Welcome to Workday's Fiscal 2025 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the call. [Operator Instructions] 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. On 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 and 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 15th, 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. And 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 close 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 experience 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 2025 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…

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 30, 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,…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] 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 this in 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.

Yes. 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 2 of them. Number one, I think for the last year, 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 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 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 -- 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 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, yes, 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 of 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 -- in the partner ecosystem is coming to fruition, and we're super excited about the potential impact it can have on us going forward.

Kash, I would just add, 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.

Thank you so much.

Thanks, Kash.

And our next question comes from the line of Mark Murphy with JPMorgan. Please proceed with your question.

Just following on Kash's question, the aspect of the lower customer headcount growth, we can see that nonfarm 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 perhaps a few points' worth? And then secondarily, I'm just wondering if it's more pronounced at HCM than FINS because it would touch the entire employee base on the HCM side.

Hi, Mark, I'm happy to start that and then maybe have Carl give more color. 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 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 nonfarm 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 with how they're seeing it and the increase over the baseline amount coming in.

Yes. Go ahead, Doug. You have some color?

Yes. 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.

Yes. Mark, I do think as both Zane and Doug alluded to, we did 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.

And does that impact HCM more than FINS?

Equally, equally.

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.

Yes, thanks very much. I want to maybe just continue on that question Mark was asking, which is I think one of the questions coming out of this will be, we understand some of the headwind of business. I guess what, I guess, buffers have you put into the guidance? Or have you changed sort of your thought process on either pipeline close rates or conversion rates so that we have a little bit more confidence in the full year guide? I realize the macro moves around a little bit. But can 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 some of the headwinds we've -- that have come up over the last quarter?

Yes, Kirk, this is Zane. I'll start and then let Carl finish the answer. We've been thoughtful as far as projecting out for the year and how we've looked at each of these dynamics. And Carl touched on the impact on the pipeline, the fact that these companies haven't necessarily moved out. It's just been a slowing effect, and 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. I'll point out, we've obviously moved the midpoint of our guide down $35 million for the full year. And we factored these two elements into account, and we are making adjustments accordingly for the year. But we believe that given what we see today, that the updated guidance accounts for the factors that we've mentioned here.

Yes. And I'd just add, Kirk, that 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 to close them throughout the rest of the year. We've taken that into account in our guidance. And 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. But I think what's really important to know 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 to 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. And all of these remain in our pipeline, which is what gives us confidence on the guide going forward.

Thanks guys.

And 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?

Yes. Thanks for the question, Brent. 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 four to six 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 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 any changes we've made outside the U.S.

Great. Thank you.

And our next question comes from the line of Brad Sills with Bank of America. Please proceed with your question.

Hello. 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 if some of these bigger platform deals where there's both FINS and HCM involved are going to 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 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.

Yes. 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 it, 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 then 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.

Hi, 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 impact that we've seen. So net -- if you net it out through the year, it's about 50:50 mix.

Just wanted to -- 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 health care segment and as well as our public sector, we are seeing that market continue to move, and they continued to perform really strong in Q1. In fact, I think health care 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 Department of Intelligent Agency.

Understood. Thank you very much.

And our next question comes from the line of Scott Berg with Needham. Please proceed with your question.

Hi, everyone. Thanks for taking the question here. Carl touched on it 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.

Yes, 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 were 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. And we backed 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 into medium enterprise. So overall, the medium enterprise continues to perform well. And actually, it's allowed us to even go down market 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.

And 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 margins, 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 consider effectively running Workday for a mid-teens growth and just leaning, cranking more on the margin upside? Is that on the table? Thank you.

Hi, Karl, yes. First off, I'll point out that as we've said for a number of quarters now, we continue to balance margin with revenue growth. And 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.

Hi, guys. Thanks for taking the question. 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 in some vertical and geography, a couple of deals that pushed late in the quarter? Just give us a sense for that linearity of how it developed and kind of where you came out.

Yes, 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 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. Has nothing at all to do with the competitive nature. In fact, I think we would say our competitors are helping us by pushing customers to migrate off their current and existing platforms, pushing them to the cloud. And when that happens, it opens up more opportunity for us. So I think 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. And then, 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? Have you reflected that at least either in the revenue guide or your thinking in backlog for the back half of the year? Is there a way to quantify how much of a persistent headwind, if there's kind of lower employee headcount, that renewal dynamic persists? What are we thinking here?

Yes, it's a good call out. We're assuming it remains consistent throughout the year. And to your point and I think what 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 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.

And our next question comes from the line of Michael Turrin with Wells Fargo Securities. Please proceed with your question.

Hi, 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 headcount 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.

Yes. Thanks, Michael. Yes, 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 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 prepared remarks, we talked about a couple of 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 there's a couple of 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.

All very helpful. Thank you.

And actually, Michael, one other thing I think 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 will be up and running in production, and we'll be able to monetize our partners who will be part of the 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.

I wanted to maybe double back on to 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 margin guide. I'd have to wonder with kind of initiatives around AI, with using the partner channel, innovating on product, I'd have to imagine that it would maybe make sense that at some point, macro is going to turn better, right, that 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 going to kind of get caught underinvested? Help me kind of understand that philosophy. Thanks.

Yes, Rishi, you've pointed out 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, having a workforce around the globe as we become more international ourselves. So there are a number of areas, and we don't want to put -- 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.

Yes. And I would just add, listen, our philosophy and strategy has been consistent. We want to 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, as we articulated, has been really solid again this quarter. 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 going to 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 our total market is outside the U.S. So we're going to continue to lean into the international opportunity. On the product side, we continued to invest in 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 margin simultaneously.

Wonderful. Thank you, guys.

Next question comes from the line of Derrick Wood with TD Cowen.

Great. Thanks. Carl, you guys called out health care 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 going to poke it on this topic. But do you think that anything that's kind of AI productivity gains related and that's leading to slower headcount growth? Or what would you flag as causing this delta versus what you guys thought about entering the year?

Yes, 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. Media and technology, to be specific, is definitely lower headcount growth than we anticipated from the past.

Okay. 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?

Yes. 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. Is that macro relation 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 and 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 want in the first quarter? Thanks.

Do you want to start with that, Doug?

Yes. I mean I guess the counter to that is that we're still seeing optimization in our customer base, meaning there's this rationalization of vendors and standardizing on our platform that we are seeing in customer base. This was uniquely two transformational large projects where they don't do any business with us today. And what that come -- what comes with that is a large business transformation. There's more cautiousness. There's more roundtrips, 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.

Yes. 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 HR IT, 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 want 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 prepared remarks, we continue to lean into our key growth areas, and I'm excited by the momentum we're building, including the full platform wins, Financials and industry wins and the growth of our partner ecosystem. And we're driving efficiencies across the business at the same time. We can optimize for investments we want to 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, Ms. Operator, to close today's call. And 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.