Welcome to Workday's Fiscal 2025 first quarter earnings call. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the call. During the Q&A, please limit your questions to one. I will now hand it over to Justin Furby, Vice President of Investor Relations. Thank you. You may begin. Welcome to Workday's first quarter fiscal 2025 earnings conference call. the call, we have Carl Eschenbach, our CEO, Zane Rowe, our CFO, Doug Robinson, our Co-President, and David Somers, our Chief Product Officer. Following prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website, where this call is being simultaneously webcast. Before we get started, we want to emphasize that some of our statements on this call, particularly our guidance, are based on the information we have as of today and include forward-looking statements regarding our financial results, applications, customer demand, operations, and other matters. These statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. Please refer to the press release and the risk factors in documents we file with the Securities and Exchange Commission, including our fiscal 2024 Annual Report on Form 10-K, for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non-GAAP financial measures, which we believe are useful as supplemental measures of Workday's performance. These non-GAAP measures should be considered in addition to, and not as a substitute for or in isolation from, GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, in our earnings press release, in our investor presentation, and on the investor relations page of our website. The webcast replay of this call will be available for the next 90 days on our company website under the Investor Relations link. Additionally, our quarterly investor presentation will be posted on our investor relations website following this call. Also, the Customers page of our website includes a list of selected customers and is updated monthly. Our second quarter fiscal 2025 quiet period begins on July 15, 2024. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2024. With that, I'll hand the call over to Carl. Thank you, Justin, and thank you all for joining us today. I'm pleased to report our solid financial performance for the quarter, including 19% subscription revenue growth, 18% 12-month backlog growth, and non-GAAP operating margin of 26%. Over the past six quarters, we've made several key investments across the business, as well as important organizational changes to set the foundation for durable growth and continued margin expansion. In Q1, we continued to build on a number of important growth initiatives, including go-to-market changes that will help us further expand our total addressable market. In the quarter, we closed several strategic deals, including a landmark federal win at the Defense Intelligence Agency. We also held our annual Innovation Summit, where we hosted 25 industry analysts and showcased our organic innovation engine, which continues to be one of the key strengths of our company. We already are seeing tremendous feedback from the event, with lots of positive industry analyst coverage on the product roadmaps and the future of Workday. Our first quarter is always our seasonally slowest. We had clear areas of outperformance, including healthcare, public sector, and continued strength in financials and full platform wins. But we also closed fewer large deals than last Q1, notably in EMEA. When purchase decisions are being made, our win rates remain strong, but within the quarter, we experienced increased deal scrutiny as compared to prior quarters, and we are seeing customers committing to lower headcount levels on renewals compared to what we had expected. We expect these dynamics to persist in the near term, which is reflected in our revised FY 25 subscription revenue guidance. While we can't control the macro, we are focusing on what's in our control, and that is innovation, scaling our go-to-market engine and partner ecosystem, and delivering customer value. We remain confident we're doing the right things to build a long-term, durable business with balanced growth and margin expansion. With the emergence of AI, the shifting talent landscape, and pressure to realize operational efficiencies, organizations across geographies and industries are turning to Workday as their trusted platform to elevate humans and supercharge work. We made several key developments in Q1 that strengthen our position, and I'll share a few highlights. Let's start with customers. Our customers truly bring the power of Workday to life. A great example is our new partnership with the Defense Intelligence Agency. The DIA is the key intelligence agency for national defense in the United States. Workday will support the DIA on its mission to rapidly accelerate recruitment and onboarding efforts and create a diverse, trusted, and agile workforce. With Workday, they'll be able to identify, integrate, and direct skills and expertise to solve emerging intelligence problems when and where they are most needed. Not only is this a significant new win, but more importantly, it unlocks an incredible market opportunity for Workday in the federal government, and we expect it to increase our pipeline over the coming quarters. In fact, the DIA was on stage at our Federal Forum event in Washington, D.C., yesterday, discussing digital transformation in the government. Now, in its second year, the forum drew a record crowd of over 600 decision makers across more than 70 agencies from the world of government and policy. This is up 100% from our Federal Forum last year, and the momentum we are building here is exciting. Speaking of momentum, we continue to take share in financials, bolstered by our go-to-market and platform investments, combined with our compelling value proposition of having a single secure platform to manage both your people and money. In Q1, new financial management customers and full platform customers both increased more than 20% over Q1 of last year, and more than 90% of our nearly 2,000 Fins customers are now leveraging the power of our HCM platform as well. In Q1, we added several full platform, HCM and Fins customers, including Baptist Health, Covenant Health Systems, the City of Milwaukee, and The Onin Group, the largest privately held staffing company in the U.S. We also had a number of expansions within the office of the CFO, including AllianceBernstein, Hospital Sisters Health System, and John Muir Health. During Q1, we also expanded our leadership in HCM, adding new relationships with organizations including ALS Group U.S.A., Carhartt, and one of the largest P&C insurers in the world, which expanded its core financials footprint to add HCM. We had several strategic HCM expansions and renewals, including ING Bank, Sandvik AB, and Valeo Management Services. Beyond the wins, we celebrate when our customers go live on our platform. In Q1, Asda, Electrolux, Topgolf, County of Richland, Apex Group, and LVHN all successfully went live on Workday. Customers trust Workday to help them navigate huge transformations. They did so with the cloud, and now they're turning to us to help them responsibly leverage AI to drive productivity, efficiency, and cost savings. Workday gives them the ultimate advantage. We've been delivering AI capabilities to our customers for nearly a decade. We've built AI into the core of our platform, which means AI features and functionality are embedded natively in all of our applications. With more than 65 million users generating more than 800 billion transactions per year on our platform, the volume of clean, trusted data that Workday and our ecosystem can leverage for AI is truly unmatched. We continue to make significant investments to further enhance our leadership in this area and deliver trusted and responsible AI innovations that drive meaningful business results. We now have more than 50 AI use cases live in production and 25 generative AI use cases on our roadmap to help our customers make confident decisions faster, increase efficiencies, and make their people more productive. In Q1, several new innovations went live for early access customers, including AI-powered content generation capabilities with growth plans, job descriptions, and knowledge base articles. These automate repetitive tasks and put information in the hands of the right people faster. We also released AI-enabled payroll insights, which help payroll professionals detect anomalies faster and more accurately to save money and reduce risk. Perhaps the best example here is our Talent Optimization solution, which leverages Workday Skills Cloud. This is an AI-first SKU where we have seen strong attach rates on new deals and have significant momentum selling back to our customer base as well. I'm pleased to share that over half of our core customer base has now licensed this product, making it one of our fastest-growing ever. Continuing to accelerate our AI roadmap, we closed the acquisition of HiredScore in Q1, giving us a comprehensive AI-powered talent acquisition and internal mobility offering. Our shared customers are realizing a 25% increase in recruiter capacity with AI, one of the many reasons we're so excited about this combination. We closed our first joint deal this quarter, and we're rapidly building pipeline, particularly across our base of more than 4,000 recruiting customers. The power of Workday is our platform, and that gives us a ton of flexibility. To fuel growth, for example, in industries.... This is a key foundational element and a major differentiator for us. We've been focusing on deepening our purpose-built offerings in key verticals, including healthcare, public sector, financial services, and professional services. As you can see in the logos from this quarter, healthcare once again performed very well, with new ACV growth exceeding 50% in Q1. At the same time, our professional and business services vertical is already well on its way to eclipsing $1 billion in annual recurring revenue. In Q1, we released a natively built Configure Price Quote solution for services businesses, which integrates with CRM platforms to streamline the quoting process. Our research shows that for 95% of our customers, quoting is still happening in spreadsheets today, so this is going to significantly increase their efficiencies. Public sector was another highlight in Q1. In addition to the DIA, we continued to excel in state and local government, closing full platform wins with the cities of North Las Vegas, Milwaukee, and Palm Bay, and Monroe and Washington counties. In education, we had a record number of Workday Student go-lives in Q1, and now have taken 20 new customers live so far this year, including Iowa State University, University of Arkansas System, and Wake Forest University. Global expansion continues to be a key growth driver for Workday. We're focused on investing at all levels to build our regional businesses with local leadership, go-to-market, and product enhancements. For instance, this quarter, our native payroll solution for customers in Australia became generally available, and our global payroll platform is now available for early adopters as we extend the power of Workday with strategic partners like ADP, Alight, and more. On the go-to-market side, we began holding Workday Elevate events across APAC, Japan, and EMEA in Q1, and will continue throughout Q2. These events bring together thousands of prospects and customers, generating new pipeline and deepening our existing relationships. Just last week, we announced our plans to invest more than GBP 550 million in our UK operations over the next 3 years. We also announced that in early 2025, our customers will be able to access our core HCM financials and adaptive planning solutions locally on the AWS cloud in the U.K. Not only are we enabling compliance with data residency requirements, we're also boosting performance and helping businesses scale for the future. So as you can see, we're continuing to invest for our growth, and I'm energized by how we'll be able to empower more U.K. organizations with the power of our platform. And while it was a more challenging quarter in some of our international markets, we saw strength in France, the Netherlands, and Japan. Key international wins in Q1 included OCP Group, Knight Frank, and Aman Resorts. Our partner ecosystem is a powerful driver of customer success, and it continues to grow in both breadth and depth. Across the board, we're seeing continued growth in our referral and co-selling efforts, with our partners sourcing more pipeline and closing more ACV in Q1 than all of FY 2024 through our sales program. This points to increasing ecosystem-led growth, which is a key priority. We have over 200 co-sell and referral partnerships that are helping expand our routes to market. One of the partners that we signed in Q1 that I'm particularly excited about is Google. Under our new partnership, GCP customers will have access to Workday products through the Google Cloud Marketplace. We're off to a fast start, and we expect to have our first transaction via the marketplace this month. We also recently expanded our relationship with AWS to include co-innovation across industries and enhanced go-to-market investments. We've built over $75 million of active ACV pipeline with AWS, and the expanded partnership should only accelerate that. In Q1, we formed a new reseller agreement with Kyriba that enables Workday customers to integrate with a network of over 1,000 global banks. This dramatically reduces the time, complexity, and cost needed to integrate and adapt with changing banking requirements. Partners are critical to helping us accelerate and broaden our innovation footprint. In two weeks, we'll welcome 1,200 partners and customers to Las Vegas for DevCon, our annual developer conference. DevCon, as well as our developer ecosystem, has grown by more than 50% since last year, which is a testament to the momentum we're building across our platform. At the event, we'll be announcing new ways for partners to build, distribute, and monetize their applications on the Workday platform. We are also launching several other components of the program to enable us to embed partner solutions within Workday in ways we've never done before. With our cloud-native platform in Workday Extend, we are enabling AI innovation, not just from Workday, but our customers and partners as well. We now have more than 900 Extend customers and 1,600 apps, delivering significant value across our ecosystem of customers and partners. Workday Extend Pro, which includes AI Gateway, as well as Developer Copilot, launching later this year, enables our customers and partners to build AI-first apps that leverage the power of our platform. There is clearly an appetite to build AI-first apps on top of Workday. More than 50% of our Q1 Extend ACV was from Extend Pro, making it another one of our fastest-growing SKUs. And our AI Marketplace, which is going live next month, gives our customers access to the best of Workday AI and solutions from third-party partners together in one place. These are just a few of the latest examples of the breadth of our innovation and the reach of our platform. Now to close, as I've said many times, we have a durable business with multiple levers to drive long-term growth. With our leadership and investment in AI, our unique ability to address organizations' most critical challenges, and the deep relationships we have with our customers and partners, Workday remains well positioned to extend our market leadership. This is exactly what drew me to Workday and what continues to excite me. We also have a diverse business, serving more than 10,500 customers across industries, which now includes more than 60% of the Fortune 500, an incredible milestone and a testament to the strategic nature of our platform. And yet, we're just getting started. With more than 40,000 organizations in our addressable market and a continued opportunity to expand our footprint and deliver even more value within our existing customer base. Moving into Q2, we are well positioned to achieve our objectives in the near term while continuing to build for the long term. I'd like to thank our customers who put their trust in us, our partners, and especially my 19,400 workmates around the world for helping drive Workday forward. With that, I'll hand it over to Zane. Thanks, Carl, and thank you to everyone for joining today's call. Our Q1 performance was in line with our expectations across our key financial metrics. Subscription revenue in the first quarter was $1.815 billion, up 19%, including a 1-point benefit from the leap year. Professional services revenue was $175 million in the quarter, leading to total revenue in Q1 of $1.99 billion, growing 18%. U.S. revenue in Q1 totaled $1.49 billion, and international revenue totaled $497 million, both growing 18%. 12-month subscription revenue backlog, or CRPO, was $6.6 billion at the end of Q1, representing growth of 18%. Renewal volume in the quarter, including early renewals, was in line with our expectations. Gross and net revenue retention rates remained strong at over 95% and over 100%, respectively. Total subscription revenue backlog at the end of the quarter was $20.68 billion, up 24%. Our non-GAAP operating income for the first quarter was $515 million, resulting in a non-GAAP operating margin of 25.9%. Margin strength was driven by moderate revenue outperformance and lower expenses. Q1 operating cash flow was $372 million, growth of 34%. During Q1, we repurchased $134 million of our shares at an average price of $267.09 per share. In addition, starting in April, we began to fund withholding taxes due on employee equity awards by net share withholding. This reduced our dilution by 1 million shares in the quarter relative to our prior sell-to-cover method and impacted our cash flow from financing by $239 million in Q1. We ended the quarter with $7.2 billion in cash and marketable securities. As of April thirtieth, headcount stood at over 19,400 workmates around the globe. We were pleased to see the continued progress across our key growth initiatives, including momentum in full platform wins and continued ramping of our partner ecosystem, which we expect to support growth in the coming years. At the same time, we experienced elevated scrutiny in our sales cycle, particularly in EMEA. Within our customer base, we continue to see expansion, primarily through product add-ons versus customer headcount growth, which has slowed relative to our expectations. Taking these factors into account, we are updating our full year FY 2025 subscription revenue guidance to $7.7 billion-$7.725 billion, representing growth of approximately 17% compared to our previous guided range of 17%-18%. We expect Q2 FY 2025 subscription revenue to be $1.895 billion, representing 17% growth.... We now expect FY 2025 professional services revenue of approximately $650 million-$660 million, reflecting the Q1 outperformance and our Q2 expectations, along with our strategy of further leveraging our partner ecosystem. For Q2, we expect professional services revenue of $175 million. Turning to backlog. As we've highlighted previously, CRPO growth is influenced by quarter-to-quarter variability in renewal volume and new business bookings. The strength in overall renewal activity in FY 2024, including early renewals, caused our CRPO growth to outpace subscription revenue growth throughout last year. This aggregate effect is impacting our backlog growth this year. In Q2, as we saw in Q1, we expect CRPO growth to be below subscription revenue growth, impacted by the cumulative headwind from last year's strong renewal activity. In Q2, we expect CRPO to increase between 15% and 16%. We continue to see momentum across our core growth areas and are continuing to invest for future growth while driving increased efficiencies across the company. We now expect FY 2025 non-GAAP operating margins of approximately 25%. For Q2, we expect non-GAAP operating margin of 24.5%, which reflects our typical seasonality. GAAP operating margins for the second quarter and full year are expected to be approximately 20 and 21 percentage points lower than the non-GAAP margins, respectively. The FY 2025 non-GAAP tax rate remains at 19%. We continue to expect FY 2025 operating cash flow of $2.25 billion and capital expenditures of approximately $330 million. In closing, I want to reiterate our commitment to investing to support long-term growth while expanding margins. We continue to see strong customer demand and engagement across our platform, supporting our financial targets and helping drive our strategic growth initiatives. With that, I'll turn it back over to the operator to begin Q&A. Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue, and you may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. As a reminder, we ask that you please limit your questions to one. Our first question comes from the line of Kash Rangan with Goldman Sachs. Please proceed with your question. Hi, thank you very much, Carl and Zane. I just wanted to get a little bit more clarification. You talked about the extended sales cycles and also, smaller customer growth, headcount growth. Was that primarily restricted to EMEA, or did you see some of that in the U.S., too? And, as a follow-up, if I could, if the partner generation of new business, which seems to have outstripped all of fiscal 2024, if that momentum continues, would you be compelled to consider getting the guidance back on track? In other words, do we have enough of other factors at play that could get you back on track as the fiscal year progresses? Thank you so much. Yeah. Hi, Kash. Thanks for the question. Let me just, before I answer your question, take a quick moment to thank our workmates, customers, and partners around the world for helping to get off to a solid start to the year. And as you can see, Kash, by our results in Q1, it was a solid quarter, but we did see a few dynamics change, and specifically, you mentioned two of them. Number one, I think for the last year or year and a half, we've talked about we haven't seen any material change to the macro, meaning we haven't seen any additional, you know, scrutiny one way or the other. In fact, it's been rather consistent, but this quarter we did. We did see a bit more scrutiny, specifically on large deals and net new deals, and that wasn't just something in the U.S., it was truly around the world we saw that. I would also say that, you know, some of that may be because we're talking to our customers about full platform deals. We're no longer just talking about HCM deals, and when we sell full platform, particularly in the large enterprise market, we are selling to multiple buyers. We're telling them we're selling to the CHRO, we're selling to the CIO and the CFO, which makes it a little bit more of a complex deal for us, which makes some of these, you know, sales cycles a bit longer. That being said, when customers do make decisions, we're clearly winning our fair share of both HCM, financials, and full platform deals. So definitely some more scrutiny than we've seen in the past. And on the headcount trends, that was something that was globally. We saw less headcount expansion at time of renewals across the world. That wasn't just something in one region versus the other. And on the partners, yeah, to your point, we continue to lean into the investments we're making around our partners. In Q1, specifically in my prepared remarks, we called out a couple highlights, including that we built more pipeline in Q1 than we did all of last year. And the second thing we called out is we closed more business to our partners than we did all of last year. This is just evidence that the investment we're making in the partners and the partner ecosystem is coming to fruition, and we're super excited about the potential impact it can have on us going forward. Hey, Kash, I would just add, you know, as we think about that growth in partners, we would expect it to ramp through the year, and as Carl alluded to, we see great progress there. As it relates to subscription revenue, the bulk of that would probably then enter into the next fiscal year, more so than this fiscal year. But obviously, we're excited about the progress we're making on the partner front. Solid, clear answers. Thank you so much. Thanks, Kash. ... And our next question comes from the line of Mark Murphy with JP Morgan. Please proceed with your question. Just following on Kash's question, the aspect of the lower customer headcount growth. You know, we can see that non-farm payrolls were growing 5% just a couple of years ago. It has fallen to about 1.8% recently. I'm curious if that roughly aligns with the slower headcount growth you're seeing across the base. In other words, could you be renewing contracts from two to three years ago and seeing that type of a headwind, you know, perhaps a few points worth? And then, secondarily, I'm just wondering if it's more pronounced in HCM than Fins, because it would touch the entire employee base on the HCM side. Hey, Mark, I'm happy to start that, and then maybe have Carl give more color. You know, I'd say generally what we see is that the increase over our baseline has come down. So we still are fortunate to see increase in net headcount, you know, growth on a year-over-year basis. But what we've seen is a slowdown and candidly, just below our expectations. So I think some of what you referenced earlier on non-farm payrolls probably does align with what we're seeing, and the other part is just a subset of our cohort and our customer base just being impacted, you know, with how they're seeing it and the increase over the baseline amount coming in. Yeah. Go ahead, Doug, you have some color? Yeah. I'd just add to that, Mark, that we see that in both renewals that shows up, but also, as you know, we have a sort of true-up mechanism that happens on an annual basis. So customers, while they're still adding employees and headcount to the system, are doing it at a more moderated rate than we had anticipated in Q1. Yeah. And Mark, I do think as both Zane and Doug alluded to, we did, you know, kind of expect a slowdown in headcount growth as compared to last year, but in Q1, it was even lower than our forecast. And we don't necessarily see that changing throughout the rest of the year, and we took that into account as we thought about the full-year guidance. Does that impact HCM more than Fins? Equally. I, I think it's equally. It's not one versus the other. Obviously, we have a much larger installed base of HCM customers, so it would be more pronounced around HCM because of our customer base, but I think it's consistent across both HCM and Fins when we have both deployed. Understood. Thank you very much. And our next question comes from the line of Kirk Materne with Evercore ISI. Please proceed with your question. Yeah, thanks very much. I want to maybe just follow... continue on that question Mark was asking, which is, you know, I, I think one of the questions coming out of this will be, we understand some of the headwinds on your business. I guess, what, I guess, buffers have you put into the guidance, or have you changed or your thought process on either pipeline close rates or conversion rates, so that you, you, you know, we have a little bit more confidence in the full year guide? I realize, you know, the macro moves around a little bit, but could you just give us a little color on what you guys have done to make sure that the guide we have in front of us is appropriate, given, you know, some of the headwinds we've, you know, that have come up over the last quarter? Thanks. Yeah, Kirk, this is Zane. I'll start and then let Carl finish the answer. You know, we've been thoughtful as far as projecting out for the year and how we've looked at each of these dynamics, you know, and Carl touch on the impact on the pipeline, the fact that, you know, these companies haven't necessarily moved out. It's just been a slowing effect, and you know, that's the part that's impacted us more so than actually losing deals. In fact, our win rates have come in nicely aligned with where we've seen them historically. So our forecast methodology hasn't changed. We feel good about the forecast. You know, I'll point out, you know, we've obviously moved the midpoint of our guide down $35 million for the full year, and we've factored these two elements into account, and we are making, you know, adjustments accordingly, you know, for the year. But we believe that, you know, given what we see today, that the updated guidance accounts for the factors that we've mentioned here. Yeah, and I'd just add, Kirk, as we looked at our pipeline for the remainder of the year, we have a solid number of large opportunities in front of us. These opportunities, while there is more scrutiny, we think we have a really good chance of closing them throughout the rest of the year. We've taken that into account in our guidance. As you know, in any given quarter, these larger transactions can be pushed out, sometimes pushed out one or two quarters, and in some cases we pull them in. I think what's really important to note is none of the larger opportunities that didn't close in Q1 moved out of our pipeline. When a customer makes a decision to go through a big transformation of a platform like Workday and HCM or Financials, it's not if they're going to do it, it's when they're going to do it. All of these remain in our pipeline, which is what gives us confidence on the guide going forward. Thanks, guys. Thanks. Our next question comes from the line of Brent Thill with Jefferies. Please proceed with your question. Thanks, Carl. On EMEA, I guess when you talk about lower wins, I know you've made a lot of changes in your players. Do you think some of this may be just a player swap out in the short term, where you're having some maybe internal execution versus an external, or are you focused more that this is more of an external force that has nothing to do with some of the changes you've implemented over the last year? Yeah, thanks for the question, Brent. I, I absolutely don't think it has to do with anything we're doing internally. In fact, if you recall, for the last number of quarters, one of the things we've highlighted, probably for the last 4-6 quarters, we've highlighted the execution that we've seen out of EMEA. We have new leaders. We're going to market differently with pricing and packaging. We're going to market differently with partners over there. We've added a lot of capacity. So everything we're doing in Europe, and for that matter, the rest of the world, I think are all positive things. I don't think this is an execution issue at all. This is just a pocket of softness we saw, you know, outside of the U.S., and it was because of the factors we talked about. And specifically in EMEA, last Q1, we closed a large number of bigger deals. We didn't have that same close rate this Q1, so the year-over-year compare was a bit tougher. But I don't think this has anything to do with what we're doing or how we're executing. In fact, I'm really bullish on the leadership team and how we're going to market and the changes we've made outside the U.S. Great. Thank you. Our next question comes from the line of Brad Sills with Bank of America. Please proceed with your question. Oh, great. Thank you so much. Maybe if I could just ask one more on some of the impacts you've seen during the quarter. We certainly understand that some of these bigger platform deals, where there's both Fins and HCM involved, are gonna take longer to push over the finish line. We're certainly hearing that from the channel, that you're seeing more of those deals. How much of this would you attribute to that, you know, that move? It seems like something you're seeing increasingly, and I guess a related question to that is, was this largely limited to some of those newer platform deals as opposed to renewal deals? How did renewals in EMEA track this quarter? Thank you. Yeah, thanks for the question, Brad. I actually, Your question actually is part of my answer. So most of the deals that we see getting more scrutiny are net new deals. It's not renewals, and a lot of them are full platform when we're selling both HCM and we're selling Fins. When we're just selling HCM, we don't see as much scrutiny. That being said, if it's a very large HCM transformational or platform deal, there is some additional scrutiny that does take place, but we absolutely are seeing more when it's full platform. The other thing I would say, on the other side of that, is full platform deals in the medium enterprise are accelerating. The reason for that is we can find a company who has a buyer and decision-maker that are one and the same, and they make a decision around both HCM and financials at once. So we talked about our financials business and full platform business being up greater than 20% year-over-year. A lot of that is in the medium enterprise, but in the large enterprise, there is more scrutiny. Hey, Brad, this is Zane. I'll just add, as you look at that forecast for the year, the $35 million, we'd attribute roughly half of that to the deal scrutiny that Carl just alluded to, and then the other half to the headcount impacts that we've seen. So net, as you net it out through the year, it's about 50/50 mix. Just one nuance- Understood. This is Doug. Just one nuance I'd add to that. On large enterprise net new, as Carl was describing, there's actually pockets of strength, too. So there is an industry element to this. So within our healthcare segment and as well as our public sector, we are seeing that market continue to move, and they continue to perform really strong in Q1. In fact, I think healthcare was up another 50% in ACV growth in the quarter. So it's not to say there's a dearth, there's an absence of large deals getting done. It's just a tougher environment for most industries that we saw on a global basis, particularly Europe. Doug, when you talk about the public sector, it's not just state and local. Now we're seeing some big wins like we saw in federal with the Defense Intelligence Agency. Understood. Thank you very much. Our next question comes from the line of Scott Berg with Needham. Please proceed with your question. Hi, everyone. Thanks for taking my question here. You know, all touched on just briefly a little bit a moment ago, but how about some clarity in terms of what you're seeing in the mid-market? Sounds like full platform deals are fine, but are you seeing some of the same scrutiny around sales cycles, some of the regional pressure there? Any additional color there would be helpful. Thank you. Yeah, sure. So in the medium enterprise, we were really pleased with our performance, specifically in the U.S., where we've been selling into that market and built out the go-to-market engine a lot quicker than we did in Europe. We're building that out now in Europe, but in the U.S., our medium enterprise business was quite solid. The reason for that is, now that we've been pushing hard on financials, we are absolutely seeing the financials have an impact on full platform sales in the medium enterprise. Also, we've changed some of our pricing and packaging as we serve that market with Workday Accelerate, which now gives us the opportunity to sell a bundle or a suite, and it's easier to sell, and for customers, it's easier to consume. We back that up with some rapid delivery capabilities on the services side that actually allows customers to get value quicker. So across the board, we're really excited about what's happening in the medium enterprise. I'd also say when it comes to our partners, while yes, our partners are very impactful on the large enterprise, we talked about the pipeline build in Q1. A lot of that partner pipeline build came in the medium enterprise. So overall, the medium enterprise continues to perform well. And actually, it's allowed us to even go downmarket quite even further, what we now call the emerging enterprise, where we're able to sell because of the pricing and packaging and accelerated deployment, we can now address a market that's even further down than we've served in the past. Helpful. Thank you. Our next question comes from the line of Karl Keirstead with UBS. Please proceed with your question. ... Okay, great. Thanks. Maybe I'll pivot to margin. So I'll direct this at you, Zane. Typically, you don't get a margin raise alongside a revenue cut. So maybe a two-parter: Where did you find those efficiencies to create that outcome? And then secondly, maybe just a bigger picture question. Would you and the leadership team, you know, consider effectively, you know, running Workday for a mid-teens growth and just leaning, cranking more on the margin upside? Is that on the table? Thank you. Hey, Carl. Yeah, first off, I'll, I'll point out that, you know, as we've said for a number of quarters now, you know, we continue to balance margin with revenue growth, and, you know, we've been fortunate to see outperformance on the top line for a number of quarters. And obviously, as I've also said, we'll invest very thoughtfully in a number of these growth areas and investment areas, and we've been doing that, but we've been doing it judiciously. And we've also been focused across the company with our people, our processes, and our systems and how we think about scale and just really being mindful about where we spend and where we invest across the business. So I would say no adjustment to that line of thinking. We're still very focused on growing this business. We think we've got tremendous TAM and tremendous opportunities around the globe. On the top line, we're pleased with the performance and with our over 19,000 workmates have been leaning in how to be more productive and how to be more efficient as we continue to scale this business. So I'm pleased there. Candidly, I think there's more to come on both fronts and excited about the opportunity, but we'll continue to balance that. Okay. Thank you, Zane. Thank you. Our next question comes from the line of Alex Zukin with Wolfe Research. Please proceed with your question. Hey, you guys. Thanks for taking the question. So if I'm reading the comments right, it doesn't sound competitive on the sales cycle elongation. It sounds more concentrated in Europe. I guess, is there this dynamic where maybe some deals that you were expecting to get into Q1 actually got pulled into Q4 from some of the early renewal activity? Or was this concentrated, you know, in some vertical in geography, a couple of deals that pushed, you know, late in the quarter? Just give us a sense for that linearity of how it developed and kind of where you came out. Yeah, sure. Thanks for the question, Alex. So first, we don't think it's anything to do with our competitors or our competitive win rates. In fact, they've remained quite stable, and when customers do decide to make a decision and move forward, our win rates are very good. That being said, as you know, in any given quarter, deals can come in or come out. In Q4, we had a solid quarter, delivered, you know, above our guidance in Q4, and we were able to pull in some deals. At the same time, we saw some deals in Q1 push out into the rest of the year, but our pipeline of big deals remains extremely solid. It has nothing at all to do with the competitive nature. In fact, I think we would say our competitors are helping, you know, us by pushing customers to migrate off their current and existing platforms, pushing them to the cloud. When that happens, it opens up more opportunity for us. I think, you know, our win rates are solid, our discount rates have remained consistent, and when customers ultimately make a decision on a big platform transformation, they're coming to Workday. Perfect. Zane, maybe just a follow-up on the headcount element on these renewals. I guess, how should we think about that as a persistent headwind across your renewal cohorts or your renewal base? Is this... Again, have you reflected that, at least either in the revenue guide or you're thinking in backlog for the back half of the year? Is there a way to quantify, you know, how much of a persistent headwind, if this kind of lower employee headcount at renewal dynamic persists? What are we thinking here? Yeah, it's a good call-out. You know, we're assuming it remains consistent throughout the year. And to your point, and I think where you're alluding to, it actually didn't impact us as much on the revenue side in Q1, but we expect it to persist through the year, which is why I mentioned that, you know, half of the change we made in our subscription revenue forecast for the year was attributable to this headcount dynamic that we're seeing with our customers. But we're assuming no change from the current environment as we look at the remainder of the year. Perfect. Thank you, guys. Of course. Thank you. Our next question comes from the line of Michael Turrin with Wells Fargo Securities. Please proceed with your question. Hey, great. Thanks. Appreciate you taking the question. Q1 is generally lighter seasonally for Workday, but the commentary throughout the call suggests you're seeing more than just seasonal. So maybe I was hoping you could just level set how you assess how much is seasonal versus persistent. And to Alex's prior question, if we are in a world of lower headcounts for longer, maybe speak to any offsets you see on the product side, whether it's consolidation, some of the AI-related product efforts you're working on or something else you have in your playbook, just to potentially help offset some of that. Thank you. Yeah. Thanks, Michael. Yeah, Q1 obviously is always a more seasonally challenged quarter for us. That being said, we mentioned a couple of factors that changed in the quarter, and those dynamics were around the deal scrutiny. As we mentioned, we had lower performance internationally, specifically in EMEA, and then those headcount trends coming in lower than our forecast. And all of that, you know, led to us adjusting our guidance for the full year. As it relates to products and specifically AI, we're really encouraged by some of the things we're seeing as early and leading indicators around AI.... On my pre-prepared remarks, we talked about a couple AI SKUs that are growing quite quickly, including Talent Optimization. We talked about Extend and now Extend Pro, which has our AI Gateway, as part of it, growing very quickly, one of our fastest-growing SKUs ever. And we're also really excited around what we see with HiredScore, the acquisition for talent, an AI-driven talent acquisition platform that we closed in the quarter. The pipeline there is building nicely. And then lastly, I would say, you know, there's a couple other dynamics out there that we're seeing in the market. When we spend time talking to our customers, they are always asking us: What are you guys doing around AI, and how can we leverage the massive data set that you have for both us and your broader customer base to leverage AI? Because they are not looking to go spend money on another AI platform or some thin veneer solution that says they're AI. We are seeing quite a bit of activity within our customer base, and they're focused on leveraging all the AI capabilities we have, and where we see fit, we're monetizing it, like the examples I just articulated. Well, very helpful. Thank you. Actually, Michael, one other thing, I think I was in my prepared remarks. We're launching the AI Marketplace this quarter, and we launched and spoke about it at Rising last year. It's actually going, and we'll be up and running in production, and we'll be able to monetize our partners who will be part of that AI Marketplace starting this quarter. Thank you. Thanks, Michael. Our next question comes from the line of Rishi Jaluria with RBC. Please proceed with your question. Oh, wonderful. Thanks so much for taking my question. I wanted to maybe double back onto the philosophical debate on margin versus growth. So look, you're guiding to about 15.5% subscription growth in the back half of the year. I understand all the macro pieces. At the same time, you're raising, raising margin guide. I'd have to wonder, with kind of initiatives around AI, with the using the partner channel, you know, innovating on product, I'd have to imagine that it would maybe make sense that at some point, macro is gonna turn better, right? This is not sales execution, this is not competition, and maybe the market starts to grow faster. I guess why not kind of keep your foot on the accelerator when it comes to, investments, especially given all these opportunities and how expensive AI workloads are, to position yourself better for when macro eventually does turn better, and you're not gonna kind of get caught underinvested. Help me kind of understand that philosophy. Thanks. Yeah, Rishi, you've pointed out, you know, a number of areas that we continue to invest in, and obviously, we're encouraged, as I mentioned, by the returns we're getting on those investments. We're also being thoughtful on the pace of those investments and as we build up those investments over time. So we feel like we're in a great position where we can continue to grow the top line, and then also, as we scale this business, just be thoughtful around all the areas where we can benefit from internally, whether it's using AI internally, it's just being more productive internally, you know, having a workforce around the globe as we, as we become more international ourselves. So there are a number of areas, and we don't want to let our foot off the accelerator on the top line. And then, candidly, we just want to be very thoughtful in where we make those investments and how we can leverage those. So we feel like we're well positioned to take advantage when things do turn around and with all the progress we've made in a number of the key areas that we've highlighted previously. Yeah, and I would just add, listen, our philosophy and strategy has been consistent. We wanna build a company that has durable long-term growth while expanding operating margins, and we're doing exactly that. We're finding operational efficiencies across the company while continuing to lean into our key investment areas, like financials. Our financials business, that we articulated, has been really solid again this quarter. You know, our units are up 20% year-over-year, and it's pulling through full platform sales. We're leaning into the partner ecosystem, and we talked about all the goodness that's happening with our partners. We're not gonna pull back on our partner investment. In fact, if anything, I want to lean deeper into it. Internationally, while we had an air pocket in Q1 from a bookings perspective, let's not forget that greater than 50% of the TAM associated with, you know, our total market is outside the U.S. So we're gonna continue to lean into the international opportunity. On the product side, we continued to invest in the business, quite deeply. We have a whole bunch of things that we showcased recently at our Innovation Summit. We have 50 different AI solutions in the market, with 25 more coming out later this year. So we're investing in the business. What we're doing slightly better is we're more prudent internally on where we're investing those dollars, and that is paying off in sustained long-term growth and expanding operating margins simultaneously. All right. Wonderful. Thank you, guys. Next question comes from the line of Derrick Wood with TD Cowen. Please proceed with your question. Great, thanks. Carl, you guys called out healthcare and public as strong verticals. Are there certain verticals you'd call out that are seeing slower than expected headcount growth? And I know investors are gonna poke on this topic, but do you think that anything's kind of AI productivity gains related, and that's leading to slower headcount growth? Or what would you flag as, you know, causing this delta versus what you guys thought about entering the year? ... Yeah, thanks for the question. Specifically on headcount growth, there are some industries, and I think you've seen it out there, where we do see a bit slower headcount growth. You know, media and technology, to be specific, is definitely lower headcount growth than we anticipated from the past. Okay. And, and just on the just in terms of what do you think caused the delta versus what you guys were thinking at the beginning of the year? Is it macro-related? Is there anything AI-related that you'd call out? Yeah. So as we indicated, we did reset our forecast for the full year on headcount growth, and it was down over last year, and it came in under what we had actually forecasted. I think it's macro related. You know, coming from AI, I don't think we're in a position to say that we see that yet. I just think in general, we're seeing people not expand their headcount growth, and in some cases, like you've seen in the high tech market, which is a big vertical for us, they've actually had layoffs. And when it comes to time of renewal, we have to reset our numbers. Understood. Thank you. Thank you. And our final question will come from the line of Brian Schwartz with Oppenheimer. Please proceed with your question. Hi, thanks for taking my question. Squeezing me in. Carl and Doug, just one question I had on the scrutinizing of larger deals that you're seeing. Is that at all reflecting that the business cost optimization cycle could be slowing, that reducing vendors is less of a priority out there in budgets? I guess, are you seeing any changes in the number of products that you're replacing in deals that you won in the first quarter? Thanks. You wanna start with that, Doug? Yeah, I mean, I guess the counter to that is that we're still seeing optimization in our customer base. Meaning there, there's this rationalization of vendors and standardizing on our platform that we are seeing in customer base. This was uniquely to transformational large projects where they don't do any business with us today, and what comes with that is a large business transformation. There's more cautiousness, there's more round trips, there's more approvals, is where we saw that. So I don't know that I'm prepared to say that that era is over because of what we're seeing specifically within our customer base. No, yeah. Doug, I don't know if I have much to add, other than our customer base is looking for Workday to consolidate their footprint around HRIT, no doubt. And we think we can do that because we have the platform and the extensibility to bring more and more applications on top of us. It's really the new deals, net new, specifically in large enterprise on a global basis, that we're seeing the scrutiny pick up. Thank you for taking my question. Thank you. Ladies and gentlemen, thank you for your participation on today's conference. I'll now turn it over to Mr. Eschenbach for final comments. Thank you, operator. I just wanted to take a few minutes to say something to the broader audience and thank everyone. First, I would like to thank all the analysts for joining us today, and I'd also like to send a special thanks out to our Workmates, customers, and partners around the globe who continue to help fuel Workday's success. As you heard from my pre-prepared remarks, we continue to lean into our key growth areas and am excited by the momentum we're building, including the full platform wins, financials and industry wins, and the growth of our partner ecosystem. We're driving efficiencies across the business at the same time. We can optimize for investments we wanna make by being much more smart about what we're doing internally, and we are committed to delivering a balance of growth and margin expansion. With that, I'd like to hand it back over to you, Miss operator, to close today's call. I wish everyone a great day, great evening, and a good summer. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.