributed computing infrastructure platform for business operations and we have announced our intention to make certain of our service offerings available through AWS. Given this, any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted.

Problems faced by our third-party data center operations or hosted infrastructure partners, with the telecommunications network providers with whom we or they contract, or with the systems by which our telecommunications providers allocate capacity among their customers, including us, could adversely affect the experience of our customers. Our third-party data center operators or hosted infrastructure partners could decide to close their facilities without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by our third-party data center operators, our hosted infrastructure partners or any of the other service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict. Additionally, if our data centers or hosted infrastructure partners are unable to keep up with our needs for capacity, this could have an adverse effect on our business. Any changes in third-party service levels at our data centers or at our hosted infrastructure partners or any errors, defects, disruptions, or other performance problems with our applications or the hosted infrastructure on which they run could adversely affect our reputation and may damage our customers’ stored files or result in lengthy interruptions in our services. Interruptions in our services might adversely affect our reputation and operating results, cause us to issue refunds or service credits to customers for prepaid and unused subscription services, subject us to potential liabilities, result in contract terminations, or adversely affect our renewal rates.
Furthermore, our financial management application is essential to Workday's and our customers’ financial projections, reporting and compliance programs, particularly customers who are public reporting companies. Any interruption in our service may affect the availability, accuracy or timelinessimpact of such projections, reporting and compliance programs and as a result could damage our reputation, cause our customers to terminate their use of our applications, require us to issue refunds for prepaid and unused subscription services, require us to indemnify our customers against certain losses and prevent us from gaining additional business from current or future customers, as well as impact our ability to accurately and timely meet our reporting and other compliance obligations.
If we fail to manage our technical operations infrastructure, or experience service outages or delays in the deployment of our applications, or the failure of our applications to perform properly;
•privacy concerns and evolving domestic or foreign laws and regulations;
•the impact of continuing global economic and geopolitical volatility, inflation, rising interest rates, instability in the global banking system, and the measures we may take in response to such events;
•any loss of key employees or the inability to attract, train, and retain highly skilled employees;
•our ability to compete effectively in the intensely competitive markets in which we participate;
•exposure to risks inherent to sales to customers outside the United States or with international operations;
•any dissatisfaction of our users with the deployment, training, and support services provided by us and our partners;
•our reliance on our network of partners to drive additional growth of our revenues;
•the fluctuation of our quarterly results;
•our ability to realize a return on our current development efforts or offer new features, enhancements, and modifications to our products and services, and our ability to realize a return on the investments we have made toward entering new markets and new lines of business;
•delays in the reflection of downturns or upturns in new sales in our operating results associated with long sales cycles;
•our ability to predict the rate of customer subscription renewals or adoptions;
•our ability to successfully integrate our applications with third-party technologies;
•a failure to manage our growth effectively;
•our ability to realize the expected business or financial benefits of company, employee, or technology acquisitions;
•our history of cumulative losses;
•any failure to protect our intellectual property rights domestically and internationally;
•lawsuits against us by third parties for alleged infringement of their proprietary rights or in connection with our use of open source software;
•risks related to government contracts and related procurement regulations;
•any adverse litigation results;
•the limited ability of non-affiliates to influence corporate matters due to the dual class structure of our common stock;
•our substantial indebtedness;
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•the limited ability of third parties to seek a merger, tender offer, or proxy contest due to Delaware law and provisions in our organizational documents; and
•the limited ability of a stockholder to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees due to the exclusive forum provision in our organizational documents.
Risks Related to Our Business and Industry
If we fail to properly manage our technical operations infrastructure, experience service outages, undergo delays in the deployment of our applications, or our applications fail to perform properly, we may be subject to liabilities and our reputation and operating results may be adversely affected.
We have experienced significant growth in the number of users, transactions, and data that our operations infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers and users, as well as our own needs, and to ensure that our services and solutions are accessible within an acceptable load time. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments. In addition, we need to properly manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters, updates, the evolution of our applications and to reduce infrastructure latency associated with dispersed geographic locations. However, the provision of new hosting infrastructure requires significant lead time. If we do not accurately predict our infrastructure requirements, our existing customerswe may experience service outages. IfFurthermore, if our operations infrastructure fails to scale, customerswe may experience delays in providing service as we seek to obtain additional capacity.capacity, and no assurance can be made that we will be able to secure such additional capacity on the same or similar terms as we currently have, which could result in a significant increase in our operating costs. Moreover, any failure to scale and secure additional capacity could result in delays in new feature rollouts, reduce the demand for our applications, result in customer and end user dissatisfaction, and adversely affect our business and operating results.
We have experienced, and may in the future experience, defects, system disruptions, outages, and other performance problems.problems, including the failure of our applications to perform properly. These problems may be caused by a variety of factors, including infrastructure and software or code changes, vendor issues, software and system defects, human or software errors,error, viruses, worms, security attacks (internal and external), fraud, spikes in customer usage, and denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Because of the large amount of data that we collect and process in our systems, it is possible that these issues could result in significant disruption, data loss or corruption, or cause the data to be incomplete or contain inaccuracies that our customers and other users regard as significant. Additionally, such issues have, and may in the future, result in vulnerabilities that could inadvertently result in unauthorized access to data. Furthermore, the availability or performance of our applications could also be adversely affected by our customers’ and other users’ inability to access the internet. For example, our customers and other users access our applications through their internet service providers. If a service provider fails to provide sufficient capacity to support our applications or otherwise experiences service outages, such failure could interrupt our customers’ and other users’ access to our applications, which could adversely affect their perception of our applications’ reliability and our revenues. In addition, certain countries have implemented or may implement legislative and technological actions that either do or can effectively regulate access to the internet, including the ability of internet service providers to limit access to specific websites or content. Other countries have attempted or are attempting to change or limit the legal protections available to businesses that depend on the internet for the delivery of their services.
Our customer agreements typically provide for monthly service level commitments on a monthly basis.commitments. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our applications as a result of the foregoing or otherwise, we may be contractually obligated to issue service credits or refunds to customers for prepaid and unused subscription services, our customers may make warranty or other claims against us, or we could face contract terminations.terminations, which would adversely affect our attrition rates. Any extended service outages could result in customer losses and adversely affect our reputation, revenuesbusiness, and operating results.
Privacy concernsFurthermore, our financial management application is essential to our and lawsour customers’ financial planning, reporting, and compliance programs. Any interruption in our service may affect the availability, accuracy, or other domestic or foreign regulations may reduce the effectivenesstimeliness of our applicationssuch programs and adversely affect our business.
Our customers can use our applications to collect, use and store personal or identifying information regarding their employees, customers and suppliers. National and local governments and agencies in the countries in which our customers operate have adopted, are considering adopting, or may adopt laws and regulations regarding the collection, use, storage, processing and disclosure of personal information obtained from consumers and individuals, whichas a result could impact our ability to offer our services in certain jurisdictions or our customers' ability to deploy our solutions globally. Privacy-related laws are particularly stringent in Europe. The costs of compliance with and other burdens imposed by privacy-related laws, regulations and standards may limit the use and adoption of our services, reduce overall demand for our services, lead to significant fines, penalties or liabilities for noncompliance, or slow the pace at which we close sales transactions, any of which could harm our business. Moreover, if Workday employees fail to adhere to adequate data protection practices around the usage of our customers' personal data, it may damage our reputation, and brand.

Additionally, we expect that existing laws, regulations and standards may be interpreted in new and differing manners in the future, and may be inconsistent among jurisdictions. Future laws, regulations, standards and other obligations, and changes in the interpretation of existing laws, regulations, standards and other obligations could result in increased regulation, increased costs of compliance and penalties for non-compliance, and limitations on data collection, use, disclosure and transfer for Workday and our customers. The European Union ("EU") and United States recently agreed to a framework for data transferred from the EU to the United States, called the Privacy Shield, but this new framework has been challenged by private parties and may face additional challenges by national regulators or additional private parties. Additionally, in 2016 the EU adopted a new regulation governing data privacy called the General Data Protection Regulation ("GDPR"), which becomes effective in May 2018. The GDPR establishes new requirements applicable to the handling of personal data and imposes penalties for non-compliance of up to 4% of worldwide revenue.
The costs of compliance with, and other burdens imposed by, privacy laws and regulations that are applicable to the businesses ofcause our customers may adversely affect our customers’ ability and willingness to process, handle, store,terminate their use and transmit demographic and personal information of their employees, customers and suppliers, which could limit the use, effectiveness and adoption of our applications and reduce overall demand. In addition, the other bases on which we and our customers rely for the transfer of data, such as model contracts, continue to be subjected to regulatory and judicial scrutiny. If we or our customers are unable to transfer data between and among countries and regions in which we operate, it could decrease demand for our applications, require us to restrictissue refunds for prepaid and unused subscription services, require us to compensate our customers for certain losses, and prevent us from gaining additional business from current or future customers. In addition, because we use Workday’s financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers and negatively impact demand for our applications.
Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all, to protect against claims and other legal actions. In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.
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We depend on data centers and computing infrastructure operated by third parties, and any disruption in these operations could adversely affect our business operations, and impairoperating results.
We host our abilityapplications and serve our customers and users from data centers operated by third parties located in the United States, Canada, and Europe. While we control and have access to maintainour servers and grow our customer base and increase our revenue. Evenall of the perception of privacy concerns, whether or not valid, may inhibit the adoption, effectiveness or usecomponents of our applications.
In additionnetwork that are located in these data centers, we do not control certain aspects of these facilities, including their operation and security. The owners of these data center facilities have limited or no obligation to government activity, privacy advocacy and other industry groups have establishedrenew their agreements with us on commercially reasonable terms, or may establish various new, additional or different self-regulatory standards that may place additional burdens on us. Our customers may expect us to meet voluntary certifications or adhere to other standards established by third parties.at all. If we are unable to maintainrenew these certificationsagreements on commercially reasonable terms, or meetif any of these standards, itdata center operators are acquired, cease to do business, or stop providing contracted services, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and experience possible service interruptions in connection with doing so.
In addition, we rely upon third-party hosted infrastructure partners globally, including AWS, Google LLC, and Microsoft Corporation, to serve customers and operate certain aspects of our services. Any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could reducebe adversely impacted. For example, in July 2022, we experienced a disruption at certain of our hosted data centers in two of our U.S. locations due to high temperatures and power outages that resulted in a brief temporary outage of our services for a subset of our customers. These facilities may also be subject to capacity constraints, financial difficulties, break-ins, sabotage, intentional acts of vandalism and similar misconduct, natural catastrophic events, as well as local administrative actions, changes to legal or permitting requirements, and litigation to stop, limit or delay operation.
Additionally, if these data center operators or hosted infrastructure partners are unable to keep up with our needs for capacity, this could have an adverse effect on our business. Any changes in third-party service levels at these data centers or at our hosted infrastructure partners, or any errors, defects, disruptions, or other performance problems with our applications or the infrastructure on which they run, including those related to cybersecurity threats or attacks, could adversely affect our reputation and may damage our customers’ or other users’ stored files or result in lengthy interruptions in our services. Interruptions in our services might adversely affect our reputation and operating results, cause us to issue refunds or service credits to customers for prepaid and unused subscription services, subject us to potential liabilities, result in contract terminations, or adversely affect our renewal rates.
The extent to which the continuing global economic and geopolitical volatility, the impact of inflation on our costs and on customer spending, and measures taken in response to such events will continue to impact our business, financial condition, and operating results will depend on future developments, which are highly uncertain and difficult to predict.
We operate on a global scale, and as a result, our business and revenues are impacted by global economic and geopolitical conditions. Global economic developments, downturns or recessions, instability in the global banking system, and global health crises may negatively affect us or our ability to accurately forecast and plan our future business activity. For example, inflation rates have recently increased, and inflationary pressure may result in decreased demand for our applicationsproducts and services, increases in our operating costs (including our labor costs), reduced liquidity, and limits on our ability to access credit or otherwise raise capital. In response to the concerns over inflation risk, the U.S. Federal Reserve raised interest rates multiple times in 2022 and 2023 and may continue to do so in the future. The COVID-19 pandemic negatively impacted the global economy, disrupted global supply chains, and created significant volatility and disruption of financial markets. In addition, the Russian invasion of Ukraine in early 2022 has led to further economic disruption. While we do not operate in Russia and while our extended workforce in Ukraine is not a material part of our workforce, the conflict has increased inflationary cost pressures and supply chain constraints which have negatively impacted the global economy and may negatively impact the supply chain required to sustain our data centers and computing infrastructure operations.
It is especially difficult to predict the impact of such events on the global economic markets, which have been and will continue to be highly dependent upon the actions of governments, businesses, and other enterprises in response to such events, and the effectiveness of those actions. As a result of these and other recent macroeconomic events, we have experienced volatility in the trading prices for our Class A common stock, and such volatility may continue in the long term. Any sustained adverse impacts from these and other recent macroeconomic events could materially and adversely affect our business.
We have experienced rapid growth. If we fail to manage our growth effectively,business, financial condition, operating results, and earnings guidance that we may issue from time to time, which could have a material effect on the value of our Class A common stock.
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Our future revenues rely on continued demand by existing customers and the acquisition of new customers who may be unablesubject to execute our business plan, maintain high levels of serviceeconomic hardship, labor shortages, and operational controlsglobal supply chain disruptions due to recent macroeconomic events and may delay or adequately address competitive challenges.
Wereduce their enterprise software spending to preserve capital and liquidity. In connection with recent macroeconomic events, we have experienced and are continuingmay continue to experience delays in purchasing decisions from existing and prospective customers and a periodreduction in customer demand. Our business, financial condition, and operating results may be negatively impacted in future periods due to the prolonged impacts of rapid growth inrecent macroeconomic events, including economic downturns or recessions. While our customers, headcount and operations. In particular, we grew from approximately 1,550 employees at the time of our initial public offering ("IPO") in October 2012 to approximately 7,900 employees as of October 31, 2017, and have also significantly increased the size of our customer base. We anticipate that we will continue to expand our operations and headcountsubscription services revenues are relatively predictable in the near term as a result of our subscription-based business model, the effect of recent macroeconomic events may not be fully reflected in our operating results and overall financial performance until future periods.
It is not possible for us to expandestimate the duration or magnitude of the adverse results of recent macroeconomic events and their effect on our customer base. This growth has placed,business, financial condition, or operating results at this time, as the impact will depend on future developments, which are highly uncertain and difficult to predict. To the extent recent macroeconomic events adversely affect our business, financial condition, and operating results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
We may lose key employees or be unable to attract, train, and retain highly skilled employees.
Our success and future growth will place, a significant strain on our management, general and administrative resources and operational infrastructure. Our success will depend in part on our ability to manage this growth effectively and to scale our operations. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. As we continue to grow, we also need to ensure that our policies and procedures evolve to reflect our current operations and are appropriately communicated to and observed by employees, and that we appropriately manage our corporate information assets, including confidential and proprietary information. Failure to effectively manage growth could result in difficulty or delays in deploying customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties, and any of these difficulties could adversely impact our business performance and results of operations.
We depend on our senior management team and the loss of one or more key employees could adversely affect our business.
Our success depends largely upon the continued services of our executive officers. We also rely on our leadership team in the areasofficers, other members of product development, marketing, sales, services,senior management, and general and administrative functions and on mission-critical individual contributors in product development. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business.other key employees. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period, and they could terminate their employment with us at any time. The lossIn December 2022, we announced the resignation of one or moreChano Fernandez from his role as Co-CEO and the appointment of Carl Eschenbach as our Co-CEO, alongside Aneel Bhusri. In June 2023, Barbara Larson stepped down from her role of CFO and Zane Rowe was appointed as our CFO. We expect there will be additional changes from time to time in our executive officersmanagement team and to other key employee roles resulting from organizational changes or key employeesthe hiring or departure of executives or other employees. These changes have the potential to disrupt our business, impact our ability to preserve our culture, negatively affect our ability to attract and any failure to develop an appropriate succession plan for these persons couldretain personnel, or otherwise have a serious adverse effect on our business.
An inability to attract and retain highly skilled employees could adversely affect our business and our future growth prospects.operating results.
To execute our growth plan, we must attract, train, and retain highly qualified personnel,personnel. Our ability to compete and succeed in a highly competitive environment is directly correlated to our managers must be successfulability to recruit and retain highly skilled employees, especially in hiring employees who are a good cultural fitthe areas of product development, cybersecurity, senior sales executives, and have the competencies to succeed at Workday. Competition for these personnel is intense, especially for engineers with high levels ofsignificant experience in designing and developing software and Internet-relatedinternet-related services, including in the areas of artificial intelligence (“AI”) and machine learning (“ML”). The market for seniorskilled personnel in the software industry is very competitive, and as we are headquartered in the San Francisco Bay Area, we face intense competition among large and small organizations in the Silicon Valley market. The increased availability of hybrid or remote working arrangements has expanded the pool of companies that can compete for our employees and employment candidates. In addition, the expansion of our sales executives. Frominfrastructure, both domestically and internationally, is necessary to grow our customer base and business. Identifying and recruiting qualified personnel and training them in our sales methodology, our sales systems, and the use of our software requires significant time, expense, and attention. Our business may be adversely affected if our efforts to time, weattract and train new members of our direct sales force do not generate a corresponding increase in revenues. We have experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications, and we may not be able to fill positions in desired geographic areas or at all.

Many of the companies with which we compete for experienced personnel have greater resources than we have and some of these companies may offer greatermore lucrative compensation packages. Particularly in the San Francisco Bay Area, jobpackages than we offer. Our business may be adversely affected if we are unable to retain our highly skilled employees, especially our senior sales executives. Job candidates and existing employees carefully consider the value of the equity awards they receive in connection with their employment. If the perceived or actual value of our equity awards declines, or if the mix of equity and cash compensation that we offer is unattractive,not sufficiently attractive, it may adversely affect our ability to recruit and retain highly skilled employees. JobAdditionally, job candidates may also be threatened with legal action under agreements with their existing employers if we attempt to hire them, which could have a chillingan adverse effect on hiring and result in a diversion of our time and resources. Additionally, laws and regulations, such as restrictive immigration laws, may limit our ability to recruit internationally. We must also continue to retain and motivate existing employees through our compensation practices, company culture, and career development opportunities. Further, our current and future office environments or our current hybrid work policies may not meet the expectations of our employees or prospective employees, and may amplify challenges in recruiting. If we fail to attract new personnel or to retain our current personnel, our business and future growth prospects could be adversely affected.
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The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.
The markets for enterprise cloud applications are highly competitive, with relatively low barriers to entry for some applications or services. Some of our competitors are larger and have greater name recognition, significantly longer operating histories, access to larger customer bases, larger marketing budgets, and significantly greater resources to devote to the development, promotion, and sale of their products and services than we do. This may allow our competitors to respond more effectively than us to new or emerging technologies and changes in market conditions.
Our primary competitors are Oracle Corporation and SAP SE, well-established providers of financial management and HCM applications, which have long-standing relationships with many customers. Some customers may be hesitant to switch vendors or to adopt cloud applications such as ours and may prefer to maintain their existing relationships with competitors. We also face competition from other enterprise software vendors, from regional competitors that only operate in certain geographic markets, and from vendors of specific applications that address only one or a portion of our applications, some of which offer cloud-based solutions. These vendors include, without limitation: UKG Inc., Automatic Data Processing, Inc., Infor, Inc., Ceridian HCM Holding Inc., Microsoft Corporation, Anaplan, Inc., and Coupa Software Inc. In order to take advantage of customer demand for cloud applications, legacy vendors are expanding their cloud applications through acquisitions, strategic alliances, and organic development. In addition, other cloud companies that provide services in different target markets may develop applications or acquire companies that operate in our target markets, and some potential customers may elect to develop their own internal applications. As the market matures and as existing and new market participants introduce new types of technologies and different approaches that enable organizations to address their HCM and financial needs, we expect this competition to intensify in the future.
Furthermore, our current or potential competitors may be acquired by, or merge with, third parties with greater available resources and the ability to initiate or withstand substantial price competition. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their offerings or resources. Many of our competitors also have major distribution agreements with consultants, system integrators, and resellers. With the introduction of new technologies, such as generative AI, we expect competition to intensify in the future. If our competitors’ products, services, or technologies become more accepted than our products, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, then our revenues could be adversely affected. In addition, our competitors may offer their products and services at a lower price, or may offer price concessions, delayed payment terms, financing terms, or other terms and conditions that are more enticing to potential customers in light of the challenging business environment created by economic downturn, or other recent macroeconomic conditions. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses, or a failure to maintain or improve our competitive market position, any of which could adversely affect our business and operating results.
Sales to customers outside the United States or with international operations expose us to risks inherent in global operations.
A key element of our growth strategy is to further develop our worldwide customer base. Operating globally requires significant resources and management attention and subjects us to regulatory, economic, and political risks that are different from those in the United States. Our efforts to further expand internationally may not be successful in creating additional demand for our applications outside of the United States or in effectively selling subscriptions to our applications in all of the markets we enter. Foreign regulations, including privacy, data localization, and import/export regulations, are subject to change and uncertainty, including as a result of geopolitical developments, which may be amplified by macroeconomic conditions, including recession, rising interest rates, or events such as the Russia-Ukraine conflict and the remaining effects of the COVID-19 pandemic. We face other risks in doing business on a global scale that could adversely affect our business, including:
•the need to develop, localize, and adapt our applications and customer support for specific countries, including translation into foreign languages, localization of contracts for different legal jurisdictions, and associated expenses;
•the need to successfully develop and execute on a go-to-market strategy that aligns application management efforts and the development of supporting infrastructure;
•stricter data privacy laws including requirements that customer data be stored and processed in a designated territory and obligations on us as a data processor;
•difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation for local markets;
•difficulties in leveraging executive presence and company culture globally;
•different pricing environments, longer sales cycles, and longer trade receivables payment cycles, and collections issues;
•new and different sources of competition;
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•potentially weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights;
•laws, customs, and business practices favoring local competitors;
•restrictive governmental actions focused on cross-border trade, such as import and export restrictions, duties, quotas, tariffs, trade disputes, and barriers or sanctions, including due to the Russia-Ukraine conflict, that may prevent us from offering certain portions of our products or services to a particular market, may increase our operating costs or may subject us to monetary fines or penalties in case of unintentional noncompliance due to factors beyond our control;
•compliance challenges related to the complexity of multiple, conflicting, and changing governmental laws and regulations, including employment, tax, privacy, intellectual property, and data protection laws and regulations;
•increased compliance costs related to government regulatory reviews or audits, including those related to international cybersecurity requirements;
•increased financial accounting and reporting burdens and complexities;
•restrictions on the transfer of funds;
•ensuring compliance with anti-corruption laws, including the Foreign Corrupt Practices Act and United Kingdom (“UK”) Bribery Act;
•the effects of currency fluctuations on our revenues and expenses and customer demand for our services;
•the cost and potential outcomes of any international claims or litigation;
•adverse tax consequences and tax rulings; and
•unstable economic and political conditions.
Any of the above factors may negatively impact our ability to sell our applications and offer services globally, reduce our competitive position in foreign markets, increase our costs of global operations, and reduce demand for our applications and services from global customers. Additionally, the majority of our international costs are denominated in local currencies and we anticipate that over time an increasing portion of our sales contracts may be outside the U.S. and will therefore be denominated in local currencies. Additionally, global events, as well as geopolitical developments such as the Russia-Ukraine conflict, fluctuating commodity prices, trade tariff developments, economic downturn, and inflation have caused, and may in the future cause, global economic uncertainty, and uncertainty about the interest rate environment, which could amplify the volatility of currency fluctuations. Therefore, fluctuations in the value of foreign currencies may impact our operating results when translated into U.S. dollars. Such fluctuations may also impact our ability to predict our future results accurately. Although we have a hedging program to help mitigate some of this volatility and related risks, there can be no assurance that the hedging program will be effective in offsetting the adverse financial impacts that may result from unfavorable movements in foreign currency exchange rates.
Our business could be adversely affected if our users are not satisfied with the deployment, training, and support services provided by us and our partners.
Our business depends on our ability to satisfy our customers and end users, both with respect to our application offerings and the professional services that are performed to help them use features and functions that address their business needs. High customer satisfaction requires that our customers undergo a successful implementation and be properly trained on our applications to effectively implement and increase their level of adoption of such applications. Implementation of our applications may be technically complicated because they are designed to enable complex and varied business processes across large organizations, integrate data from a broad and complex range of workflows and systems, and may involve deployment in a variety of environments. Incorrect or improper implementation or use of our applications could result in customer and user dissatisfaction and harm our business and operating results.
In order for our customers to successfully implement our applications, they need access to highly skilled and trained service professionals. Professional services may be performed by our own staff, by a third party partner, or by a combination of the two. Our strategy is to work with third parties to increase the breadth of capability and depth of capacity for delivery of these services to our customers, and third parties provide a majority of deployment services for our customers. If customers are not satisfied with the quality and timing of work performed by us or a third party or with the type of professional services or applications delivered, or if we or a third party have not delivered on commitments made to our customers, then we could incur additional costs to address the situation, the revenue recognition of the contract could be impacted, and the dissatisfaction with our services could damage our ability to expand the applications subscribed to by our customers. Negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers both domestic and abroad.
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Customers and other users also depend on our support organization to provision the environments used by our customers and to resolve technical issues relating to our applications. We may be unable to respond quickly enough to accommodate short-term increases in demand for support services. We may also be unable to modify the format of our support services to compete with changes in support services provided by our competitors. Increased demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. Failure to maintain high-quality technical support and training, or a market perception that we do not maintain high-quality support or training, could adversely affect our reputation, our ability to offer and sell our applications, our renewal rates, and our business and operating results.
Our future success depends on the rate of customer subscription renewals or adoptions, and our revenues or operating results could be adversely impacted if we do not achieve renewals and adoptions at expected rates or on anticipated terms.
As the markets for our applications mature, or as new competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same pace or based on the same pricing model as we have used historically. From time to time, we also make changes to our pricing structure, which could adversely impact demand for our offerings. Moreover, our customers have and may continue to request price concessions and delayed payment terms. Economic uncertainty and the risk or occurrence of global or domestic recessions can prompt existing and prospective customers to demand price concessions and delayed payment terms with increasing frequency and significance, and our competitors may become more likely to provide such concessions, which could adversely affect our revenues, profitability, financial position, and cash flows in any given period. Attrition of senior management or other purchasing decision-makers at our customers has impacted and may continue to impact our direct sales efforts. Furthermore, because our future revenue growth relies, in large part, on new customer acquisition, any inability of our sales force to establish relationships with potential customers during the current environment or prospects deferring buying decisions due to the economic uncertainty, is likely to have a negative impact on our future revenue growth and other financial measures.
In addition, our customers have no obligation to renew their subscriptions for our applications after the expiration of either the initial or renewed subscription period. If we or our partners are unable to successfully educate our customers on the benefits and features of our applications, or if our customers are aware of those benefits and features but do not use them, our customers may renew for fewer elements of our applications, renew on different pricing terms, or fail to renew, and market perceptions of our company and our applications may be impaired, and our reputation and brand may suffer. Our customers’ renewal rates may also decline or fluctuate as a result of a number of other factors, the risk of which may be heightened by current macroeconomic conditions and may further increase if these conditions persist, including their level of satisfaction with our applications and pricing, their ability to continue their operations and spending levels, reductions in their headcount, and the evolution of their business. If our customers do not renew their subscriptions for our applications on similar pricing terms, our revenues may decline, and we may not be able to meet our revenue projections, which could negatively impact our business and the market price of our Class A common stock. In addition, over time the average term of our contracts could change based on renewal rates or for other reasons.
Our future success also depends, in part, on our ability to sell additional products to our current customers, and the success rate of such endeavors is difficult to predict, especially with regard to any new lines of business that we may introduce from time to time. This may require increasingly costly marketing and sales efforts that are targeted at senior management, and if these efforts are not successful, our business and operating results may suffer. Additionally, acquisitions of our customers by other companies have led, and could continue to lead, to cancellation of our contracts with those customers, thereby reducing the number of our existing and potential customers.
We rely on our network of partners to drive additional growth of our revenues, and if these partners fail to perform, our ability to sell and distribute our products may be impacted, and our operating results and growth rate may be harmed.
Our strategy for additional growth depends, in part, on sales generated through our network of partners and professional services provided by our partners. If the operations of these partners are disrupted, including as a direct or indirect result of recent macroeconomic conditions, our own operations may suffer, which could adversely impact our operating results. Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources, and we cannot ensure that these partnerships will result in increased customer usage of our applications or increased revenue. We may be at a disadvantage if our competitors are effective in providing incentives to our current or potential partners to favor their products or services or to prevent or reduce subscriptions to our services, or in negotiating better rates or terms with such partners, particularly in international markets where our potential partners may have existing relationships with our competitors. In addition, acquisitions of our partners by our competitors could end our strategic relationship with such acquired partner and result in a decrease in the number of our current and potential customers.
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While we provide our partners with training and programs, these programs may not be effective or utilized consistently by partners. In addition, new partners may require extensive training and/or may require significant time and resources to achieve productivity. Changes to our direct go-to-market models may cause friction with our partners and may increase the risk in our partner ecosystem. The actions of our partners may subject us to lawsuits, potential liability, and reputational harm if, for example, any of our partners misrepresent the functionality of our products to customers, fail to perform services to our customers’ expectations, or violate laws or our corporate policies. In addition, our partners may utilize our platform to develop products and services that could potentially compete with products and services that we offer currently or in the future. Concerns over competitive matters or intellectual property ownership could constrain these partnerships. If we fail to effectively manage and grow our network of partners, maintain good relationships with our partners, or properly monitor the quality and efficacy of their service delivery, or if our partners do not effectively market and sell our subscription services, use greater efforts to market and sell their own products or services or those of our competitors, or fail to meet the needs of our customers, our ability to sell our products and efficiently provide our services may be impacted, and our operating results and growth rate may be harmed.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly operating results, including our revenues, subscription revenue backlog, operating margin, profitability, and cash flow, may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control, and as a result, may not fully reflect the underlying performance of our business. As discussed above, the extent to which global economic uncertainty, inflation, the remaining effects of the COVID-19 pandemic, and other recent macroeconomic events could continue to impact our operating results will depend on future developments, which are highly uncertain and difficult to predict. Fluctuations in our quarterly results and related impacts to any earnings guidance we may issue from time to time, including any modification or withdrawal thereof, may negatively impact the value of our securities. Additionally, as we typically sign a significantly higher percentage of agreements with new customers as well as renewal agreements with existing customers in the fourth quarter of each year, we may experience a greater impact on our business and quarterly results due to the prolonged uncertainty.
Additional factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:
•our ability to attract new customers, customer renewal rates, the financial condition and creditworthiness of our customers, and the timing and rate at which we sign agreements with customers;
•the addition or loss of large customers, including through acquisitions or consolidations;
•regulatory compliance costs, including research and development costs incurred to add functionality to help our customers comply with evolving privacy and data security laws;
•the timing of recognition of revenues and operating expenses, including expenses related to acquisitions and potential future charges for impairment of goodwill;
•our use of estimates, judgments and assumptions under current accounting standards;
•the amount and timing of operating expenses related to organizational changes, employee matters, and the maintenance and expansion of our business, operations, and infrastructure;
•network outages or security breaches;
•general economic, market, and geopolitical conditions, including the impact of recent economic downturn, instability in the global banking system, the Russia-Ukraine conflict, inflation, and rising interest rates;
•increases or decreases in the number of elements of our services or pricing changes upon any renewals of customer agreements;
•the changes in payment terms and timing of customer payments and payment defaults by customers, including those impacted by the recent macroeconomic conditions;
•changes in our pricing policies or those of our competitors and the mix of applications sold during a period;
•seasonal variations in sales of our applications, which have historically been highest in our fiscal fourth quarter;
•the timing and success of new application and service introductions by us or our competitors;
•changes in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic partners, and the impact of strategic partnerships, acquisitions, or equity investments;
•expenses related to our real estate portfolio, including our leases and data center expansion; and
•changes in laws and regulations that impact our business or reported financial results, including changes in accounting principles generally accepted in the United States.
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If we are not able to realize a return on our current development efforts or offer new features, enhancements, and modifications to our services that are desired by current or potential customers, our business and operating results could be adversely affected.
Developing software applications and related enhancements, features, and modifications is expensive, and the investment in product development often involves a long return on investment cycle. Accelerated application introductions and short application life cycles require high levels of expenditures that could adversely affect our operating results if not offset by revenue increases, and we believe that we must continue to dedicate a significant amount of resources to our development efforts to maintain our competitive position. However, we may not receive significant revenues from these investments for several years, if at all. Furthermore, macroeconomic conditions, including the economic downturn, could have a continuing impact on our plans to offer certain new features, enhancements, and modifications of our applications in a timely manner. If we are unable to provide new features, enhancements to user experience, and modifications in a timely and cost-effective manner that achieve market acceptance, align with customer expectations, and that keep pace with rapid technological developments and changing regulatory landscapes, our business and operating results could be adversely affected. For example, AI and ML are propelling advancements in technology, but if they are not widely adopted and accepted or fail to operate as expected, our business and reputation may be harmed. Some of our larger customers may also require features and functions unique to their business processes that we do not currently offer. In order to help ensure we meet these requirements, we may devote a significant amount of technology support and professional service resources to such customers. The success of enhancements, new features, and applications depends on several factors, including their timely completion, introduction, and market acceptance as well as access to development resources and the technologies required to build and improve our applications, such as the datasets required to train our ML models. If we are not successful in developing these new features, enhancements, modifications, and applications, and bringing them to market timely, it may negatively impact our customer renewal rates, limit the market for our solutions, or impair our ability to attract new customers.
We have experienced rapid growth, and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and operational controls, or adequately address competitive challenges.
We have experienced rapid growth in our customers, headcount, and operations and anticipate that we will continue to expand our customer base, headcount, and operations. This growth has placed, and future growth will place, a significant strain on our management, administrative, operational, and financial infrastructure. Our success will depend in part on our ability to manage this growth effectively, utilize our resources efficiently, and to scale our operations appropriately. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial, and management controls as well as our reporting systems and procedures. Failure to effectively manage growth or efficiently utilize our resources could result in difficulty or delays in deploying products and services to customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features, or other operational difficulties, and any of these difficulties could adversely impact our business performance and operating results.
If we fail to develop widespread brand awareness cost-effectively, our business may suffer.
We believe that developing and maintaining widespread positive awareness of our brand is critical to achieving widespread acceptance of our applications, retaining and attracting customers, and hiring and retaining employees. However, brand promotion activities may not generate the customer awareness or increased revenues we anticipate, and even if they do, any increase in revenues may not offset the significant expenses we incur in building our brand. Concerns about global economic and geopolitical volatility, including a possible or emergent recession, particularly if extended for prolonged periods, could impede our brand-building activities and could have negative effects on our ability to develop and maintain widespread positive awareness of our brand, which could harm our business, financial condition, and operating results.
If we fail to successfully promote and maintain our brand, or we fail to expand awareness of our newer solutions or products, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoption of our applications. Additionally, the loss of one or more of our key customers, or a failure to renew our subscription agreements with one or more of our key customers, could significantly impair our ability to market our applications which, in turn, could have a negative impact on our revenues, reputation, and our ability to obtain new customers. In addition, if our brand is negatively impacted, it may be more difficult to hire and retain employees.
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If we cannot maintain or adapt our corporate culture, we could lose the innovation, teamwork, and passion that we believe contribute to our success, and our business may be harmed.
We believe that a critical component of our success has been our corporate culture as reflected inand our core values: employees, customer service, innovation, integrity, fun, and profitability. We have invested substantial timealso believe that our commitment to our corporate culture, as well as our commitment to building products and resources in buildingservices that help provide our team.customers with information regarding their own workforce and corporate culture, is part of the reason why our customers choose us. As we continue to grow, both organically and through acquisitions of employee teams, and develop the infrastructure associated with being a more mature public company, we will need to maintain our corporate culture among a larger number of employees who are dispersed inthroughout various geographic regions. Additionally, we and our stakeholders increasingly expect to have a corporate culture that embraces diversity and inclusion, and any inability to attract and retain diverse and qualified personnel may harm our corporate culture and our business. Moreover, our hybrid work policies require significant action to preserve our culture. As we continue to grow, we must be able to effectively integrate, develop, and motivate a large number of new employees, while maintaining the effectiveness of our business execution and the beneficial aspects of our corporate culture and values. Any failure to preservemaintain or adapt our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursueachieve our corporate objectives.objectives, including our ability to quickly develop and deliver new and innovative products.
The markets in which
If we participate are intensely competitive,unable to successfully integrate our applications with a variety of third-party technologies, our business and if we do not compete effectively, our operating results could be adversely affected.
The markets for financial management and HCM applications are highly competitive, with relatively low barriers to entry for some applications or services. Our primary competitors are SAP SE ("SAP") and Oracle Corporation ("Oracle"), well-established providers of financial management and HCM applications, which have long-standingWe depend on relationships with many customers. Some customersthird-party technology and content providers and other key suppliers, and are also dependent on third parties for the license of certain software and development tools that are incorporated into or used with our applications. If the operations of these third parties are disrupted, including as a direct or indirect result of recent macroeconomic conditions, our own operations may be hesitantsuffer, which could adversely impact our operating results. In addition, we rely upon licensed third-party software to switch vendorshelp improve our internal systems, processes, and controls. Acquisitions of our third-party technology providers and other suppliers could end our strategic relationship with such acquired provider(s) or to adopt cloud applications such as ours, and prefer to maintain their existingsupplier(s), or may result in the support services they provide being negatively affected. If we are unsuccessful in establishing or maintaining our relationships with competitors. SAP and Oracle are larger and have greater name recognition, much longer operating histories, larger marketing budgets and significantly greater resources than we do. These vendors, as well as other competitors, could offer financial management and HCM applications on a standalone basis at a low pricethese third parties, or bundled as part of a larger sale. In order to take advantage of customer demand for cloud applications, legacy vendors are expanding their cloud applications through acquisitions, strategic alliances and organic development. Legacy vendors may also seek to partner with other leading cloud providers, such asif the alliance between Oracle and Salesforce.com. We also face competition from custom-built software vendors and from vendors of specific applications, some of which offer cloud-based solutions. These vendors include, without limitation: The Ultimate Software Group, Inc., Automatic Data Processing and Infor Global Solutions. We also face competition from cloud-based vendors including providers of applications for HCM and payroll services such as Ceridian, Inc. and providers of financial management applications such as NetSuite, Inc., which was recently acquired by Oracle. We may also face competition from a variety of vendors of cloud-based and on-premise software applications that address only one or a portion of our applications. In addition, other companies that provide cloud applications in different target markets may develop applications or acquire companies that operate in our target markets, and some potential customers may elect to develop their own internal applications. With the introduction of new technologies and market entrants, we expect this competition to intensify in the future.
Many of our competitors are able to devote greater resources to the development, promotion and salequality of their products and services. Furthermore,or performance is inadequate, our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiatecompete in the marketplace or withstand substantial price competition. In addition, many of our competitors have established marketing relationships, access to larger customer bases and major distribution agreements with consultants, system integrators and resellers. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their offerings or resources. If our competitors’ products, services or technologies become more accepted than our applications, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, thengrow our revenues could be adversely affected. In addition, some of our competitors may offer their productsimpaired and services at a lower price. If we are unable to achieve our target pricing levels, our operating results would be negatively affected. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of which could adversely affect our business.may suffer.

IfTo the market for enterprise cloud computing grows more slowly than in recent years, our business could be adversely affected.
Our success will depend to a substantial extent on the continued growth of cloud computing in general, and of financial management and HCM services in particular. Many enterprises have invested substantial personnel and financial resources to integrate traditional enterprise software into their businesses, and therefore may be reluctant or unwilling to migrate to cloud computing. It is difficult to predict customer adoption rates and demand forthat our applications depend upon the future growth ratesuccessful integration and sizeoperation of the cloud computing marketthird-party software in conjunction with our software, any undetected errors or the entry of competitive applications. The continued expansion of the cloud computing market depends on a number of factors, including the cost, performance, and perceived value associated with cloud computing,defects in this third-party software, as well as cybersecurity threats or attacks related to such software could prevent the ability of cloud computing companies to address security and privacy concerns. Further,deployment or impair the cloud computing market is less developed in many jurisdictions outside of the United States. If we or other cloud computing providers experience security incidents, loss of customer data, disruptions in delivery or other problems, the market for cloud computing applications as a whole, including our applications, may be negatively affected. If there is a reduction in demand for cloud computing caused by a lack of customer acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing technologies and applications, decreases in corporate spending or otherwise, it could result in decreased revenues or growth rates and our business could be adversely affected.
If we are not able to provide successful enhancements, new features and modifications, our business could be adversely affected.
If we are unable to provide enhancements and new features for our existing applications or new applications that achieve market acceptance or that keep pace with rapid technological developments, our business could be adversely affected. For example, we are focused on enhancing the features and functionality of our applications, to enhance their utility to larger customers with complex, dynamic and global operations. The successdelay new application introductions, result in a failure of enhancements, new features and applications depends on several factors, including the timely completion, introduction and market acceptance of the enhancements or new features or applications. Failure in this regard may significantly impair our revenue growth. In addition, because our applications, result in increased costs, including warranty and other related claims from customers, and injure our reputation. Furthermore, software may not continue to be available to us on commercially reasonable terms. Although we believe that there are designedcommercially reasonable alternatives to operate on a varietythe third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace. Integration of systems,new software into our applications may require significant work and require substantial investment of our time and resources.
As Workday Mobile becomes increasingly important to Workday’s customer experience, we willalso need to continuously modify and enhance our applications to keep pace with changes in Internet-relatedthird-party internet-related hardware, iOS, Android, and other mobile-related technologies, and other third-party software, communication, browser, and database technologies. We may not be successful in either developing these modifications and enhancements or in bringing them to market in a timely fashion.technologies, as well as with customer expectations. We must also appropriately balance the application capability demands of our current customers with the capabilities required to address the broader market. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our product development expenses. Any failure of our applications to operate effectively with future network platforms and other third-party technologies could reduce the demand for our applications, result in customer and end user dissatisfaction, and adversely affect our business.
Our applications must integrate with a variety of third-party technologies,business and if we are unable to ensure that our solutions interoperate with such technologies, demand for our applications and our operating results could be adversely affected.
Our applications must integrate with a variety of technologies and we must continuously modify and enhance our applications to adapt to changesresults. We may experience difficulties in operating systems, hardware, software, communication, browser and database technologies. Any failure of our solutions to operate effectively with future technologies or our failure to respond to changes in a timely and effective manner could reduce the demand for our applications, result in customer dissatisfaction and harm our operating results and business.
If our applications fail to perform properly, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims.
Our applications are inherently complex and may contain material defects or errors. Any defects in functionality or that cause interruptions in the availability of our applications could result in:
loss or delayed market acceptance and sales;
breach of warranty claims;
issuance of refunds or service credits to customers for prepaid and unused subscription services;
loss of customers;
diversion of development and customer service resources; and
injurymanaging improvements to our reputation.
The costs incurredsystems, processes, and controls or in correcting any material defects or errors might be substantial and could adversely affect our operating results.

Because of the large amount of data that we collect and process, it is possible that hardware failures or errors in our systems could result in data loss or corruption, or cause the information that we collect to be incomplete or contain inaccuracies that our customers regard as significant. Furthermore, the availability or performance of our applications could be adversely affected by a number of factors, including customers’ inability to access the Internet, the failure of our network orconnection with third-party software, systems, security breaches or variability in user traffic for our services. For example, our customers access our applications through their Internet service providers. If a service provider fails to provide sufficient capacity to support our applications or otherwise experiences service outages, such failure could interrupt our customers’ access to our applications, which could adversely affect their perception of our applications’ reliability and our revenues. We may be required to issue credits or refunds for prepaid amounts related to unused services or otherwise be liable to our customers for damages they may incur resulting from certain of these events. In addition to potential liability, if we experience interruptions in the availability of our applications, our reputation could be adversely affected and we could lose customers.
Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.
Catastrophic events may disrupt our business.
Our corporate headquarters are located in Pleasanton, California and we have data centers located in Ashburn, Virginia; Atlanta, Georgia; Portland, Oregon; Dublin, Ireland; Amsterdam, the Netherlands; and Toronto, Canada. We also rely on AWS’s distributed computing infrastructure platform. The west coast of the United States contains active earthquake zones and the southeast is subject to seasonal hurricanes. Additionally, we rely on our network and third-party infrastructure and enterprise applications, internal technology systems and our website for our development, marketing, operational support, hosted services and sales activities. In the event of a major earthquake, hurricane or catastrophic event such as fire, power loss, telecommunications failure, cyber-attack, war or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in our services, breaches of data security and loss of critical data, all of which could have an adverse effect on our operating results.
Because we sell applications to manage complex operating environments of large customers, we encounter long sales cycles, which could adversely affect our operating results in a given period.
Our ability to increase revenues and achieve and maintain profitability depends, in large part, on widespread acceptance of our applications by large businesses and other organizations. Sales efforts targeted at these large customers involve greater costs, longer sales cycles and less predictability in completing some of our sales. Our customers’ deployment timeframes vary based on many factors including the number and type of applications being deployed, the complexity and scale of the customers’ businesses, the configuration requirements, the number of integrations with other systems and other factors, many of which are beyond our control. In the large enterprise market, the customer’s decision to use our applications may be an enterprise-wide decision and, therefore, these types of sales require us to provide greater levels of education regarding the use and benefits of our applications. In addition, our target customers may prefer to purchase applications that are critical to their business from one of our larger, more established competitors. Our typical sales cycles are six to twelve months, and we expect that this lengthy sales cycle may continue or expand as customers increasingly adopt our applications beyond HCM. Longer sales cycles could cause our operating and financial results to suffer in a given period.
The loss of one or more of our key customers, or a failure to renew our subscription agreements with one or more of our key customers, could negatively affectmaterially impair our ability to market our applications.
We rely on our reputation and recommendations from key customers in order to promote subscriptions to our applications. The loss of,provide solutions or failure to renew by, any of our key customers could have a significant impact on our revenues, reputation and our ability to obtain new customers. In addition, acquisitions of our customers could lead to cancellation of our contracts with those customers or by the acquiring companies, thereby reducing the number of our existing and potential customers.

Our business could be adversely affected if our customers are not satisfied with the deployment services provided by us or our partners.
Our business depends on our ability to satisfy our customers, both with respect to our application offerings and the professional services that are performed to help our customers use features and functions that address their business needs. Professional services may be performed by our own staff, by a third party, or by a combination of the two. Our strategy is to work with third parties to increase the breadth of capability and depth of capacity for delivery of these services to our customers and third parties providein a majoritytimely manner, cause us to lose customers, limit us to smaller deployments of our deployment services. If customers are not satisfied with the quality of work performed by ussolutions, or a third party or with the type of professional services or applications delivered, then we could incur additional costs to address the situation, the revenue recognition of the contract could be impacted, and the dissatisfaction withincrease our services could damage our ability to expand the applications subscribed to by our customers. We must also align our product development and professional services operations in order to ensure that customers’ evolving needs are met. Negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers.
Any failure to offer high-quality technical support services may adversely affect our relationships with our customers and our financial results.costs.
Our customers depend on our support organization to provision the environments used by our customers and to resolve technical issues relating to our applications. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by our competitors. Increased customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our applications and business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our applications to existing and prospective customers, and our business, operating results and financial position.
Sales to customers outside the United States or with international operations expose us to risks inherent in international sales and operations.
A key element of our growth strategy is to expand our international operations and develop a worldwide customer base. Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks that are different from those in the United States. Our international expansion efforts may not be successful in creating demand for our applications outside of the United States or in effectively selling subscriptions to our applications in all of the international markets we enter. In addition, we will face risks in doing business internationally that could adversely affect our business, including:
the need to localize and adapt our applications for specific countries, including translation into foreign languages, localization of contracts for different legal jurisdictions and associated expenses;
the need for a go-to-market strategy that aligns application management efforts and the development of supporting infrastructure;
stricter data privacy laws including requirements that customer data be stored and processed in a designated territory and obligations on us as a data processor;
difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation for local markets;
difficulties in leveraging executive presence and company culture globally;
different pricing environments, longer sales cycles and longer accounts receivable payment cycles, and collections issues;
new and different sources of competition;
potentially weaker protection for intellectual property and other legal rights than in the United States and practical difficulties in enforcing intellectual property and other rights;
laws, customs and business practices favoring local competitors;
restrictive governmental actions focused on cross-border trade, such as duties, quotas and tariffs;
compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations;
increased financial accounting and reporting burdens and complexities;
restrictions on the transfer of funds;
ensuring compliance with anti-corruption laws including the Foreign Corrupt Practices Act;
the effects of currency fluctuations on our revenues and customer demand for our services;
adverse tax consequences and tax rulings; and
unstable economic and political conditions.

Any of the above factors may negatively impact our ability to sell our applications and offer services internationally, reduce our competitive position in foreign markets, increase our costs of international operations and reduce demand for our applications and services from international customers. Additionally, the majority of our international costs are denominated in local currencies and we anticipate that over time, an increasing portion of our international sales contracts may be denominated in local currencies. Therefore, fluctuations in the value of the U.S. dollar and foreign currencies may impact our operating results when translated into U.S. dollars. We have a hedging program but we cannot ensure that this hedging program will be effective and we will continue to have risk of exchange rate fluctuations.
We have acquired, and may in the future acquire, other companies, employee teams, or technologies, which could divert our management’s attention, result in additional dilution to our stockholders, and otherwise disrupt our operations and adversely affect our operating results.
We have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our applications, enhance our technical capabilities, obtain personnel, or otherwise offer growth opportunities. The pursuit of acquisitions may divert the attention of management, disrupt ongoing business, and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
We have limited experience in acquisitions. We
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These impacts may notcontinue through integration activities. Moreover, we may be ableunable to integrate acquired personnel, operations and technologies successfullycomplete proposed transactions timely or effectively manageat all due to the combined operations following the acquisition.failure to obtain regulatory or other approvals, litigation, or other disputes, which may obligate us to pay a termination fee. We also may not achieve the anticipated benefits from the acquisitionsan acquisition due to a number of factors, including:
•inability or difficulty integrating the intellectual property, technology infrastructure, personnel, and operations of the acquired business, including difficulty in addressing security risks of the acquired business;
•inability to integrate or benefitretain key personnel from acquisitions in a profitable manner;the acquired company;
incurrence of •acquisition-related costs, liabilities, or liabilities,tax impacts, some of which may be unanticipated;
•difficulty integratingin leveraging the intellectual property and operationsdata of the acquired business;business if it includes personal data;
difficulty integrating and retaining the personnel of•ineffective or inadequate controls, procedures, or policies at the acquired business;company and increased risk of non-compliance;
•multiple product lines or service offerings as a result of our acquisitions that are offered, priced, and supported differently, as well as the potential for such acquired product lines and service offerings to impact the profitability of existing products;
•the opportunity cost of diverting management and financial resources away from other products, services, and strategic initiatives;
•difficulties and additional expenses associated with supporting legacy productssynchronizing product offerings, customer relationships, and hosting infrastructure ofcontract portfolio terms and conditions between Workday and the acquired business;
difficulty terminating•unknown liabilities or converting the customers ofrisks associated with the acquired business onto our applications and contract terms;businesses, including those arising from existing contractual obligations or litigation matters;
•adverse effects on our brand or existing business relationships with business partners and customers as a result of the acquisition;acquisition, including integrating acquired technologies;
•potential write-offs of acquired assets and potential financial and credit risks associated with acquired customers;
•inability to maintain relationships with key customers, suppliers, and partners of the acquired business;
•difficulty in predicting and controlling the effect of integrating multiple acquisitions concurrently;
•lack of experience in new markets, products, or technologies;
diversion•difficulty in integrating operations and assets of management’s attention froman acquired foreign entity with differences in language, culture, or country-specific currency and regulatory risks;
•the inability to obtain (or a material delay in obtaining) regulatory approvals necessary to complete transactions or to integrate operations, or potential remedies imposed by regulatory authorities as a condition to or following the completion of a transaction, which may include divestitures, ownership or operational restrictions or other business concerns;structural or behavioral remedies; and
use•the failure of resources that are needed in other parts of our business;strategic acquisitions to perform as expected or to meet financial projections, which may be heightened due to recent macroeconomic events and
use of substantial portions of our available cash to consummate the acquisition. market volatility.
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.operating results.
Acquisitions could also result in use of substantial portions of our available cash and dilutive issuances of equity securities or the incurrenceissuance of debt, which could adversely affect our operating results. In addition, if an acquired business fails to meet our expectations, our business, financial condition, and operating results business and financial position may suffer.
If we are not able to realize a return on the investments we have made toward entering new markets and new lines of business, our business and operating results could be adversely affected.
We continue to seek opportunities to enter into new markets and/or new lines of business, some of which we may have very limited or no experience in. As an entrant to new markets and new lines of business, we may not be effective in convincing prospective customers that our solutions will address their needs, and we may not accurately estimate our infrastructure needs, human resource requirements, or operating expenses with regard to these new markets and new lines of business. We may also fail to accurately anticipate adoption rates of these new lines of business or their underlying technology. Also, we may not be able to properly price our solutions in these new markets, which could negatively affect our ability to sell to customers. Furthermore, customers in these new markets or of the new lines of business may demand more features and professional services, which may require us to devote even greater research and development, sales, support, and professional services resources to such customers. If we fail to generate adequate revenues from these new markets and lines of business, or if we fail to do so within the envisioned timeframe, it could have an adverse effect on our business, financial condition, and operating results.
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The use of new and evolving technologies, such as AI and ML, in our offerings may result in reputational harm and liability.
We are increasingly building AI and ML into many of our offerings. As with many cutting-edge innovations, these technologies present new risks and challenges, and existing laws and regulations may apply to us in new ways, the nature and extent of which are difficult to predict. The risks and challenges presented by these technologies could undermine public confidence in AI and ML, which could slow its adoption and affect our business. Many of our products are powered by AI and ML, some of which include the use of large language models and generative AI, for use cases that could potentially impact human, civil, privacy, or employment rights and dignities. Our failure to adequately address ethical and social issues that may arise with such technologies and use cases, failure by others in our industry, or actions taken by our customers, employees, or other end users (including misuse of these technologies), could negatively affect the adoption of our solutions and subject us to reputational harm, regulatory action, or legal liability, which may harm our financial condition and operating results. We have been subject to a historylawsuit alleging that our products and services enable discrimination, and although we believe that such claims lack merit, legal proceedings can be lengthy, expensive and disruptive to our operations and the outcome of cumulative lossesany claims or litigation, regardless of the merits, is inherently uncertain. We may be subject to other litigation and we do not expectregulatory actions that may cause financial, competitive, and developmental impacts. Regardless of outcome, these types of claims could cause reputational harm to be profitable onour brand or result in liability. Additionally, a GAAP basis forquickly evolving legal and regulatory environment may cause us to incur increased research and development costs, or divert resources from other development efforts, to address social, ethical, and other issues related to AI and ML. For example, to demonstrate compliance with the foreseeable future.
We have incurred significant losses in each period sinceNew York City Automated Employment Decision Tools law, which took effect July 5, 2023, customers may publicly disclose information about their use of our inception in 2005. These lossesAI and ML products, including the results of certain sensitive employment-discrimination analyses, potentially subjecting us to reputational or business harm or legal liability. Our employees, customers, or customers’ employees who are dissatisfied with our accumulated deficit reflect the substantial investments we made to acquire new customers and develop our applications. We expect our operating expenses to increase in the future due to anticipated increases in sales and marketing expenses, product development expenses, operations costs, and general and administrative costs, and therefore we expect our losses on a GAAP basis to continue for the foreseeable future. Furthermore,public statements, policies, practices, or solutions related to the extent we are successful in increasing our customer base, we will also incur increased losses in the acquisition period because costs associated with acquiring customers are generally incurred up front, while subscription services revenues are generally recognized ratably over the terms of the agreements, which are typically three years or longer. You should not consider our recent growth in revenues as indicative of our future performance. We cannot assure you that we will achieve GAAP profitability in the future, nor that, if we do become profitable, we will sustain profitability.
We may not receive significant revenues from our current development efforts for several years, if at all.
Developing software applications is expensive and the investment in product development often involves a long return on investment cycle. We have made and expect to continue to make significant investments in development and use of AI and ML may express opinions that could introduce reputational or business harm, or legal liability or cease their relationship with us.
Our aspirations and disclosures related opportunities. Accelerated application introductionsto environmental, social, and short application life cycles require high levels of expendituresgovernance (“ESG”) matters expose us to risks that could adversely affect our operating results ifreputation and performance.
The positions we take on ESG matters, human capital management initiatives, and ethical issues from time to time may impact our brand, reputation, or ability to attract or retain customers. In particular, our brand and reputation are associated with our public commitments to environmental sustainability (including our science-based targets), strong corporate governance practices, equality, inclusivity, and ethical use, and any perceived changes in our dedication to these commitments could impact our relationships with potential and current customers, employees, stockholders, and other stakeholders. These commitments reflect our current plans and aspirations and are not offset by revenue increases. We believeguarantees that we must continuewill be able to dedicateachieve them. Our failure to accomplish or accurately track and report on these goals on a significant amount of resources totimely basis, or at all, could adversely affect our development efforts to maintain our competitive position. However, we may not receive significant revenues from these investments for several years, if at all.

If we experience significant fluctuations in our rate of anticipatedreputation, financial performance, and growth, and failexpose us to balance our expenses with our revenue forecasts, our results could be harmed.increased scrutiny from the investment community as well as enforcement authorities.
Our ability to forecast our future rate of growthachieve any ESG objective is limited and subject to a number of uncertainties, including general economic and market conditions. We plan our expense levels and investment on estimates of future revenue and future anticipated rates of growth. We may not be able to adjust our spending quickly enough if our growth rates fall short of our expectations.
Moreover, we have encountered and will encounternumerous risks, and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described herein. If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change due to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
We may not be able to sustain our revenue growth rates in the future.
You should not consider our historical revenue growth rates as indicative of our future performance. Our revenue growth rates have declined, and may decline in future periods, as the size of our customer base increases and as we achieve higher market penetration rates. Other factors may also contribute to declines in our growth rates, including slowing demand for our services, increasing competition, a decrease in the growth of our overall market, our failure to continue to capitalize on growth opportunities, and the maturation of our business, among others. As our growth rates decline, investors’ perceptions of our business and the trading price of our securities could be adversely affected.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Our quarterly results of operations, including the levels of our revenues, gross margin, operating margin, profitability, cash flow and unearned revenue, may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control. Examples of such risks include:
•the availability and cost of low- or non-carbon-based energy sources;
•the evolving regulatory requirements affecting ESG standards or disclosures;
•the availability of suppliers that can meet our sustainability, diversity and other ESG standards;
•our ability to recruit, develop and retain diverse talent in our labor markets;
•the availability and cost of high-quality verified emissions reductions and renewable energy credits;
•the ability to renew existing or execute on new virtual power purchase agreements; and
•the success of our organic growth and acquisitions or dispositions of businesses or operations.
Standards for tracking and reporting ESG matters continue to evolve. In addition, our processes and controls may not always comply with evolving standards for identifying, measuring, and reporting ESG metrics, including ESG-related disclosures that may be required of public companies by the SEC or other regulatory bodies, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future. It is likely that increasing regulatory requirements and regulatory scrutiny related to ESG matters will continue to expand globally and result in higher associated compliance costs. Further, we may rely on data and calculations provided by third parties to measure and report our ESG metrics and if the data input or calculations are incorrect or incomplete, our brand, reputation, and financial performance may be adversely affected.
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If our ESG practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment, business partner, acquirer, or service provider could be negatively impacted. Further, our failure or perceived failure to pursue or fulfill our goals and objectives or to satisfy various reporting standards on a timely basis, or at all, could have similar negative impacts or expose us to government enforcement actions and private litigation.
Risks Related to Cybersecurity, Data Privacy, and Intellectual Property
If our information technology systems are compromised or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, our operations may be disrupted, our applications may become unavailable, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities.
Our applications involve the storage and transmission of our customers’ and other users' sensitive and proprietary information, including personal or identifying information regarding our customers, their employees, job candidates, customers, prospectus, and suppliers, as well as financial, accounting, health, and payroll data. Additionally, our operations and the availability of the services we provide also depend on our information technology systems. As a result, a compromise of our applications or systems, or unauthorized access to, acquisition, use, tampering, release, alteration, theft, loss, or destruction of sensitive data, or unavailability of data or our applications, has and could disrupt our operations or impact the availability or performance of our applications; expose us and our customers to regulatory obligations and actions, litigation, investigations, remediation and indemnity obligations, or supplemental disclosure obligations; damage our reputation and brand; or result in loss of customer, consumer, and partner confidence in the security of our applications, an increase in our insurance premiums, loss of authorization under the Federal Risk and Authorization Management Program (“FedRAMP”) or other authorizations, impairment to our business, and other potential liabilities or related fees, expenses, or loss of revenues.
The financial and personnel resources we employ to implement and maintain security measures, including our information security risk insurance policy, may not be sufficient to address our security needs. The security measures we have in place may not be sufficient to protect against security risks, preserve our operations and services and the integrity of customer and personal information, and prevent data loss, misappropriation, and other security breaches. Our information systems may be compromised by computer hackers, employees, contractors, or vendors, as well as software bugs, human error, technical malfunctions, or other malfeasance.
Cybersecurity threats and attacks are often targeted at companies such as ours and may take a variety of forms ranging from individuals or groups of security researchers, including those who appear to offer a solution to a vulnerability in exchange for some compensation, to sophisticated hacker organizations, including state-sponsored actors who may launch coordinated attacks, such as retaliatory cyber attacks stemming from the Russia-Ukraine conflict. In the normal course of business, we are and have been the target of malicious cyber-attack attempts and have experienced other security events. As our market presence grows, we may face increased risks of cybersecurity attack or other security threats. Key cybersecurity risks range from viruses, worms, ransomware, and other malicious software programs, to phishing attacks, to exploitation of software bugs or other defects, to targeted attacks against cloud services and other hosted software, any of which can result in a compromise of our applications or systems and the data we store or process, disclosure of Workday confidential information and intellectual property, production downtimes, reputational harm, and an increase in costs to the business. As the techniques used to obtain unauthorized access or sabotage systems change frequently, are becoming increasingly sophisticated and complex, and often are not identified until they are launched against a target, and because evidence of unauthorized activity may not have been captured or retained, or may be proactively destroyed by unauthorized actors, we may be unable to anticipate these attacks, assess the true impact they may have on our business and operations, or to implement adequate preventative measures. Future cyber-attacks and other security events may have a significant or material impact on our business and operating results.
There may also be attacks targeting any vulnerabilities in our applications, internally built infrastructure, enhancements, and updates to our existing offerings, or in the many different underlying networks and services that power the internet that our products depend on, most of which are not under our control or the control of our vendors, partners, or customers. Systems and processes designed to protect our applications, systems, software, and data, as well as customer data and other user data, and to prevent data loss and detect security breaches, may not be effective against all cybersecurity threats or perceived threats. We have been subject to such incidents, including through third-party service providers and in connection with acquisitions we have made. In addition, our software development practices have not and may not identify all potential privacy or security issues, and inadvertent disclosures of data have occurred and may occur. For example, in August 2022, we applied a fix in Workday Recruiting to address an issue that temporarily made certain information discoverable to unintended parties. We took immediate action to fix the issue, notify affected customers, and confirm this issue had not impacted Workday’s other environments or applications. We have no indication that the data was accessed maliciously. We also performed an internal investigation and engaged a third party to penetration test the systems at issue, which caused, and may continue to cause, expense and business disruption. These efforts may not be completely effective or eliminate potential risks from this and similar incidents.
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Additionally, remote work and resource access, including our hybrid work model, has and may continue to result in an increased risk of cybersecurity-related events such as phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result may not fully reflect the underlying performance of our business. Fluctuationemployees and our service providers continuing to work remotely from non-corporate managed networks.
Furthermore, we have acquired or partnered with a number of companies, products, services, and technologies over the years, and incorporated third-party products, services, and technologies into our own products and services. Addressing security issues associated with acquisitions, partnerships, incorporated technologies, and our supply chain requires significant resources, and we have inherited and may in quarterly resultsthe future inherit additional risks upon integration with or use by Workday. In addition, if a high-profile security breach occurs with respect to an industry peer, our customers and potential customers may generally lose trust in the security of financial management, spend management, human capital management, planning, or analytics applications, or in cloud applications for enterprises in general. Any or all of these issues could negatively impact the value of our securities. Factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:
affect our ability to attract new customers;
the additioncustomers, cause existing customers to elect to terminate or loss of largenot renew their subscriptions, result in reputational damage, cause us to pay remediation and indemnity costs and/or issue service credits or refunds to customers including through acquisitions or consolidations;
the timing of operating expensesfor prepaid and recognition of revenues;
the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;
network outages or security breaches;
general economic and market conditions;
customer renewal rates;
increases or decreases in the number of elements of ourunused subscription services, or pricing changes upon any renewals of customer agreements;
changes in our pricing policies or those of our competitors;
the mix of applications sold during a period;
seasonal variations in sales of our applications, which have historically been highest in our fiscal fourth quarter;
the timing and success of new application and service introductions by us or our competitors;
changes in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;
changes in laws and regulations that impact our business; and
the timing of expenses related to acquisitions and potential future charges for impairment of goodwill.

Because we recognize subscription services revenues over the term of the contract, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern.
We generally recognize subscription services revenues from customers when control of the promised services is transferred, which typically occurs over a period of three years or longer. As a result, most of the subscription services revenues we report in each quarter are derived from the recognition of unearned revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscription contracts in any single quarter will likely have a minor impact on our revenue results for that quarter. However, such a decline will negatively affect our revenues in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our applications, and potential changes in our pricing policies or rate of renewals, may not be fully reflected in our results of operations until future periods. We may be unable to adjust our cost structure to reflect the changes in revenues. In addition, a significant majority of our costs are expensed as incurred, while revenues are recognized over the life of the customer agreement. As a result, increased growth in the number of our customers could result in our recognitionlawsuits, regulatory fines, or other action or liabilities, any of more costs than revenues in the earlier periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as subscription revenues from new customers generally are recognized over the applicable subscription term.
Our ability to predict the rate of customer subscription renewals or adoptions, and the impact these renewals and adoptions will have on our revenues or operating results, is limited.
As the markets for our applications mature, or as new competitors introduce new products or services that compete with ours, we may be unable to attract new customers at the same price or based on the same pricing model as we have used historically. Moreover, large customers, which are the focus of our sales efforts, may demand greater price concessions. As a result, in the future we may be required to reduce our prices, which could adversely affect our revenues, gross margin, profitability, financial positionbusiness and cash flow.operating results.
In addition,We rely on sophisticated information systems and technology, including those provided by third parties, for the secure collection, processing, transmission, storage of confidential, proprietary, and personal information, and to support our customers have no obligation to renew their subscriptions for our applications after the expiration of the initial subscription period. Our customers may renew for fewer elements of our applications or on different pricing terms. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our pricing or our applications and their ability to continue theirbusiness operations and spending levels. If our customers do not renew their subscriptions for our applications on similar pricing terms, our revenues may decline and our business could suffer. In addition, over time the average term of our contracts could change based on renewal rates or for other reasons.
Our future success also depends in part on our ability to sell additional features or enhanced elements of our applications to our current customers. This may require increasingly costly sales efforts that are targeted at senior management. If these efforts are not successful, our business may suffer.
Failure to adequately expand and optimize our direct sales force will impede our growth.
We will need to continue to expand and optimize our sales infrastructure, both domestically and internationally, in order to grow our customer base and our business. Identifying and recruiting qualified personnel and training them in the use of our software requires significant time, expense and attention. It can take significant time before our sales representatives are fully trained and productive. Our business may be adversely affected if our efforts to expand and train our direct sales force do not generate a corresponding increase in revenues. In particular, if we are unable to hire, develop and retain talented sales personnel or if new direct sales personnel are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of this investment or increase our revenues.
If we fail to develop widespread brand awareness cost-effectively, our business may suffer.
We believe that developing and maintaining widespread positive awareness of our brand is critical to achieving widespread acceptance of our applications, attracting new customers and hiring and retaining employees. Brand promotion activities may not generate customer awareness or increase revenues, and even if they do, any increase in revenues may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoptionavailability of our applications. In addition, if our brand is negativelythe past several years, supply chain attacks have increased in frequency and severity. As we are both a provider and consumer of information systems and technology, we are at higher risk of being impacted it may be more difficult to hireeither directly or indirectly by these attacks. The control systems, cybersecurity program, infrastructure, physical facilities of, and retain employees.

Our growth depends in part on the success of our strategic relationships with third parties.
In order to grow our business, we anticipate that we will continue to depend on relationshipspersonnel associated with third parties such as deployment partners, technologythat we rely on are beyond our control. The audits we periodically conduct of some of our third-party vendors do not guarantee the security of and content providers and other key suppliers. Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources. Our competitors may be effective in providing incentivesunable to prevent security events impacting the information technology systems of third parties to favor their products or services or to prevent or reduce subscriptions to our services, or in negotiating better rates or terms with key suppliers. In addition, acquisitionsthat are part of our partners by our competitorssupply chain or that provide valuable services to us, which have resulted and could result in a decrease in the numberunauthorized access to data of Workday, our employees, our customers, our third-party partners, or other end users; acquisition, destruction, alteration, use, tampering, release, unavailability, theft or loss of confidential, proprietary, or personal data of Workday, our employees, our customers, our third party partners, or other end users; or the disruption of our currentoperations and potential customers, as our partnersability to conduct our business or the availability of our applications; or could otherwise adversely affect our business, financial condition, operating results, or reputation.
Privacy concerns, evolving regulation of cloud computing, cross-border data transfer, and other domestic or foreign laws and regulations may no longer facilitatereduce the adoption of our applications, result in significant costs and compliance challenges, and adversely affect our business and operating results.
Legal requirements related to collecting, storing, handling, and transferring personal data are rapidly evolving at both the national and international level in ways that require our business to adapt to support customer compliance. As the regulatory focus on privacy intensifies worldwide, and jurisdictions increasingly consider and adopt privacy laws, the potential risks related to managing personal data by our business may grow. In addition, possible adverse interpretations of existing privacy-related laws and regulations by governments in countries where our customers operate, as well as the potential customers.implementation of new legislation, could impose significant obligations in areas affecting our business or prevent us from offering certain services in jurisdictions where we operate.
If we
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Following the European Union’s (“EU”) passage of the General Data Protection Regulation (“GDPR”), which became effective in May 2018, the global data privacy compliance landscape has grown increasingly complex, fragmented, and financially relevant to business operations. As a result, our business faces current and prospective risks related to increased regulatory compliance costs, government enforcement actions and/or financial penalties for non-compliance, and reputational harm. For example, a new EU-U.S. Data Privacy Framework (“DPF”) is in place under which EU data can legally be transferred to the United States. However, it is expected to face legal challenges. Until challenges to the DPF make their way through the court system, uncertainty may continue about the legal requirements for transferring customer personal data to and from Europe, an integral process of our business that remains governed by, and subject to, GDPR requirements. Failure to comply with the GDPR data processing requirements by either ourselves or our subcontractors could lead to regulatory enforcement actions, which can result in monetary penalties of up to 4% of worldwide revenue, private lawsuits, reputational damage, and loss of customers. Other countries such as Russia, China, and India have also passed or are unsuccessful in establishing or maintaining our relationships with third parties, our ability to competeconsidering passing laws imposing varying degrees of restrictive data residency requirements. Regulatory developments in the marketplaceUnited States present additional risks. For example, the California Consumer Privacy Act (“CCPA”) took effect on January 1, 2020, and the California Privacy Rights Act (“CPRA”), which expands upon the CCPA, came into effect on January 1, 2023. The CCPA and CPRA give California consumers, including employees, certain rights similar to those provided by the GDPR, and also provide for statutory damages or to grow our revenuesfines on a per violation basis that could be impairedvery large depending on the severity of the violation. Numerous states have enacted, or are considering, privacy laws as well, creating a patchwork of state laws that may create compliance challenges. Furthermore, the U.S. Congress is considering numerous privacy bills, and the U.S. Federal Trade Commission continues to fine companies for unfair or deceptive data protection practices and may undertake its own privacy rulemaking exercise. In addition to government activity, privacy advocacy and other industry groups have established or may establish various new, additional, or different self-regulatory standards that customers may require us to adhere to and which may place additional burdens on us. Increasing sensitivity of individuals to unauthorized processing of personal data, whether real or perceived, and an increasingly uncertain trust climate has and may continue to create a negative public reaction to technologies, products and services such as ours or otherwise expose us to liability.
Taken together, the costs of compliance with and other obligations imposed by data protection laws and regulations may require modification of our operating resultsservices, limit use and adoption of our services, reduce overall demand for our services, lead to significant fines, penalties, or liabilities for noncompliance, or slow the pace at which we close sales transactions, or otherwise cause us to modify our operations, any of which could harm our business. The perception of privacy concerns, whether or not valid, may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased customer usageinhibit the adoption, effectiveness, or use of our applications or increased revenues.
Adverse economic conditions may negativelyotherwise impact our business.
Our Compliance with applicable laws and regulations regarding personal data may require changes in services, business depends on the overall demand for enterprise software and on the economic health of our current and prospective customers. Any significant weakening of the economy in the United Statespractices, or Europe and of the global economy, more limited availability of credit, a reduction in business confidence and activity, decreased government spending, economic uncertainty and other difficulties, such as rising interest rates and increased inflation, may affect one or more of the sectors or countries in which we sell our applications.
The vote of the United Kingdom ("UK") to leave the EU, known as Brexit, has created substantial economic and political uncertainty, the impact of which depends on the terms of the UK's withdrawal from the EU, which may not be determined for several years or more. This uncertainty may cause some of our customers or potential customers to curtail spending, and may ultimatelyinternal systems that result in new regulatory and cost challenges to our UK and other international operations. In addition, a strong dollarincreased costs, lower revenue, reduced efficiency, or greater difficulty competing with foreign-based firms which could reduce demand for our applications and services in countries with relatively weaker currencies. Brexit has had an effect on global markets and currencies, including a decline in the value of the British pound as compared to the U.S. dollar. These adverse conditions could result in reductions in sales of our applications, longer sales cycles, reductions in subscription duration and value, slower adoption of new technologies and increased price competition. Any of these events would likely have an adverse effect onadversely affect our business and operating results and financial position.results.
Any failure to protect our intellectual property rights domestically and internationally could impair our ability to protect our proprietary technology and our brand.
Our success and ability to compete depend in part upon our intellectual property. We rely on patent, copyright, trade secret and trademark laws, trade secret protection, and confidentiality or license agreements with our employees, customers, suppliers, partners, and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate. We have patent applications pending in the United States and throughout the world, but we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, any patents issued to us in the future may not provide us with competitive advantages or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties, including those affiliated with state-sponsored actors, to copy or reverse engineer our applications, including with the assistance of insiders, and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer, and disclosure of our technology may be unenforceable under the laws of jurisdictions outside the United States. In addition, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States.
We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances. No assurance can be given that these agreements will be effective in controlling access to and distribution of our applications and proprietary information. Further, these agreements do not prevent our competitors or partners from independently developing technologies that are substantially equivalent or superior to our applications.
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We may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect, and enforce our intellectual property rights could seriously adversely affecthave a serious adverse effect on our brand and our business.
We may be sued by third parties for alleged infringement of their proprietary rights.
There is considerable patent and other intellectual property development activity in our industry. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry. From time to time, third parties may claim that we are infringing upon their intellectual property rights, and we may be found to be infringing upon such rights. In the future, they may claim that our applications and underlying technology infringe or violate their intellectual property rights, even if we are unaware of the intellectual property rights that others may claim cover some or all of our technology or services.services, and we may be found to be infringing such rights. Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services, require us to change our products, technology, or business practices, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications, or refund fees, which could be costly. In addition, we may be sued by third parties who seek to target us for actions taken by our customers, including through the use or misuse of our products. Even if we were to prevail in such aan intellectual property dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. Furthermore, from time to time we may introduce or acquire new products, including in areas where we historically have not competed, which could increase our exposure to patent and other intellectual property claims.

Some of our applications utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Some of our applications include software covered by open source licenses, which may include, by way of example, GNU General Public License and the Apache License. The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our applications. We attempt to avoid adverse licensing conditions in our use of open source software in our products and services. However, there can be no assurance that our efforts have been or will be successful. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open source software in a certain manner. In the event that portions of our proprietary software are determined to be impacted by an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and services. In addition, the open source license terms for future versions of open source software that we use might change, requiring us to pay for a commercial license or re-engineer all or a portion of our technologies. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third partythird-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business.
We employ third-party licensed software for use in

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Risks Related to Legal and Regulatory Matters
Unfavorable laws, regulations, interpretive positions or withstandards governing new and evolving technologies that we incorporate into our applications,products and the inability to maintain these licenses or errors in the software we licenseservices could result in increased costs, or reduced service levels, which wouldsignificant cost and compliance challenges and adversely affect our business and operating results.
Some of our products and services, such as Workday’s People Experience and Talent Optimization product suites, currently utilize or will utilize new and evolving technologies such as AI and ML and blockchain, including a variety of ML use cases that touch our finance and spend management product suites, among others. While existing laws and regulations may apply to these types of technologies, the overall regulatory environment governing these types of technologies is still currently undeveloped and likely to evolve as government interest in these technologies increases. Regulation of these technologies, as well as other technologies that we utilize in our products and services, also varies greatly among international, federal, state, and local jurisdictions and is subject to significant uncertainty. Governments and agencies domestic and abroad may in the future change or amend existing laws, or adopt new laws, regulations, or guidance, or take other actions which may severely impact the permitted uses of our technologies. Any failure by us to comply with applicable laws, regulations, guidance, or other rules could result in costly litigation, penalties, or fines. In addition, these regulations and any related enforcement actions could establish and further expand our obligations to customers, individuals, and other third parties with respect to our products and services, limit the countries in which such products and services may be used, restrict the way we structure and operate our business, require us to divert development and other resources, and reduce the types of customers and individuals who can use our products and services. Furthermore, our customers may operate in foreign jurisdictions, including countries in which we don't operate, and may be subject to additional laws and regulations outside the scope of our products. Increased regulation and oversight of products or services which utilize or rely on these technologies may result in costly compliance burdens or otherwise increase our operating costs, detrimentally affecting our business. These new technologies could subject us to additional litigation brought by private parties, which could be costly, time-consuming, and distracting to management and could result in substantial expenses and losses.
We are subject to risks related to government contracts and related procurement regulations, which may adversely impact our business and operating results.
Our applications incorporatecontracts with federal, state, local, and foreign government entities are subject to various procurement regulations and other requirements relating to their formation, administration, performance, and termination, which could adversely impact our business and operating results. Government certification requirements applicable to our platform, including FedRAMP, may change and, in doing so, restrict our ability to sell into the governmental sector until we have attained the full or revised certification. These laws and regulations provide public sector customers various rights, many of which are not typically found in commercial contracts. For instance, the process of evaluating potential conflicts of interest and developing necessary provisions and contract clauses, where needed, may delay or prevent Workday from being awarded certain third-party softwareU.S. federal government contracts.
Additionally, we have obtained authorization under licenses from other companies. We anticipate that we will continue to rely on such third-party software and development tools from third parties in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace. Our use of additional or alternative third-party software would requireFedRAMP, which allows us to enter into license agreementsthe U.S. federal government market. Such certification is subject to rigorous compliance and if we lose our certification, it could inhibit or preclude our ability to contract with third parties.certain U.S. federal government customers. In addition, integration of the software used insome customers may rely on our applications with new third-party software may require significant workauthorization under FedRAMP to help satisfy their own legal and require substantial investment ofregulatory compliance requirements and our time and resources. To the extent that our applications depend upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our applications, delay new application introductions,failure to maintain FedRAMP authorization would result in a failurebreach under public sector contracts obtained on the basis of such authorization. This could subject us to liability, result in reputational harm, and adversely impact our applicationsfinancial condition or operating results.
We may be subject to audits and injureinvestigations relating to our reputation.government contracts, and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refunding or suspending of payments, forfeiture of profits, payment of fines, and suspension or debarment from future government business. In addition, such contracts may provide for delays, interruptions, or termination by the government at any time, without cause, which may adversely affect our business and operating results and impact other existing or prospective government contracts.
Changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself may diminish the demand for our applications, and
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Adverse litigation results could have a negativematerial adverse impact on our business.
Federal, stateWe are regularly involved with claims, suits, purported class or foreign government bodies or agencies have in the past adopted,representative actions, and may be involved in the future adopt, lawsregulatory and government investigations and other proceedings, involving competition, intellectual property, data security and privacy, bankruptcy, tax and related compliance, labor and employment, commercial disputes, and other matters. Such claims, suits, actions, regulatory and government investigations, and other proceedings can impose a significant burden on management and employees, could prevent us from offering one or regulations relatingmore of our applications, services, or features to Internet usage. Changes in these laws or regulationsothers, could require us to modifychange our applicationstechnology or business practices, or could result in order to comply with these lawsmonetary damages, fines, civil or regulations. In addition, government agencies or private organizations may begin to impose taxes, feescriminal penalties, reputational harm, or other charges for accessing the Internetadverse consequences. Adverse outcomes in some or commerce conducted via the Internet. These lawsall of these claims may result in significant monetary damages or chargesinjunctive relief that could limit the growthadversely affect our ability to conduct our business. The litigation and other claims are subject to inherent uncertainties and management’s view of Internet-related commerce or communications, or negatively impact demand for Internet-based applications such as ours.
In addition, businesses could be adversely affected due to delaysthese matters may change in the development or adoption of new standards and protocols to handle increased demands of Internet activity, security, reliability, cost, ease of use, accessibility, and quality of service. Businesses have been adversely affected by "viruses," "worms" and similar malicious programs and have experienced a variety of outages and other delays as a result of damage to Internet infrastructure. These issues could negativelyfuture. A material adverse impact demand for our cloud-based applications.
We may discover weaknesses in our internal controls over financial reporting, which may adversely affect investor confidence in the accuracy and completeness of our financial reports and consequently the market price of our securities.
As a public company, we are required to design and maintain proper and effective internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and provide a management report on the internal controls over financial reporting, which must be attested to by our independent registered public accounting firm. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and ourcondensed consolidated financial statements may be materially misstated.could occur for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.

The process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 is challenging and costly. In the future, we may not be able to complete our evaluation, testing and any required remediation in a timely fashion. If we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities could be negatively affected, and we could become subject to investigations by the NASDAQ Global Select Market, the SEC, or other regulatory authorities, which could require additional financial and management resources. In addition, because we use Workday's financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers, and negatively impact demand for our applications.
We may not be able to utilize a portion of our net operating loss or research tax credit carryforwards, which could adversely affect our profitability.
As of OctoberJuly 31, 2017,2023, we had federal and state net operating loss carryforwards due to prior period losses, which iflosses. If not utilized, will begin tothe pre-fiscal 2018 federal and the state net operating loss carryforwards expire in varying amounts between fiscal 20262024 and fiscal 2044. The federal net operating losses generated in and after fiscal 2018 for federaldo not expire and state purposes, respectively.may be carried forward indefinitely. We also have federal research tax credit carryforwards, which if not utilized will begin to expire inbetween fiscal 2026.2024 and fiscal 2044. These net operating loss and research tax credit carryforwards could expire unused and be unavailable to reduce future income tax liabilities, which could adversely affect our profitability. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an "ownership“ownership change."” A Section 382 "ownership change"“ownership change” generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. It is possible that an ownership change, or any future ownership change, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our profitability.
Adverse
Unanticipated tax laws or regulations could be enacted orany change in the application of existing tax laws could be applied to us or our customers, which couldespecially those limiting our ability to utilize our net operating loss and research tax credit carryforwards, may increase the costs of our services and adversely impact our profitability and business.
We operate and are subject to taxes in the United States and numerous foreignother jurisdictions throughout the world. Changes to federal, state, local, or international tax laws on income, sales, use, indirect, or other tax laws, statutes, rules, regulations, or ordinances on multinational corporations are currently being considered by the United States and other countries where we do business. These contemplated legislative initiatives include, but are not limited to, changes to transfer pricing policies and definitional changes to permanent establishment that could be applied solely or disproportionately to services provided over the Internet.internet. These contemplated tax initiatives, if finalized and adopted by countries, may ultimately impact our effective tax rate and could adversely affect our sales activity resulting in a negative impact on our operating results and cash flows.
In addition, existing tax laws, statutes, rules, regulations, or ordinances could be interpreted, changed, modified, or applied adversely to us (possibly with retroactive effect), which could require us to pay additional tax amounts, and fines or penalties, and interest for past amounts. Existing tax laws, statutes, rules, regulations, or ordinances could also be interpreted, changed, modified, or applied adversely to our customers (possibly with retroactive effect), which could require our customers to pay additional tax amounts with respect to services we have provided, and fines or penalties, and interest for past amounts. If we are unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, thereby adversely impacting our operating results and cash flows. If our customers must pay additional fines or penalties, it could adversely affect demand for our services.

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Risks Related to Financial Matters
Because we encounter long sales cycles when selling to large customers and we recognize subscription services revenues over the term of the contract, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern.
We generally recognize subscription services revenues over time as services are delivered to the customer, which typically occurs over a period of three years or longer. As a result, most of the subscription services revenues we report in each quarter are derived from the recognition of unearned revenue relating to subscriptions entered into during previous quarters. Consequently, a decline in new or renewed subscription contracts in any single quarter will likely have a minor impact on our revenue results for that quarter. However, such a decline will negatively affect our revenues in future quarters. Additionally, because much of our sales efforts are targeted at large enterprise customers, our sales cycles involve greater costs, longer sales cycles, the provision of greater levels of education regarding the use and benefits of our applications, less predictability in completing some of our sales, and varying deployment timeframes based on many factors including the number, type, and configuration of applications being deployed, the complexity, scale, and geographic dispersion of the customers’ business and operations, the number of integrations with other systems, and other factors, many of which are beyond our control.
Our reportedtypical sales cycles are six to twelve months but can extend for eighteen months or more, and we expect that this lengthy sales cycle may continue or expand as customers increasingly adopt our applications beyond human capital management. Due to the uncertainty of the recent macroeconomic environment, we have started to see instances of increased scrutiny from existing and prospective customers and the lengthening of certain sales cycles, and expect this trend may continue. Longer sales cycles could cause our operating and financial results to suffer in a given period. Accordingly, the effect of significant downturns in sales and market acceptance of our applications, as well as potential changes in our pricing policies or rate of renewals, may not be fully reflected in our operating results until future periods. Additionally, we may be unable to adjust our cost structure to reflect any such changes in revenues. In addition, a majority of our costs are expensed as incurred, while revenues are recognized over the life of the customer agreement. As a result, increased growth in the number of our customers could result in our recognition of more costs than revenues in the earlier periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as subscription services revenues from new customers generally are recognized over the applicable subscription term. Furthermore, our subscription-based model is largely based on the size of our customers’ employee headcount. Therefore, the addition or loss of employees by our customers, including any significant reductions in force by our customers, or customer insolvencies resulting from severe economic hardship, could have an impact on our subscription services revenues in any given period. Although we have downside protection in our customer agreements in the form of base minimums, should there be any prolonged decrease in our customers’ headcounts, we could experience reduced subscription services revenues upon renewal or potentially outside of the renewal period, which could materially impact our business and operating results in any given period.
Our historic revenue growth rates should not be viewed as indicative of our future performance.
Our revenue growth rates have declined and may decline again in the future as the size of our customer base and market penetration increases. In addition, our future rate of growth is subject to a number of uncertainties, including general economic and market conditions, including those caused by recent economic downturn, as well as risks associated with growing companies in rapidly changing industries. Other factors may also contribute to declines in our growth rates, including slowing demand for our services, increasing competition, a decrease in the growth of our overall market, our failure to continue to capitalize on growth opportunities, and the maturation of our business, some of which may be magnified by macroeconomic conditions. As our growth rates decline, investors’ perceptions of our business and the trading price of our securities could be adversely affected.
Additionally, our ability to accurately forecast our future rate of growth is limited. It is difficult to predict customer and other user adoption rates and demand for our applications, the future growth rate and size of the cloud computing market for our services, or the entry of competitive applications. Moreover, it has been, and due to recent macroeconomic events, rising rates of inflation and related interest rate increases, and concerns about a possible recession, we expect it will continue to be even more difficult for us to forecast our operating results. We plan our expense levels and investments on estimates of future revenues and anticipated rates of growth. If our growth does not meet estimates, we may not be able to adjust our spending quickly enough to avoid an adverse impact on our financial results as a consequence of spending that is not aligned with our actual performance.
Moreover, we have encountered and will encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, including the risks and uncertainties described herein. If our assumptions regarding these risks and uncertainties (which we use to plan our business) are incorrect or change due to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
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We have a history of cumulative losses, and we may not achieve or sustain profitability on a GAAP basis in the future.
Until recently, we had incurred significant net losses on a GAAP basis in each period since our inception in 2005 and our quarterly operating results may fluctuate in the future. We expect our operating expenses to increase in the future due to substantial investments we have made and continue to make to acquire new customers and develop our applications, anticipated increases in sales and marketing expenses, employee headcount growth expenses, product development expenses, operations costs, and general and administrative costs, and therefore we expect we may incur losses on a GAAP basis in the future. Furthermore, to the extent we are successful in increasing our customer base, we also expect to incur increased net losses in the acquisition period because costs associated with acquiring customers are generally incurred up front, while subscription services revenues are generally recognized ratably over the terms of the agreements, which are typically three years or longer. You should not consider any prior period GAAP-profitability and growth in revenues as indicative of our future performance. We cannot ensure that we will achieve GAAP profitability in the future or that, if we become GAAP-profitable in a certain period, we will sustain such profitability.
We have substantial indebtedness which may adversely affect our financial condition and operating results.
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, $750 million aggregate principal amount of 3.700% notes due April 1, 2029, and $1.25 billion aggregate principal amount of 3.800% notes due April 1, 2032. Additionally, in April 2022, we entered into the 2022 Credit Agreement which provides for a revolving credit facility in an aggregate principal amount of $1.0 billion. As of July 31, 2023, we had no outstanding revolving loans under the 2022 Credit Agreement.
We may incur substantial additional debt in the future, some of which may be secured debt. There can be no assurance that we will be able to repay this indebtedness when due, or that we will be able to refinance this indebtedness on acceptable terms or at all.
In addition, our indebtedness could, among other things:
•make it difficult for us to pay other obligations;
•make it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, debt service requirements, or other purposes;
•adversely affect our liquidity and result in a material adverse effect on our financial condition upon repayment of the indebtedness;
•require us to dedicate a substantial portion of our cash flow from operations to service and repay the indebtedness, reducing the amount of cash flow available for other purposes;
•limit our flexibility in planning for and reacting to changes in our business;
•increase our vulnerability to the impact of adverse economic conditions, including rising interest rates (which can make refinancing existing indebtedness more difficult or costly); and
•negatively impact our credit rating, which could limit our ability to obtain additional financing in the future and adversely affect our business.
Our Senior Notes and 2022 Credit Agreement also impose restrictions on us and require us to maintain compliance with specified covenants. For example, our 2022 Credit Agreement includes a financial covenant that requires us to maintain a specific leverage ratio. Our ability to comply with these covenants may be affected by changesevents beyond our control. If we breach any of the covenants and do not obtain a waiver from the lenders, then, subject to applicable cure periods, any outstanding indebtedness may be declared immediately due and payable. Any required repayment of our debt as a result of a fundamental change or other acceleration would lower our current cash on hand such that we would not have those funds available for use in accounting principles generally accepted in the United States.our business.
Generally accepted accounting principles in the United States
We are subject to interpretation byrisks associated with our equity investments, including partial or complete loss of invested capital, and significant changes in the Financial Accounting Standards Board ("FASB"),fair value of this portfolio could adversely impact our financial results.
We invest in early to late stage companies for strategic reasons and to support key business initiatives, and we may not realize a return on our equity investments. Many such companies generate net losses and the SEC,market for their products, services, or technologies may be slow to develop or never materialize. These companies are often dependent on the availability of later rounds of financing from banks or investors on favorable terms to continue their operations. The financial success of our investment in any company is typically dependent on a liquidity event, such as a public offering, acquisition, or other favorable market event reflecting appreciation to the cost of our initial investment. The capital markets for public offerings and various bodies formed to promulgateacquisitions are dynamic and interpret appropriate accounting principles. A changethe likelihood of liquidity events for the companies we have invested in has and could further deteriorate, which could result in a loss of all or a substantial part of our investment in these principlescompanies. Additionally, instability in the global banking system has created bank-specific and broader financial institution liquidity risks and concerns, which may have an adverse impact on the companies we have invested or interpretationsmay invest in.
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Further, valuations of non-marketable equity investments are inherently complex due to the lack of readily available market data and the anticipated valuation at the time of our investment may not meet our expectations. In addition, we may experience additional volatility to our results of operations due to changes in market prices of our marketable equity investments and the valuation and timing of observable price changes or impairments of our non-marketable equity investments. Volatility in the global market conditions, including recent economic disruptions, inflation, and ongoing volatility in the public equity markets, may impact our equity investments. This volatility could have a significant effect onbe material to our reported financial results in any given quarter and may even affect the reporting of transactions completed before the announcement or effectiveness of a change.
We have broad discretion in the use ofcause our cash balancesstock price to decline. In addition, our ability to mitigate this volatility and realize gains on investments may not use them effectively.
We have broad discretion in the use of our cash balances and may not use them effectively. The failurebe impacted by our managementcontractual obligations to apply these funds effectively could adversely affect our business and financial condition. Pending their use,hold securities for a set period of time. For example, to the extent a company we have invested in undergoes an initial public offering (“IPO”), we may investbe subject to a lock-up agreement that restricts our cash balancesability to sell our securities for a period of time after the public offering or otherwise impedes our ability to mitigate market volatility in a manner that does not produce income or that loses value. Our investments may not yield a favorable return to our investors and may negatively impact the price of oursuch securities.

Risks Related to Ownership of Our Class A Common Stock
Our Chairman and CEOCo-Founders have control over key decision making as a result of their control of a majority of our voting stock.
As of OctoberJuly 31, 2017,2023, our co-founderCo-Founder and ChairmanCEO Emeritus David Duffield, together with his affiliates, held voting rights with respect to approximately 6145 million shares of Class B common stock 0.1and 0.3 million shares of Class A common stock, and less than 0.1 million RSUs.stock. As of OctoberJuly 31, 2017,2023, our co-founderCo-Founder, Co-CEO, and CEOChairperson Aneel Bhusri, together with his affiliates, held voting rights with respect to approximately 8 million shares of Class B common stock and 0.10.3 million shares of Class A common stock. Of the Class B shares held by Mr. Bhusri, approximately 0.1 million shares are subject to time-based vesting. In addition, Mr. Bhusri holds exercisable options to acquire approximately 2 million shares of Class B common stock and 0.2 million RSUs, which will be settled in an equivalent number of shares of Class A common stock. Further, Messrs. Duffield and Bhusri have entered into a voting agreement under which each has granted a voting proxy with respect to certain Class B common stock beneficially owned by him effective upon his death or incapacity as described in our registration statement on Form S-1 filed in connection with our IPO. Messrs. Duffield and Bhusri have each initially designated the other as their respective proxies. Accordingly, upon the death or incapacity of either Mr. Duffield or Mr. Bhusri, the other would individually continue to control the voting of shares subject to the voting proxy. Collectively, the shares described above represent a substantial majority of the voting power of our outstanding capital stock. As a result, Messrs. Duffield and Bhusri have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, they have the ability to control the management and affairs of our company as a result of their positions as our Chairman and CEO, respectively, and their ability to control the election of our directors. Mr. Duffield, in his capacity as a board member, and Mr. Bhusri, in his capacity as a board member and officer, each owe a fiduciary duty to our stockholders and must act in good faith in a manner they reasonably believe to be in the best interests of our stockholders. As stockholders, even as controlling stockholders, they are entitled to vote their shares in their own interests, which may not always be in the interests of our stockholders generally.
In addition, Mr. Bhusri has the ability to control the management and affairs of our company as a result of his position as a member of our Board of Directors and an officer of Workday. Mr. Bhusri, in his capacity as a board member and officer, owes a fiduciary duty to our stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of our stockholders.
The dual class structure of our common stock has the effect of concentrating voting control with our Chairman and CEO, and alsoCo-Founders, as well as with other executive officers, directors, and affiliates; this will limitaffiliates, which limits or precludeprecludes the ability of non-affiliates to influence corporate matters.
Our Class B common stock has 10 votes per share and our Class A common stock, which is the stock that is publicly traded, has one vote per share. Stockholders who hold shares of Class B common stock, including our executive officers, directors, and other affiliates, together hold a substantial majority of the voting power of our outstanding capital stock as of OctoberJuly 31, 2017.2023. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the conversion of all shares of all Class A and Class B shares to a single class of common stock on the date that is the first to occur of (i) October 11,17, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr. Duffield and Mr. Bhusri, or (iv) the date on which the holders of a majority of the shares of Class B common stock elect to convert all shares of Class A common stock and Class B common stock into a single class of common stock. This concentrated control will limit or preclude the ability of non-affiliates to influence corporate matters for the foreseeable future.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning purposes. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. If, for example, our ChairmanMr. Duffield and CEOMr. Bhusri retain a significant portion of their holdings of Class B common stock for an extended period of time, they could, in the future, continue to control a majority of the combined voting power of our Class A common stock and Class B common stock.
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Our stock price has been volatile in the past and may be subject to volatility in the future.
The trading price of our Class A common stock has historically been volatile historically, and could be subject to wide fluctuations in response to various factors, described below. These factors, as well as the volatilitymany of which are beyond our Class A common stock, could also impact the price of our convertible senior notes.control. The factors that have and may in the future affect the trading price of our securities some of whichinclude, but are beyond our control, include:not limited to:
•overall performance of the equity markets;
•fluctuations in the valuation of companies perceived by investors to be comparable to us, such as high-growth or cloud companies, or in valuation metrics, such as our price to revenues ratio;
•guidance, as well as our ability to give guidance, as to our operating results and other financial metrics that we provide to the public, differences between our guidance and market expectations, our failure to meet our guidance, any withdrawal of previous guidance or changes from our historical guidance;
•the research and reports that securities or industry analysts publish about us or our business, and whether analysts who cover us downgrade our Class A common stock or publish unfavorable or inaccurate research about our business;
•variations in, recommendationsand limitations of, the various financial and other metrics and modeling used by securities analysts that followin their research and reports about our securities;business;
•announcements of technological innovations, new applications or enhancements to services, acquisitions, strategic alliances, or significant agreements by us or by our competitors;

•announcements of negative corporate developments by us or by our competitors and other high-growth or cloud companies including, among other things, any announcements related to security incidents;
•disruptions in our services due to computer hardware, software, or network problems;
•announcements of customer additions and customer cancellations or delays in customer purchases;
•recruitment or departure of key personnel;
•the economy as a whole, political and regulatory uncertainty, and market conditions in our industry and the industries of our customers;
•trading activity by directors, executive officers, and significant stockholders, or the perception in the market that the holders of a large number of shares intend to sell their shares;
the exercise of rights held by certain of our stockholders, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders;
•the size of our market float and significant stock option exercises;
•any future issuances of our securities;
sales•the inability to execute on our publicly announced Share Repurchase Program as planned, including failure to meet internal or external expectations around the timing or price of share repurchases, and purchasesany reductions or discontinuances of any Class A common stock issued upon conversionrepurchases thereunder;
•the impact of current macroeconomic conditions, including instability in the global banking system, geopolitical conflicts, inflationary pressures, and recession;
•environmental, social, governance, ethical, and other issues impacting our convertible senior notes or in connection with the convertible note hedge and warrant transactions related to such convertible senior notes;brand;
•our operating performance and the performance of other similar companies; and
•the sale or availability for sale of a large number of shares of our Class A common stock in the public market.
Additionally, the stock markets have at times experienced extreme price and volume fluctuations that have affected and may in the future affect the market prices of equity securities of many companies. These fluctuations have, in some cases, been unrelated or disproportionate to the operating performance of these companies. Further, the trading prices of publicly traded shares of companies in our industry have been particularly volatile and may be very volatile in the future.
In the past, some companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
We have indebtedness inmay not realize the formanticipated long-term stockholder value of convertible senior notes.our Share Repurchase Program.
In June 2013, we completed an offeringNovember 2022, our Board of $350 million of 2018 Notes, and we concurrently issued an additional $250 million of 2020 Notes. In September 2017, we completed an offering of $1.15 billion of 2022 Notes.
As a result of these convertible notes offerings, we incurred $350 million principal amount of indebtedness,Directors authorized the Share Repurchase Program under which we may be requiredrepurchase up to pay at maturity in 2018, $250$500 million principal amount of indebtedness, which we may be required to pay at maturity in 2020, and $1.15 billion principal amount of indebtedness, which we may be required to pay at maturity in 2022, or upon the occurrence of a fundamental change (as defined in the applicable indenture). There can be no assurance that we will be able to repay this indebtedness when due, or that we will be able to refinance this indebtedness on acceptable terms or at all. In addition, this indebtedness could, among other things:
make it difficult for us to pay other obligations;
make it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;
require us to dedicate a substantial portion of our cash flow from operations to service and repay the indebtedness, reducing the amount of cash flow available for other purposes; and
limit our flexibility in planning for and reacting to changes in our business.
Exercise of the warrants associated with our 2018 Notes, 2020 Notes, or 2022 Notes may affect the priceshares of our Class A common stock. The Share Repurchase Program has a term of 18 months, but the program may be modified, suspended, or terminated at any time. Such repurchases may be made through open market transactions, through privately negotiated transactions, or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1, in accordance with applicable securities laws and other restrictions.
In connection withAny failure to repurchase stock after we have announced our offeringintention to do so may negatively impact our reputation and investor confidence in us and may negatively impact our stock price.
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The existence of the 2018 Notes, we sold warrantsShare Repurchase Program could cause our stock price to acquire uptrade higher than it otherwise would and could potentially reduce the market liquidity for our stock. Although the Share Repurchase Program is intended to approximately 4.2 million shares of our Class A common stock at an initial strike price of $107.96, which become exercisable beginning on October 15, 2018. In connection with our offering of the 2020 Notes, we sold warrants to acquire up to approximately 3.1 million shares of our Class A common stock at an initial strike price of $107.96, which become exercisable beginning on October 15, 2020. In connection with our offering of the 2022 Notes, we sold warrants to acquire up to approximately 7.8 million shares of our Class A common stock at an initial strike price of $213.96, which become exercisable beginning on January 1, 2023. The warrants may be settled in shares or in cash. The exercise of the warrants could have a dilutive effect ifenhance long-term stockholder value, there is no assurance it will do so because the market price per share of our Class A common stock exceedsmay decline below the strikelevels at which we repurchased shares and short-term stock price fluctuations could reduce the effectiveness of this program.
Repurchasing our common stock will reduce the amount of cash we have available to fund working capital, repayment of debt, capital expenditures, strategic acquisitions or business opportunities, and other general corporate purposes, and we may fail to realize the anticipated long-term stockholder value of the warrants. The counterpartiesShare Repurchase Program. Furthermore, the timing and amount of any repurchases, if any, will be subject to the warrant transactionsliquidity, market and note hedge transactions relating to the Notes are likely to enter into or unwind various derivative instrumentseconomic conditions, compliance with respect to our Class A common stock or purchase or sell shares of our Class A common stock orapplicable legal requirements such as Delaware surplus and solvency tests, and other securities linked to or referencing our Class A common stock in secondary market transactions prior to the respective maturity of the Notes. These activities could adversely affect the trading price of our Class A common stock.

relevant factors.
Delaware law and provisions in our restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock.
Our status as a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law (“DGCL”) may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and amended and restated bylaws contain provisions that may make the acquisition of our companyWorkday more difficult, including the following:
•any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class;
•our dual class common stock structure, which provides our chairman and CEOCo-Founders with the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A and Class B common stock;
•our boardBoard of directorsDirectors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause;
•when the outstanding shares of our Class B common stock represent less than a majority of the combined voting power of common stock:
◦certain amendments to our restated certificate of incorporation or amended and restated bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A and Class B common stock;
◦our stockholders will only be able to take action at a meeting of stockholders and not by written consent; and
◦vacancies on our boardBoard of directorsDirectors will be able to be filled only by our boardBoard of directorsDirectors and not by stockholders;
•only our chairmanchairperson of the board, chiefco-chief executive officer, either co-president,officers, co-presidents, or a majority of our boardBoard of directorsDirectors are authorized to call a special meeting of stockholders;
•certain litigation against us can only be brought in Delaware;
•we will have two classes of common stock until the date that is the first to occur of (i) October 11,17, 2032, (ii) such time as the shares of Class B common stock represent less than 9% of the outstanding Class A and Class B common stock, (iii) nine months following the death of both Mr. Duffield and Mr. Bhusri, or (iv) the date on which the holders of a majority of the shares of Class B common stock elect to convert all shares of Class A common stock and Class B common stock into a single class of common stock;
•our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without the approval of the holders of Class A common stock; and
•advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
In addition, Section 203 of the DGCL imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock, which may discourage, delay, or prevent a change in control of our company.
Furthermore, the change in control repurchase event provisions of our Senior Notes may delay or prevent a change in control of our company, because those provisions allow note holders to require us to repurchase such notes upon the occurrence of a fundamental change or change in control repurchase event.
These anti-takeover defenses could discourage, delay, or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire, any of which, under certain circumstances, could depress the market price of our securities.
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The exclusive forum provision in our organizational documents may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.
Our restated certificate of incorporation and our bylaws, to the fullest extent permitted by law, provide that the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. There is uncertainty as to whether a court would enforce this exclusive forum provision with respect to claims under the Securities Act. If securitiesa court were to find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or industry analysts publish inaccurate or unfavorable research aboutunenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition, and operating results.
Our bylaws include a provision providing that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (“Federal Forum Provision”). Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or discontinue publishing research aboutstate courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our business,stockholders to enforce any duty or liability created by the priceSecurities Act must be brought in federal court and trading volumecannot be brought in state court.
In addition, neither the exclusive forum provision in our restated certificate of incorporation nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities could decline.
The trading marketshall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholders’ ability to bring a claim in a judicial forum of their choosing for our securities will depend in part on the research and reports that securities or industry analysts publish aboutdisputes with us or our business. If onedirectors, officers, or more of the analysts who coverother employees, which may discourage lawsuits against us downgradeand our Class A common stock or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the pricedirectors, officers, and trading volume of our securities to decline.other employees.
We do not intend to pay dividends for the foreseeable future.
We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. Consequently, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment.

General Risk Factors
Adverse economic conditions may negatively impact our business.
Our business depends on the overall demand for enterprise software and on the economic health of our current and prospective customers. Any significant weakening of the economy in the United States or abroad, limited availability of credit, reduction in business confidence and activity, decreased government spending, or economic uncertainty, all of which are being impacted by concerns of a domestic or global recession, the Russia-Ukraine conflict, inflation, increasing interest rates, instability in the global banking system, and other macroeconomic factors, may continue to affect one or more of the sectors or countries in which we sell our applications. These economic conditions have arisen and can arise suddenly, and the full impact of such conditions can be difficult to predict. In addition, geopolitical and domestic political developments, such as existing and potential trade wars and other events beyond our control, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets. Alternatively, a strong dollar could reduce demand for our applications and services in countries with relatively weaker currencies.
These adverse conditions have resulted and could continue to result in reductions in sales of our applications, longer sales cycles, reductions in subscription duration and value, customer bankruptcies, slower adoption of new technologies, and increased price competition. Any of these events would likely have an adverse effect on our business, financial condition, and operating results.
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Catastrophic or climate-related events may disrupt our business.
Our corporate headquarters are located in Pleasanton, California, and we have data centers located in the United States, Canada, and Europe. The west coast of the United States contains active earthquake zones and the southeast is subject to seasonal hurricanes or other extreme weather conditions. Additionally, we rely on internal technology systems, our website, our network, and third-party infrastructure and enterprise applications, which are located in a wide variety of regions, for our development, marketing, operational support, hosted services, and sales activities. In the event of a major earthquake, hurricane, or other natural disaster, or a catastrophic event such as fire, power loss, telecommunications failure, vandalism, civil unrest, cyber-attack, geopolitical instability, war, terrorist attack, insurrection, pandemics or other public health emergencies, or the effects of climate change (such as drought, flooding, heat waves, wildfires, increased storm severity, and sea level rise), we may be unable to continue our operations and have, and may in the future, endure system interruptions, and may experience delays in our product development, lengthy interruptions in our services, breaches of data security, and loss of critical data, all of which could cause reputational harm or otherwise have an adverse effect on our business and operating results. In addition, the impacts of climate change on the global economy and our industry are rapidly evolving. We may be subject to increased regulations, reporting requirements, standards, or stakeholder expectations regarding climate change that may impact our business, financial condition, and operating results.
We may discover weaknesses in our internal controls over financial reporting, which may adversely affect investor confidence in the accuracy and completeness of our financial reports and consequently the market price of our securities.
As a public company, we are required to design and maintain proper and effective internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and provide a management report on the internal controls over financial reporting, which must be attested to by our independent registered public accounting firm. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated.
The process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 is challenging and costly. In the future, we may not be able to complete our evaluation, testing, and any required remediation in a timely fashion. If we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities could be negatively affected, and we could become subject to investigations by the Financial Industry Regulatory Authority, the SEC, or other regulatory authorities, which could require additional financial and management resources. In addition, because we use Workday’s financial management application, any problems that we experience with financial reporting and compliance could be negatively perceived by prospective or current customers, and negatively impact demand for our applications.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
Information relatingNone.
Purchases of Equity Securities by the Issuer
The table below sets forth information regarding our purchases of our Class A common stock during the three months ended July 31, 2023 (in thousands, except per share data):
Period
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Program (1)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)
May 1, 2023 - May 31, 2023— $— — $425,334 
June 1, 2023 - June 30, 2023384 214.85 384 342,885 
July 1, 2023 - July 31, 2023251 223.64 251 286,687 
Total635 635 
(1)In November 2022, our Board of Directors authorized the repurchase of up to $500 million of our outstanding shares of Class A common stock. We may repurchase shares of Class A common stock from time to time through open market purchases, in privately negotiated transactions, or by other means, including through the issuanceuse of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act, in accordance with applicable securities laws and other restrictions. The timing and total amount of shares repurchased will depend upon business, economic, and market conditions, corporate and regulatory requirements, prevailing stock prices, and other considerations. The Share Repurchase Program has a term of 18 months, may be suspended or discontinued at any time, and does not obligate us to acquire any amount of Class A common stock. As of July 31, 2023, we were authorized to purchase a remaining $287 million of our outstanding shares of Class A common stock under the Share Repurchase Program. For further information, see Note 13, Stockholders’ Equity, of the 2022 Notes was providedto Condensed Consolidated Financial Statements included in Current Report on Form 8-K dated September 15, 2017.Part I, Item 1 of this report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.Insider Trading Arrangements

During the three months ended July 31, 2023, the following directors and/or officers of Workday adopted or terminated a “Rule 10b5-1 trading arrangement,” as defined in item 408(a) of Regulation S-K intending to satisfy the affirmative defense of Rule 10b5-1(c):
Name and TitleActionTotal Shares of Class A Common Stock to be Purchased or SoldAdoption DateExpiration Date
Carl Eschenbach (Co-Chief Executive Officer)AdoptPurchase of up to $2,050,000 of Class A Common StockMay 30, 2023August 29, 2024
Rich Sauer (Chief Legal Officer, Head of Corporate Affairs, and Corporate Secretary)Adopt
Sale of up to 78,261 shares of Class A Common Stock (1)
June 7, 2023January 31, 2025
(1)Includes shares withheld or sold by Workday in mandatory transactions to cover withholding taxes in connection with the settlement of equity awards.


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ITEM 6. EXHIBITS
The Exhibits listed below are filed as part of this Form 10-Q.
Incorporated by ReferenceFiled Herewith
Exhibit No.ExhibitFormFile No.Filing DateExhibit No.
10.1†8-K001-35680May 25, 202310.1
10.2†8-K001-35680May 25, 202310.2
31.1X
31.2X
31.3X
32.1X
32.2X
32.3X
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)X
101.SCHInline XBRL Taxonomy Schema Linkbase DocumentX
101.CALInline XBRL Taxonomy Calculation Linkbase DocumentX
101.DEFInline XBRL Taxonomy Definition Linkbase DocumentX
101.LABInline XBRL Taxonomy Labels Linkbase DocumentX
101.PREInline XBRL Taxonomy Presentation Linkbase DocumentX
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)X
†     Indicates a management contract or compensatory plan.
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   Incorporation by Reference
Exhibit
Number
  Form File No. Filing Date Exhibit No. Filed Herewith
4.1 
Indenture dated September 15, 2017 between Workday, Inc. and Wells Fargo Bank, National Association
8-K 001-35680 September 15, 2017 4.1  
10.1 
Form of Convertible Bond Hedge Confirmation
8-K 001-35680 September 15, 2017 99.1  
10.2 
Form of Warrant Confirmation
8-K 001-35680 September 15, 2017 99.2  
10.3 
Form of Additional Convertible Bond Hedge Confirmation
8-K 001-35680 September 15, 2017 99.3  
10.4 
Form of Additional Warrant Confirmation
8-K 001-35680 September 15, 2017 99.4  
31.1 
Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
        X
31.2 
Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
        X
32.1 
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
        X
32.2 
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
        X
101.INS XBRL Instance Document        X
101.SCH XBRL Taxonomy Schema Linkbase Document        X
101.CAL XBRL Taxonomy Calculation Linkbase Document        X
101.DEF XBRL Taxonomy Definition Linkbase Document        X
101.LAB XBRL Taxonomy Labels Linkbase Document        X
101.PRE XBRL Taxonomy Presentation Linkbase Document        X

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: November 30, 2017
August 24, 2023
Workday, Inc.
Workday, Inc./s/ Zane Rowe
/s/ Robynne D. Sisco
Robynne D. Sisco
Zane Rowe
Chief Financial Officer
(Principal (Principal Financial and Accounting Officer)

Exhibit Index
68
    Incorporation by Reference
Exhibit
Number
   Form File No. Filing Date Exhibit No. Filed Herewith
4.1 
Indenture dated September 15, 2017 between Workday, Inc. and Wells Fargo Bank, National Association
 8-K 001-35680 September 15, 2017 4.1  
10.1 
Form of Convertible Bond Hedge Confirmation
 8-K 001-35680 September 15, 2017 99.1  
10.2 
Form of Warrant Confirmation
 8-K 001-35680 September 15, 2017 99.2  
10.3 
Form of Additional Convertible Bond Hedge Confirmation
 8-K 001-35680 September 15, 2017 99.3  
10.4 
Form of Additional Warrant Confirmation
 8-K 001-35680 September 15, 2017 99.4  
31.1 
Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
         X
31.2 
Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended
         X
32.1 
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
         X
32.2 
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
         X
101.INS XBRL Instance Document         X
101.SCH XBRL Taxonomy Schema Linkbase Document         X
101.CAL XBRL Taxonomy Calculation Linkbase Document         X
101.DEF XBRL Taxonomy Definition Linkbase Document         X
101.LAB XBRL Taxonomy Labels Linkbase Document         X
101.PRE XBRL Taxonomy Presentation Linkbase Document         X



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