Operator: Ladies and gentlemen, welcome to Workday's First Quarter Fiscal Year '27 Earnings Call. [Operator Instructions] I will now hand it over to Justin Furby, Vice President of Investor Relations. Please go ahead.

Justin Furby: Thank you, operator. Welcome to Workday's First Quarter Fiscal 2027 Earnings Conference Call. On the call, we have Aneel Bhusri, our CEO; Gerrit Kazmaier, our President, Product and Technology, Rob Enslin, our President and Chief Commercial Officer; and Zane Rowe, our CFO. 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 includes 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 the documents we file with the Securities and Exchange Commission, including our fiscal 2026 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 disclosure 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, the prepared remarks of this call and our quarterly investor presentation will be posted on our Investor Relations website following this call. Our second quarter fiscal 2027 quiet period begins on July 15, 2026. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2026. With that, I'll hand the call over to Aneel.

Aneel Bhusri: Thanks, Justin, and thanks to everyone for joining us today. It's great to be with all of you. I now have a full quarter under my belt since returning as CEO and I truly feel the energy building at Workday every day, both on our path forward on AI and the company as a whole. We're in New York City this week for the Sana AI Summit, where we brought together some of the brightest minds in AI with our top customers. It's an incredible event, and it was great to see a few of you there. A few weeks ago, we hosted our top industry analysts at our Annual Innovation Summit, typically a skeptical group, they came away generally impressed by the pace of innovation and by our renewed focus on operating like a startup. One of them even called it the reinvention of Workday. Indeed, their reaction to our vision and execution around AI told me that we are absolutely on the right path. So do our Q1 results. We had a great first quarter. In fact, it was the best first quarter of new ACV growth in 5 years, anchored by the strength of our core business and the traction we're seeing with AI. Following slower ACV growth in fiscal year '26, we're seeing momentum once again building in the business. I'm confident in our ability to drive accelerated new ACV bookings this year as we bring new agents to market for our customers and drive even greater adoption. Last quarter, I mentioned I came back to help Workday lead again during the biggest technology transformation of our lives. After being back for 3 months, I have even more conviction that this is Workday's moment to lead. But to do it, we need to operate differently than we have been. And coming back, I was very focused on returning Workday to a start-up orientation and a growth mindset. Indeed, I watched a lot of Steve Jobs videos where he talked about his management approach when he returned as CEO. What struck me most wasn't about what Apple built after he returned, which was obviously incredible. It was more about his management philosophy. There was one interview in particular from All things D where he called Apple the biggest start-up in the world and said it was the start-up mindset he brought back, fewer layers, faster decisions, the best ideas winning, more ownership. We are trying to emulate that start-up playbook. As a great philosopher Yogi Berra once said -- and apropos that we were in New York City this week -- "It's like deja vu all over again." And so we're going back to our founding principles. I've said before, Chapter 4 is a refounding moment for Workday. With AI, we are essentially a start-up again. We're start-up sitting on one of the most important enterprise platforms ever built and the trust of more than 11,500 customers. We need to embrace that mindset. It's all about focus and trust, clear ownership and the best ideas winning. That's how we are leading Workday now and it's how Dave and I led the company early on. As part of this mindset, we've simplified our priorities to three. Number one, build and deliver the AI future. Number two, grow with our customers. And number three, live our values. We've also streamlined ownership across the organization, so every workmate knows exactly how their work connects, fewer things done with greater focus, a dedicated AI agent factory, building agents across all of our application areas, clear ownership and accelerated development of our AI APIs. We've got the right people to do it. We have some incredible leaders from the companies we have acquired now in key roles at Workday. One of them is Joel Hellermark, the founder of Sana, who we named our Chief AI Officer just today. That's by design. These leaders know the start-up mindset and they're helping Workday move faster and stay focused. I've also thought a lot about how Workday wins in this new chapter. I've met with dozens of customers since I've been back, and I keep hearing the same thing. Not one of them is looking to replace Workday with something they're building internally or from a start-up. Instead, they were looking to us first for AI solutions for the HR and finance worlds, and hopefully, IT in the future. It's really our opportunity for the taking, but we need to execute flawlessly and with speed. We have all the requisite components, one data model for all customers, one security model and a true cloud architecture. Our business process framework gives AI the rails it needs to operate safely and accurately inside the enterprise. And over the past several years, we have completely rewritten our tech platform to be AI native in the way we manage transactions, reports and UI requests. That's basically the foundation we spent 21 years building, and now it's been modernized for AI down to the core OMS. And we're delivering the results as well. Q1 was our first quarter with both Sana and Paradox fully integrated. With Sana, we're giving our customers a completely new Workday experience. It's a new front door to Workday that is simple and modern. The Sana platform is also the foundation for everything we're building in AI going forward. Joel and his team have created something remarkable, and the integration has gone further and faster than I anticipated. We've already proven that customers trust Workday to deliver AI through agents we acquired. This is a year we prove that they also buy the agents we're building organically. Agents that only Workday can build, and Gerrit will share more on that momentum in a moment. And while there are some who believe that AI can disrupt Workday, I see something different. Our chance to once again be a disruptor with AI clearly driving that disruption. To that point, Gerrit will talk about Sana for ITSM and the new travel agent we announced today at the Summit. These are early examples of what it looks like when we use Sana to rapidly innovate on top of our data and context. What ties all this together is one simple truth. Customers don't want AI for AI's sake. They want AI that adds value to how they run their businesses. Our early adopter customers are already seeing that and they want more from Workday. To close, I am confident that Workday is ready for this AI moment. Our core business is strong, our AI strategy is working and our execution is accelerating, starting with Q1. Seeing the agent's Gerrit is building and the success Rob is having selling and deploying them with customers, I couldn't be more confident in our path ahead and ability to lead. Gerrit, over to you.

Gerrit Kazmaier: Awesome. Thanks, Aneel, and hello to everyone. For AI, the world model, it is like the Holy Grail. Today, a large language model, it just predicts the next token in a sentence. And the world model, it is the step change needed for it to understand the physics of its real environment. It's about how things actually work and the laws that govern them. On Workday's platform, we have over 80 million users under contract and approximately 1.4 trillion transactions annually. That is giving us a set of data on context that no other competitor can replicate. For more than 20 years, we have been on the journey of building the world model of work. And here is what we have done. We have mapped the patterns of work at scale. Who approves what, how money moves, how people get hired, assessed, develop and scheduled for their work and the policies, the processes and the exceptions around them. And here is the key insight for you. This world model of work, it is the best context engine for agentic HR, finance and beyond. It unlocks unmatched enterprise grade accuracy for AI automation. All of this is adding up to agents that our customers can trust to perform actual work inside real business processes. And you can see that clearly in the impact that they are delivering already for our customers. In Q1, for example, we have supported 14 million hiring processes with our recruiting agent. That is up 44% year-over-year. And we have analyzed more than 1.1 million contracts with contract intelligence. That is up 53% from last quarter. Now that is the world model of work at work. And while we're driving all of this amazing impact, the pace of innovation here at Workday, it is accelerating. We now have 20 organic agents in GA or EA, and a number of customers using these agents has more than doubled quarter-over-quarter with over 4,000 customers using at least one organically developed agent as of today. And here are just a few highlights for you. Deployment agent is now being used in our first end-to-end customer project. It is designed to deliver an estimated 30% reduction in implementation hours and costs. And in our next wave of AI-driven projects, we are aiming to get that reduction up to 50%. And here is why this is so important. This reduction in time and in cost of deployment, it is removing historic barrier to choose Workday, particularly in the mid-market segment. Further, customers like the University of Arkansas System, GE Vernova and Mohegan, they are using deployment agent across the Workday systems to instantly resolve issues and answer questions, so admins, they can spend their time moving their projects forward. Also, we are seeing a super-fast takeoff of our Self-Service Agent. This quarter, our first Fortune 500 customers are expected to go live on Self-Service Agent, and we will take another big step at the end of this month. All HCM and finance customers on our AI terms of service, they will get Sana for Workday and our Self-Service Agent as a part of their existing contract. So now let's talk about our accelerating AI business momentum. In Q1, our new ACV from agentic AI product, it grew more than 200% year-over-year. And we are also approaching USD 500 million in ARR from our agentic AI solutions. But we are not stopping here. AI, it lets us break free from the narrow definition of legacy business applications that lead to frustrating user experience brakes and outsized spend for so many companies out there. With Sana, as our AI platform, we are pushing the boundaries of HR and finance and IT with new AI solutions. Just today, here in New York City, we announced two new agentic solutions from Workday that proved this out. Sana Travel Agent brings business travel planning, booking and expenses into a single conversational experience. With more than 5 million expense reports processed monthly on Workday and much of it is travel, this agent, it takes on the heavy lifting. It can automatically handle bookings, receipts, policy checks and expenses. So employees get a more seamless travel experience and finance teams they get real-time visibility into current spend and future travel commitments. We have also announced Sana for ITSM, which automates workflows for employee on and offboarding, access changes and everyday IT request. Many service requests start with employee life cycle changes that Workday already knows about, like joining a company, moving across teams or even exiting. And with the key data, the work identity, the org chart, job profiles and so much more running on Workday, we inherently know the chain of approvals, the required policies and the right work context. That allows us to simplify and automate ITSM request at a whole new level. Lastly, let's take a look at the Workday platform and our AI momentum there. Workday Extend Pro enables customers to build their own AI-powered solutions on our platform, taking advantage of our AI APIs. In Q1, Extend Pro continued to be one of the fastest-growing products with new ACV nearly doubling year-over-year. And here is our approach. At Workday, we embraced the AI ecosystem and we designed for openness to our customers and our partners, they can build their own AI innovations without locking them into a single vendor stack. We are giving our customers choice and three clear paths to run agents on the Workday platform designed to meet them wherever they are. First, our customers can build their own AI agents with Workday's agent-ready tools. These are a new class of Workday connectors and APIs that are purpose-built for autonomous consumption by AI agents at enterprise scale and available via open standards like MCP. Second, our customers can plug in Workday agents into their agentic front door using the A2A protocol. And already in Q1, we have made Self-Service Agent available in Microsoft Teams, Microsoft Copilot and Google Gemini. And third, they can use Workday's agents in Sana for the fully optimized work experience. The Workday provides the reasoning, the context and the ultimate AI user experience. It's the AI workbench for work. These options give our customers and partners the flexibility to adopt AI the way that best fits their business. So stay tuned for our upcoming developer conference, DevCon, the first week of June in Las Vegas. There, we will announce new Workday AI platform innovations. And here is the bottom line of all of this. Enterprise AI starts to pay off when agents can perform actual work with the same approvals, security, policy and guardrails that govern the rest of the business. That's exactly the future we are delivering for our customers. Powerful AI agents harnessing the world's model of work built on an open platform. And with that, over to you, Rob.

Robert Enslin: Thank you, Gerrit, and hello, everyone. We're proud that more than 11,500 customers around the world trust Workday with the most important parts of their business. From payroll to closing the books. And as Aneel said, growing with our customers is one of our top priorities. You see that in our results. In Q1, expansions once again drove roughly 60% of our subscription revenue growth with customers like Queensland University of Technology, Rakuten Group and Bank OZK expanding their relationships with Workday. We also continue to go deep in federal and had a record turnout at our fourth annual Fed forum in D.C. last month with nearly 600 attendees. And in Q1, we kicked off the next phase of our contract with the Defense Intelligence Agency. Also in Q1, net new business drove 40% of our subscription revenue growth. We formed new relationships around the world with key brands including Harley-Davidson, Del Monte, Australian Gas Infrastructure Group, Smiths Group, Heartland Dental and ACHM Hotels by Marriott. State and local government was also a standout this quarter, where we signed statewide deals with the State of Delaware and the Commonwealth of Massachusetts. Turning to AI. The numbers this quarter tell a clear story. More than 1/4 of new ACV from customer base expansions came from AI and expansion deals that included AI were over 50% larger on average. The pattern is consistent. Customers who adopt our AI go deeper on the platform. The University of Arkansas system is a great example. They have 21 institutions including research universities, community colleges and an academic medical center, all on a single Workday instance, they process over 2 million transactions a month. And in Q1, they used our deployment agent to cut support tickets and uncover configuration insights that once required manual searches. Deployment agent has significantly increased the operational velocity and allowed them to scale Workday with less reliance on external consultants. Our Flex Credits pricing model is quickly gaining traction, with Flex Credits, we've unified AI monetization across Workday, one model for agents, AI APIs and data cloud. It makes AI adoption simpler for our customers. While still early in the journey, we're seeing a growing mix of AI monetization coming through Flex Credits. And as we bring our new agentic innovations and acquired agents onto the model throughout the year, this will become a more meaningful part of how we grow. We're also continuing to make progress outside of North America. In APAC, we expanded our operations into Vietnam, which opens up a brand-new market for Workday. This strategic expansion is made possible by 5 global and regional partners, all dedicated to meeting the growing local demand in Vietnam for digital transformation. And in EMEA, we launched an EU-based data residency in Frankfurt. This was a significant milestone for European customers with data sovereignty requirements. We're also expanding Workday GO globally to help these customers get up and run faster in a more standardized way. EMEA is now our second largest region for medium enterprise, which we define as 500 to 3,500 employees. A new ACV in that segment grew by more than 50% in the quarter. Workday GO is now available in France, Germany and the U.K. with an additional 14 countries available through our partner network. Speaking of partners, our ecosystem continues to be a meaningful driver of our growth. In Q1, roughly 30% of net new ACV was sourced by partners. We also hit several milestones worth mentioning, including Insperity's HRScale solution is now generally available, bringing Workday to the PEO market for the first time to deliver full-service HR or growing businesses. Workday Recognition powered (sic) [ provided ] by Achievers is live and we expanded our Workday Wellness program with Morgan Stanley at Work and PerkSpot. The momentum this quarter was broad across expansions, net new AI and international. We are growing with our customers and continuously evolving to meet their needs. Now over to Zane to share more on the financials.

Zane Rowe: Thanks, Rob, and thank you to everyone for joining today's call. As Rob mentioned, our results this quarter demonstrate ongoing customer adoption across our platform as enterprises around the globe turn to Workday to manage and empower their most important assets. Subscription revenue in Q1 was $2.354 billion, up 14%. Professional services revenue was $188 million, resulting in total revenue of $2.542 billion, growth of 13%. From a geographic perspective, U.S. revenue in Q1 totaled $1.89 billion, up 13% and international revenue totaled $649 million, up 16%. 12-month subscription revenue backlog or cRPO, was $8.81 billion at the end of Q1, growing 15.5%. This was driven by continued customer expansion, bolstered by our AI solutions, and growth from new customers. Total subscription revenue backlog at the end of Q1 was $27.29 billion, up 11%. Gross revenue retention rates remained strong at 97% in the quarter. Net customer expansion rates remained consistent with what we observed last quarter, contributing roughly 60% of our subscription revenue growth for Q1. Non-GAAP operating income for the first quarter was $809 million, representing a non-GAAP operating margin of 31.8%. Margin strength was the result of the revenue outperformance combined with favorable spend versus expectations. Q1 operating cash flow was $696 million, growth of 52% and free cash flow for the quarter was $616 million, growth of 46% and in line with our expectations. We repurchased $1.6 billion of our shares during the quarter and had $1.3 billion in remaining authorization as of April 30. We ended the quarter with $4.4 billion in cash and marketable securities. Our headcount as of quarter end stood at 20,834 workmates around the globe. Now turning to guidance. We remain focused on driving adoption of our agentic solutions across HR and finance, while expanding into adjacent market opportunities, providing a foundation for long-term growth. We are pleased with our performance in Q1, and we are reiterating our FY '27 subscription revenue outlook of $9.925 billion to $9.950 billion, growth of 12% to 13%. We expect Q2 FY '27 subscription revenue to be approximately $2.455 billion, growth of 13%. We anticipate cRPO to increase between 13.5% and 14.5% in Q2. For Q2, we expect professional services revenue of $180 million. As Aneel mentioned, we are streamlining how we operate the business and are focused on investing in areas with the highest returns. We are increasing our FY '27 non-GAAP operating margin guidance to 30.5%. For Q2, we expect a non-GAAP operating margin of approximately 30%. We expect Q2 GAAP operating margin to be approximately 19 percentage points lower than our non-GAAP operating margin, and the full year FY '27 GAAP operating margin to be approximately 18 to 19 points lower. The FY '27 non-GAAP tax rate is expected to be 19%. We are maintaining our FY '27 operating cash flow outlook of $3.45 billion, and we continue to expect FY '27 capital expenditures of approximately $270 million, resulting in free cash flow of $3.180 billion, growth of 15%. In closing, we remain focused on the potential for AI to transform our HCM and finance solutions. While still early in this journey, we are beginning to see the benefits from AI to our business model across both the top and bottom line, and we are executing on a framework to drive long-term growth while expanding GAAP and non-GAAP margins. We look forward to updating you on our progress in the quarters ahead. With that, I'll turn it back over to the operator to begin Q&A.

Operator: [Operator Instructions] And our first question comes from the line of Keith Weiss with Morgan Stanley.

Keith Weiss: Congratulations on a really nice start to the fiscal year. A lot of really bullish signals that we're getting on sort of the AI adoption. I wanted to ask a broader question. And maybe, Aneel, I'll ask you to kind of do my job for me because I'm trying to create a broader argument. You said at the beginning of your remarks that nobody is looking to sort of rebuild the core Workday system and that core transactional engine. And I agree, and I think most investors agree with that statement. I think where more of the concern is the additional functionality that Workday can be selling to these organizations, which kind of drives growth, that there's a new competitive dynamic there and maybe a new value proposition there. And I think where investors perhaps are getting it wrong is assuming that because the cost of software development is coming down with cogeneration tools, there's a change, a significant change in sort of the TCO of getting that additional capability from Workday versus building it themselves. And I think what investors get wrong is they're looking at it too narrowly in terms of what creates that TCO. So can you help kind of round out that equation of when your customers are looking for those innovations, obviously, the innovations have to be there, but they're also looking for a good TCO. How does Workday now stack up in that TCO versus building it yourself using these agentic cogeneration tools?

Aneel Bhusri: So first of all, Keith, thank you for all the time that you spent on Workday. I know it's your last call, and we very much appreciate all the time you spend with us and wish you all the best in whatever you choose to do next. So I guess I'd answer it in 3 prongs, and I'd hand it over to Gerrit. When I look at the world of agentic in enterprise, we have this concept of lawful and lawless agents. Lawful being done the right way, lawless going directly against the data and getting results that bypass security or bypass the business process framework. I have yet to meet a single customer that wants to do things in a lawless way. They all have to follow lawful. If they follow lawful, there are 3 paths for us to be successful. One, the best path is for us to sell our own agents, and there's a clear TCO on those agents. And I think we've defined that, and we're seeing the success with those agents. Second is they can use Extend Pro to build their own AI applications, again, leveraging our platform. And the third is as we roll out these AI APIs on a consumption basis, that's the way that third parties could build agentic applications, but they still have to use the rails, the security, the governance, the business process framework to make sure they're doing it in a lawful way. And again, I'll just say there's not a single customer that wants to do things in a lawless way, not in the world of HR and finance. And so I don't know if you want to add anything, Gerrit, but I think it's, I think I feel pretty well covered, Keith, in having a solution for whatever customers would like to do.

Gerrit Kazmaier: Yes. And I think Aneel has said it well. First of all, we embrace the ecosystem of builders. Actually, we provide APIs as part of the Workday platform, so customers can continue to build their own solutions and partners can continue to build own innovations that are part of the Workday platform and ecosystem. That in itself for us is a huge accelerant and value add and captured in our API Flex Credits model. But I think the real point here, Keith, is that for differentiated AI solutions that drive real value, which are not just augmentations, but actually redefining how HR and finance operates by taking big labor spends and making them smaller software spends, you need to have the 3 ingredients that only Workday has. One is the world model of work, our compounding data set, which lets you actually contextualize AI systems. Secondly, what Aneel spoke about, all of the deterministic business process logic that defines policy, compliance, correctness in the key processes from managing people to closing the books. And then thirdly, not to forget, it's all about being deeply embedded in the flow of business, right? Us providing that as part of the business processes as they happen, financial transactions, hiring decisions, pay cycles allows us to actually automate the work in the background and not just being a side panel that comes in without a true integration in the flow of work. So we feel really strong about both our platform and openness and the differentiation of our first-party agents.

Keith Weiss: Outstanding. That's helpful guys. And Aneel and team, it's really been a privilege covering Workday over these past 2 decades and seeing what you guys have built here. So thank you very much.

Operator: And our next question comes from the line of Gabriela Borges with Goldman Sachs.

Gabriela Borges: I would love to hear a little bit more about the feedback you're getting from customers as you deploy agentic. Sometimes what we notice is there's a gap between how these products and technologies perform in a sandbox or on a demo versus what customers are actually able to implement. So maybe just walk us through when you present some of the newer technologies like Sana or some of the organic agentic development, what is the gap that you have to work with customers on? Or what are the limiting factors to them fully getting the value out of the agent? And how do you work with the customer to solve them?

Aneel Bhusri: I'll put it to Gerrit and to Rob. I think there's a piece for both of them in that.

Gerrit Kazmaier: Yes. First of all, what we see, Gabriela, is that for us, the big difference is we engage on very specific problems when we speak about AI. We are not coming in generically with a broad exploration of what may be possible. We are solving concrete problems in the value chain from hire to retire to our financial processes from record to report, and that makes it very focused and value specific. So that alone in itself allows us to avoid that POC-driven unclear ROI scenario. And because of all of the success that we have in that space, we can actually guide customers to the best practices, right? We know how Chipotle, 7-Eleven and so many others have transformed hiring, how NetApp transformed procurement. And that allows us to have a very specific value-oriented conversation. So what we are seeing actually right now is a very fast takeoff on our first-party agents. And frankly, for us, the challenge is how do we meet this demand curve, right? So we are now starting to provision Self-Service Agent to all of our customers because actually, we got so many inbound requests that we felt it's easier for us just to turn a default on than to have services engagement being wrapped around it. And the last part before I hand it over to Rob, I think what you are pointing to, the true change is changing in the business processes and the operating model of companies when they decree a much higher degree of automation. And that's not a technology change, right? That's a workforce transformation that's happening at multiple levels at the same point in time. And this is why we've created our forward-deployed engineers and our AI consultants. So they go in and they're not just bringing the technology, but they are really engaging on the business process transformation itself and guide our customers through it. Rob?

Robert Enslin: Yes. I would just add, Gabriela, that we've had, I don't know, maybe 100 customer touch points between Aneel, myself and Gerrit in the last 3 months. And the feedback from all of them have been overwhelming, actually positive, where these customers are really focused on how our agents can help them in the flow of work and what they're doing. And certain agents have had tremendous success early on like deployment agent where existing customers can see the value immediately and they're actually selling to other customers and customers are your best sales folks. So I would say that's super optimistic, and they all come in with questions on where we are and they all leave with how do we actually get started. And as Gerrit said, with Sana as the front door, we're launching that in a big way. And then I'd say with Sana Enterprise, we're more focused on use cases, working with our customers to build use cases that add tremendous value to them. The uptake there on big brand names has been incredible. We ran the Sana Lighthouse program and the demand has been, as I said, overwhelming early on, I would say, the same here.

Operator: And our next question comes from the line of Michael Turrin with Wells Fargo Securities.

Michael Turrin: Aneel, maybe you could speak to just the early progress. I know last quarter, there was commentary just around reprioritizing growth. This quarter, you mentioned best new ACV 1Q in 5 years. So maybe just speak to the progress and what you're seeing within Flex Credits or agentic usage or some of the efforts there and then Zane, maybe just to complement how you're able to expand margin while still prioritizing growth at the moment.

Aneel Bhusri: So I guess I'd say a lot of the right work was already being done when I came back. Gerrit and team were on the right path, building the right agents, building the right infrastructure and we're now seeing the fruits of those efforts. And we're just getting more focused on what those efforts are, right? We're focused on building organic agents, and that's going extremely well with self-deployment agent and deployment agent, sorry, Self-Service Agent and deployment agent. The acquired agents continue to be strong. And as we roll out more of those agents, we're going to see continued momentum. But we're also doing some really great work on the APIs, which is going to be the way we monetize the headless transaction. So the pieces are coming into place. It's really about reprioritizing to be AI first and AI native as opposed to AI being part of our story. When you go through a technology transition, and I'm old enough to have been through a lot of them, you've got to put that technology transition front and center. And our core business is strong. But the 150th feature in HR or finance is not going to move the needle for our business. The next agentic application will. I don't know if you want to add anything to that, Gerrit.

Gerrit Kazmaier: I think you said it well. And like Aneel has described, what we have changed at Workday and have laser focus now is either building APIs for AI or building AI agents. And that allows us really to be fully focused on the biggest opportunity ahead of us.

Zane Rowe: So Michael, I'll just add on the margin side. Obviously, we're very pleased with the revenue performance in Q1, which always helps you on margin. The same being said, as Aneel said, coming back with focus and the teams across the company are focused on how we work faster, how we stay focused in each area and disciplined in where we make hires and the work that they're doing. And on top of that, we're recognizing the benefits on AI ourselves. So within Gerrit's team and R&D, we're seeing tremendous productivity improvements, whether it's our customer success business, we're seeing productivity improvements there, a lot of Rob's team on go-to-market as well. And we're using our own products, as you would expect us to. So very pleased with the progress we're seeing, enabled us to move up the guide by 50 bps over the course of the year, and we look forward to continuing to increase our margins over time. So we remain focused in both the top line and the bottom line and investing in key areas here.

Aneel Bhusri: Yes. And if I could just say, this is more aspirational than anything else. I'd love to see us continue the growth that we had in Q1, but keep headcount as close to flat for the year as possible because we are getting the benefits of using our own products and other AI tools. And I think that's where I think I'm hopeful and believe that we're going to have additional margin expansion as we get those benefits. And I would say that's different than what my view was coming in 3 months ago.

Operator: And our next question comes from the line of John DiFucci with Guggenheim Securities.

John DiFucci: Aneel and team, a really nice job on the execution this quarter. But I actually have a question related to the Sana AI Summit today in New York. Your new Chief AI Officer, Joel Hellermark, talked about not playing it safe in what is a technology paradigm shift. This all sounds good, and Workday has a leadership position. And Aneel, you know this as well as anybody, the innovator's dilemma is a strong force. So with that context, I sort of have a high-level question for Gerrit and maybe, Aneel, if you want to join in, too. Gerrit, how do you, as the product leader at Workday, ensure that you do not only enable this paradigm shift happening with Workday, but actually lead through it. And is it possible to do that while leveraging the leadership presence you have built since the last paradigm shift? Or do you have to sort of abandon stuff?

Gerrit Kazmaier: Yes. Thank you for that question, and thank you for attending Sana AI Summit today here in New York, truly a landmark moment, I think, for us and for the industry. And what you have heard today, I just want to break it down very clearly. So we all understand what we say, we are not playing it safe and driving deep AI innovation. For AI, it's all about understanding what the key value levers are. And as you have said earlier, right, with Workday's world model of work, we have a set of data which allows us to rethink business processes that weren't part of Workday's remit today. And because of the AI leverage that we are getting that Zane described in just productivity, we can execute so fast. So today, what you've heard that we announced our travel agent. We didn't do travel before, but we did expenses. We did projects. We have the worker profile and the pay cycle, right? So now we can actually venture in this new area by just bringing this together in one seamless experience without taking on a high degree of functional development cost in the travel space because through AI, the data that we have and the productivity leverage, we can bring it together on the Workday platform. And I think the even bigger one, I think this was the context that Joel spoke about. We also launched Sana for ITSM today. And it's all about being really intentional here. The most complex, the most expensive journeys in ITSM are related to the employee life cycle. Those are all events that we have inherently in the Workday platform already, recruiting, onboarding, offboarding, team changes, relocations. Now taking that and actually extending that out now to the complete workflow automation that sits beyond HR service delivery to IT service delivery suddenly feels super natural. Basically, AI makes us boundaryless or limitless, right, in the opportunities that we can pursue. And when Joel spoke today at the Sana AI Summit is that we think of ourselves as an AI challenger, not as a defendant. And we are putting intentional investments into areas where we know we have all of the benefits already at Workday today to go out and disrupt places.

Aneel Bhusri: And I would just add to what Gerrit said, John, and echo what you said about, thank you for attending the event earlier. Playing it safe is not -- not playing it safe is not like we're going to take risk with security or governance. It's more that I think AI sort of resets competitive boundaries, and we can make bets in a bunch of new markets. All the bets don't need to work. If we make 3 or 4 bets and 2 of them work, that's a huge success. And I think that what you're going to see is us is, first of all, doubling down on what we're doing in AI within our HR and finance world, but also taking some bets that expand our TAM because they're there for the taking. Our data model with HR and finance happens to be a very robust data model that really captures every business object under the sun to build other applications. And I think that's one of the reasons why we have that flexibility.

John DiFucci: I got to say this is one of the first times I've heard an application company talk about things, and it's not restrictive when it comes to AI. It's actually expansive. So it's still early, but thanks for those answers.

Operator: And our next question comes from the line of Brad Zelnick with Deutsche Bank.

Brad Zelnick: Gentlemen, I wanted to ask about deployment agent, reducing the cost and time of deployment. I remember the impact of launch years ago, which was targeted at the mid-market, but then we saw it become a competitive weapon even in the low end of enterprise. How would you compare deployment agent perhaps to launch as an incremental unlock helping to reduce TCO and make you even more competitive, but also could it positively impact seasonality of your business and being able to sign deals even later into the calendar year for customers that might want to go live by the beginning of their next fiscal year. Any additional thoughts about deployment agent would be great.

Aneel Bhusri: I think it's Rob and Gerrit.

Robert Enslin: Yes, let me go first. So I mean, for deployment agent with new implementations and Workday GO, we're seeing, what are the numbers we're seeing?

Gerrit Kazmaier: 30% on current projects and 50% reduction in the projects that we are just starting now.

Robert Enslin: Yes, and so that, and that will continue to improve and change the whole dynamics around implementation and speed to implementation. So it goes to your point early on about can customers go live faster? For sure, we would definitely think that's a possibility, and we'll definitely get there much quicker. The hard work in implementations, master data testing and that becomes just so much more effective and faster. So that's a benefit. And the part that I'm really quite excited as well is the existing customers that are deploying deployment agent. I mentioned the state of Arkansas and the benefits that they receive, the existing customers using the deployment agent when they want to change configuration and they want to do things. They don't have to go out to RFP. They don't have to talk to a systems integrator. They can see what they need to do themselves. And that makes it very self-service in these large institutions. And that enables them to move much faster to deploy different business models as well. So I think there's broad coverage with it, and there's going to be a broad impact with it as well.

Gerrit Kazmaier: And Brad, since you asked about launch, so launch is a method, which basically has a scope of Workday and an implementation method that allowed us to super streamline it. Now deployment agent is actually applying AI to automate that entire process. So it's the next logical step, if you think about it from improving that method further to make it AI automated. And the mission of that team, right, the mission statement itself is the $0 deployment of Workday in a month. So we are doing exactly what you already have led to. We are taking now the launch scope and basically drive it with deployment agent to significantly increase the automation, which directly translates to the reduction in project time and customer cost at virtually the same amount. And we are still at the beginning of that. We are super confident that with that, we can completely squash migration complexity and deployment times for customers to a degree. But the whole consideration in the mid-market, for instance, if you move to Workday or not because time of migration, cost of migrations are a consideration. Our ambition is to make this a completely nonissue. And with that, unlocking our customers' Workday at scale.

Operator: And our next question comes from the line of Alex Zukin with Wolfe Research.

Aleksandr Zukin: Maybe just a quick 2-parter. Aneel, for you, it's rare when Q1 has a net new ACV acceleration. It sounded like it was something kind of was a little bit different this quarter, particularly on the net new side. So maybe just dive in, what are you seeing out there in the demand environment? That's not happening for every other application software company clearly. So kind of what do you think is different from a Workday perspective that drove that incrementally better execution? And then, Zane, just maybe any high-level commentary on how much, if any, DIA benefit you guys saw in the quarter that I think Rob alluded to in the prepared remarks. And just kind of when do you think we'll start to see some of this accelerating bookings that seemingly is kind of happening under the hood actually reflect in some of the cRPO dynamics?

Aneel Bhusri: So I'd say, first of all, one quarter does not make a year. So we're optimistic heading out of Q1, but we've got a lot to play for, for the rest of the year. I do think, candidly, I think there were some deals that slipped from Q4. We always talk about how the deals slipped from Q4, we'll close them in Q1. Well, Rob's team really did close a lot of great business in Q1. But the reality is if you look at the split, the AI products are driving the growth. And what's exciting to me is that the organic products are showing great promise and they're getting early acceptance and deployment, but they're still in the early days. And I think towards the second half of the year when they're deeper into general availability and more customers are using it, and we're on the Flex Credits model. I think it just, it's all good news this year as we build towards that AI growth. And Rob has done a great job of making sure the sales force and services teams are aligned to driving that growth, not just out of the core, but really focused on the AI growth.

Zane Rowe: Yes, Alex, and as you touched on, we were pleased to see DIA come into the first quarter. As Aneel alluded to, it was a great quarter for a number of reasons with linearity. We recognized some DIA revenue, not significant, but some DIA revenue in the quarter. And unlike last year, we expect to recognize that revenue over the course of the year. If you recall, last year, it was back-end loaded. So we're pleased with how we'll recognize that revenue over the course of the year. And then as Aneel mentioned, with a lot of the Flex Credits sales and the momentum we have in our sales and in AI, we expect to see those bookings ramp up over the course of the year. So have a larger booking impact into the second half and we would expect because of the recognition of revenue to see that impact FY '28 to a greater degree.

Operator: And our next question comes from the line of Brent Thill with Jefferies.

Brent Thill: Aneel, for Sana, when does this start to get fully integrated? And when do you feel like this starts to have an impact on deals? And maybe the answer is right now? And a second follow-up with Rob and Zane, just on the quarter, just to follow on Alex's point. Were there any, were there less changes to the sales go-to-market this Q1 than you've had maybe in past Q1s? And I know you mentioned there are some slip deals, but perhaps there's also less tinkering with the go-to-market team that gave them more time in the field to sell or...

Aneel Bhusri: So on the first one, it's available today. It's fully integrated. We need to move more customers on to our equivalent of the innovation services agreement. But the uptake has been super rapid. On the Sana learning piece, that was also a good, we also had a good quarter there. And the rest of Sana is more about what comes next with some of these newer applications. I don't know, Gerrit, if you want to add anything. But it is now the new front end for Workday. I mean that is de facto default that is the new front end for Workday.

Gerrit Kazmaier: Yes. The only piece to add is that at the end of May, we're going to provision Sana for Workday and Self-Service Agent to all of our customers on our current AI terms of service and make it basically the default deployed solution as part of their contract, further unlocking it. So it's going to be a huge surge for us again.

Robert Enslin: Yes. And on the field, was there less changes year-over-year? I would say we were very prepared for coming into financial year 2027. We had planned this very early on. We knew that we needed to move to a denser model with customer base because of the agents and what we're doing with organic -- inorganic agents and agents. So we were super ready for that. And we had broad-based success on a global basis. North America did really well. Fed came back strong. Our international business with Europe was very good. Japan was very good. We had a strong net new quarter and a strong large enterprise quarter. So I would say we were ready for whatever changes we put in place, and it was not disruptive, obviously, and we had very good linearity all through Q1.

Operator: We will now take 2 more questions. Our next question comes from the line of Karl Keirstead with UBS.

Karl Keirstead: Okay. Great. Maybe, Rob, just sticking with you. Just as investors and I watch the number of reps pick up in the tech sector, and we worry a little bit about seat compression spilling over into the non-tech sector. I just wanted to ask you what you're seeing in terms of seat growth versus module expansion as drivers of that nice overall expansion that you highlighted on the call.

Robert Enslin: Yes. So I would say we see a long runway with the value sales and the agents and what we're doing with Flex Credits, the launch of Sana into the market and broad-based. We see that, and we said early on, I think last quarter, we mentioned that the back half of the year, we continue to see, and that we definitely continue to see that. On the FSE expansion, I mean, we continue to see expansion in the overall when we look at the amount of customers. As we acquire net new customers, we bring in new customers on board, and we continue to do pretty well in the net new space, and I still think there's opportunity there. But I would say, ultimately, a broader part of our business is going to move to the Flex Credits type environment with APIs and consumption.

Zane Rowe: Karl, I'll just add, we've commented over the last number of quarters on, as it relates to FSEs. And as Rob alluded to, it's been flat or marginally up. And this quarter, I'd say flattish. But to your point on the technology sector, obviously, we've got a diverse customer base. I mean we've seen any declines in the tech sector more than offset in other areas. So there's been a balance. There's definitely been movement. We did see it in the tech sector specifically, but we've been flattish. And as I pointed out in my prepared remarks, we've seen good net expansion more broadly. So it's not a meaningful part of our revenue growth.

Aneel Bhusri: Yes. And I think it's really important to recognize that if FTE count does go down, it's being replaced by -- AI is replacing labor, not software right now. And as long as we do what we are doing right now and continue to execute, we're a beneficiary of the shift to agentic work.

Operator: And our final question comes from the line of Raimo Lenschow with Barclays.

Raimo Lenschow: Congrats from me as well. Just a quick one for Zane. RPO, like cRPO, like as we expected, RPO was slightly lower growth. Can you talk a little bit about, is that kind of customers signing shorter contracts or there's a duration effect? Can you just talk to the puts and takes there?

Zane Rowe: Yes, happy to. I mentioned on the last call as well, we've actually seen real consistency in duration and RPO at the highest level is more driven by the mix of customer base versus net new offerings. And over the last couple of quarters, I've called out that we've been pleased with the growth on customer base as a mix. And the duration for each of those has been pretty consistent. But when you do a renewal, it tends to have a slightly shorter duration than a net new offering. So it's simply been that mix that's driven any difference between cRPO and RPO.

Operator: Ladies and gentlemen, thank you for your participation on today's conference. You may now disconnect.