Workday Inc. (NASDAQ:WDAY)

The financial performance, as measured by economic profit, demonstrates a consistent pattern of negative value creation over the observed period. While net operating profit after taxes (NOPAT) exhibits a positive trend from 2020 onwards, it has not been sufficient to overcome the cost of capital applied to the invested capital base.

NOPAT Trend

Net operating profit after taxes began at a loss of US$113 million in 2020, increasing to a profit of US$84 million in 2021. This growth continued substantially, reaching US$506 million in 2022, US$102 million in 2023, and further increasing to US$673 million in 2024 and US$860 million in 2025. Despite this positive trajectory, NOPAT experienced a dip in 2023 before resuming growth.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating between 19.85% and 20.17%. A slight increase is observed from 19.91% in 2020 to 20.10% in 2025, indicating a marginal increase in the required rate of return for investors.

Invested Capital

Invested capital consistently increased from US$5,129 million in 2020 to US$9,420 million in 2025. This represents a significant expansion of the capital base over the six-year period, suggesting ongoing investment in operations and growth initiatives.

Economic Profit

Economic profit remained negative throughout the entire period. Starting at a loss of US$1,135 million in 2020, it fluctuated around this level, reaching a loss of US$1,132 million in 2021, US$1,035 million in 2022, and increasing to a loss of US$1,522 million in 2023. While the loss decreased to US$1,068 million in 2024, it remained negative, ending at a loss of US$1,033 million in 2025. The negative economic profit indicates that the company’s returns are not exceeding its cost of capital, despite the growth in NOPAT.

The increasing invested capital, coupled with a consistent cost of capital, contributes to the sustained negative economic profit. While NOPAT is improving, the rate of improvement is insufficient to generate positive economic profit given the size of the invested capital and its associated cost.

The financial data reveals notable fluctuations in both net income and net operating profit after taxes (NOPAT) over the six-year period under review.

Net Income (Loss)

The net income figures exhibit significant volatility. In the initial two years, there are substantial losses of US$481 million and US$282 million, respectively. This trend reverses in the third year with a modest net income of US$29 million, followed by another loss of US$367 million in the fourth year. The final two years show a marked improvement, with net income surging to US$1,381 million in the fifth year before moderating to US$526 million in the sixth year. This pattern indicates a recovery trajectory with considerable ups and downs, culminating in positive and substantially higher profitability compared to the initial years.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a consistent upward trend overall despite a minor dip in the fourth year. Starting from a significant negative value of US$113 million in the first year, NOPAT shifts to positive territory at US$84 million in the second year and climbs further to US$506 million in the third year. Although it declines to US$102 million in the fourth year, the metric rebounds strongly to US$673 million and US$860 million in the final two years. This trend corresponds with improving operational efficiency and profitability before tax considerations, underscoring enhanced operating performance over time.

In summary, the data reflects a company experiencing initial financial challenges with losses and negative operating profits that progressively improve, culminating in positive net income and solid operational profitability in the most recent years. The fluctuations observed in net income suggest episodic impacts beyond operational capabilities, while the upward trend in NOPAT demonstrates strengthening core business performance.

Provision for (benefit from) income taxes

The provision for income taxes demonstrates considerable volatility over the analyzed periods. It begins with a negative value of -2 million USD in early 2020, indicating a tax benefit or credit. This shifts to a modest positive provision of 7 million USD in 2021, before returning to a larger benefit of -13 million USD in 2022. A significant increase to 107 million USD is observed in 2023, followed by a sharp reversal to a substantial tax benefit of -1025 million USD in 2024. The latest figure in 2025 reflects a positive provision again at 112 million USD. These fluctuations suggest an irregular tax expense pattern, possibly influenced by varying taxable income, deferred tax adjustments, or extraordinary items across the years.

Cash operating taxes

Cash operating taxes show a generally increasing trend with notable irregularities. Starting at 13 million USD in 2020, this figure rises to 20 million USD in 2021, then unexpectedly falls to a negative value of -4 million USD in 2022, indicating a refund or credit situation. The amount then spikes sharply to 118 million USD in 2023. However, similar to previous volatility, it drops again to -3 million USD in 2024 before rising to 34 million USD in 2025. This pattern points to inconsistent cash tax payments possibly due to timing differences, utilization of tax credits, or adjustments in prior year tax liabilities.

Total reported debt & leases

The total reported debt and leases value exhibited an overall upward trend over the observed periods. Starting at 1,570 million USD in early 2020, the figure increased to 2,238 million USD by early 2021, followed by a slight decrease to 2,103 million USD in early 2022. Subsequent years saw a marked increase with values reaching 3,249 million USD in early 2023, then increasing gradually to 3,296 million USD in early 2024 and 3,362 million USD in early 2025. This pattern indicates a growing reliance on debt and lease obligations, particularly notable from 2022 onward.

Stockholders’ equity

Stockholders’ equity displayed a consistent and substantial growth trend throughout the periods analyzed. Beginning at 2,487 million USD in early 2020, it rose steadily each year: 3,278 million USD (2021), 4,535 million USD (2022), 5,586 million USD (2023), culminating at 8,082 million USD in early 2024 and 9,034 million USD by early 2025. The continuous increase in equity suggests positive retained earnings, additional capital contributions, or asset revaluations, strengthening the company’s net worth.

Invested capital

The invested capital increased at a diminishing yet overall positive rate across the reported years. Starting at 5,129 million USD in early 2020, it grew to 6,061 million USD by early 2021, then to 7,706 million USD in early 2022. Growth continued more slowly in subsequent years, reaching 8,178 million USD (2023), 8,631 million USD (2024), and 9,420 million USD (2025). This upward trend reflects increased resources committed to the business, likely in both equity and debt financing.

Summary of financial position trends

The increasing stockholders’ equity alongside a rising total debt and leases balance indicates that the company has been expanding its capital structure with a mixture of equity and debt. The growth in invested capital parallels these changes, showing an overall expansion in resource deployment. Notably, debt growth accelerated in later years, emphasizing a possible strategic leveraging to support business growth. The consistent equity increase suggests a solid financial foundation and potential profitability or capital inflows contributing to retained earnings and equity balance. These patterns demonstrate steady financial growth, with a balanced but gradually increasing leverage position.

The economic spread ratio demonstrates a fluctuating, yet generally improving, trend over the observed period. While consistently negative, indicating the company is not generating returns exceeding its cost of capital, the magnitude of the negative spread has decreased in recent years.

Economic Spread Ratio Trend

The economic spread ratio began at -22.12% as of January 31, 2020. It improved to -18.68% in 2021, and further to -13.43% in 2022. A slight deterioration occurred in 2023, with the ratio reaching -18.61%. However, the trend reversed in subsequent years, with improvements to -12.37% in 2024 and -10.97% in 2025. This suggests a gradual increase in the efficiency of capital allocation or a decrease in the cost of capital, or a combination of both.

The invested capital has consistently increased throughout the period, moving from US$5,129 million in 2020 to US$9,420 million in 2025. This growth in invested capital occurred alongside the fluctuating economic spread ratio.

Economic Profit and Invested Capital Relationship

Economic profit remained negative across all observed years, ranging from -US$1,135 million to -US$1,522 million. The increasing invested capital, coupled with consistently negative economic profit, contributes to the negative economic spread ratio. The narrowing of the negative spread ratio in later years suggests that while economic profit remains negative, it is not decreasing at the same rate as the growth in invested capital.

The observed trend in the economic spread ratio indicates a potential improvement in the company’s ability to generate returns on its invested capital, although further analysis is required to determine the sustainability of this trend and the underlying drivers.

The economic profit margin exhibited a fluctuating, yet generally improving, trend over the observed period. While consistently negative, indicating economic losses, the magnitude of these losses decreased from 2020 to 2025.

Economic Profit Margin Trend

The economic profit margin began at -28.46% in 2020. A notable improvement was seen in 2021, with the margin increasing to -24.37%. This positive trend continued into 2022, reaching -18.20%. However, the margin deteriorated in 2023 to -22.82%, before resuming an improving trajectory, reaching -13.77% in 2024 and further improving to -11.66% in 2025. This suggests a gradual increase in the efficiency of capital allocation over time, despite continued economic losses.

Adjusted revenues demonstrated consistent growth throughout the period. This revenue growth did not translate into positive economic profit, but it did contribute to the lessening negative impact on the economic profit margin.

Relationship between Revenue and Economic Profit Margin

Adjusted revenues increased from US$3,987 million in 2020 to US$8,866 million in 2025. Despite this substantial revenue increase of 122.4%, the economic profit remained negative across all years. The improvement in the economic profit margin from -28.46% to -11.66% suggests that revenue growth, while not sufficient to generate economic profit, did improve the company’s ability to cover its cost of capital. The rate of margin improvement slowed between 2024 and 2025.

Economic profit itself remained negative throughout the period, although the absolute value of the loss decreased from US$1,135 million in 2020 to US$1,033 million in 2025. This indicates that while the company is generating accounting profits, it is not generating returns exceeding its cost of capital.

Economic Profit

The economic profit figures show a slight reduction in the magnitude of the loss over the six-year period. The largest loss occurred in 2023 at US$1,522 million, representing a temporary setback in the overall trend. The decrease in the loss from 2024 (US$1,068 million) to 2025 (US$1,033 million) is relatively small, suggesting diminishing returns from current strategies.