We conduct business on a global basis in multiple foreign currencies, subjecting Workday to foreign currency exchange risk. To mitigate this risk, we utilize derivative hedging contracts as described below. We do not enter into any derivatives for trading or speculative purposes.

Our foreign currency contracts are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.

We enter into foreign currency forward contracts to hedge a portion of our forecasted revenue and expense transactions (“cash flow hedges”). We designate these forward contracts as cash flow hedging instruments since the accounting criteria for such designation has been met.

Cash flow hedges are recorded on the Condensed Consolidated Balance Sheets at fair value. Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows. Gains or losses resulting from changes in the fair value of these hedges are recorded in Accumulated other comprehensive income (loss) (“AOCI”) on the Condensed Consolidated Balance Sheets and are subsequently reclassified to the same line item as the hedged transaction on the Condensed Consolidated Statements of Operations in the same period that the hedged transaction affects earnings. As of July 31, 2023, we estimate that $41 million of net gains recorded in AOCI related to our cash flow hedges will be reclassified into income within the next 12 months.

As of July 31, 2023, and January 31, 2023, the notional values of the cash flow hedges that we held to buy U.S. dollars in exchange for other currencies were $2.1 billion and $1.7 billion, respectively. The notional values of the cash flow hedges that we held to sell U.S. dollars in exchange for other currencies were $350 million and $324 million as of July 31, 2023, and January 31, 2023, respectively. All contracts had maturities of less than 48 months.

We also enter into foreign currency forward contracts to hedge a portion of our net outstanding monetary assets and liabilities (“non-designated hedges”). These forward contracts are intended to offset foreign currency gains or losses associated with the underlying monetary assets and liabilities and are recorded on the Condensed Consolidated Balance Sheets at fair value. These forward contracts are not designated as hedging instruments under applicable accounting guidance, and therefore all changes in the fair value of these forward contracts are recorded in Other income (expense), net on the Condensed Consolidated Statements of Operations. Cash flows from the settlement of these forward contracts are classified as operating activities on the Condensed Consolidated Statements of Cash Flows.

As of July 31, 2023, and January 31, 2023, the notional values of the non-designated hedges that we held to buy U.S. dollars in exchange for other currencies were $138 million and $235 million, respectively, and the notional values of the non-designated hedges that we held to sell U.S. dollars in exchange for other currencies were $19 million and $2 million, respectively.


	Condensed Consolidated Balance Sheets Location	July 31, 2023		January 31, 2023
Derivative assets:
Cash flow hedges	Prepaid expenses and other current assets	$	32,135	$	42,968
Cash flow hedges	Other assets	14,676		21,757
Non-designated hedges	Prepaid expenses and other current assets	380		99

Total derivative assets		$	47,191	$	64,824
Derivative liabilities:
Cash flow hedges	Accrued expenses and other current liabilities	$	16,600	$	13,231
Cash flow hedges	Other liabilities	21,469		15,496
Non-designated hedges	Accrued expenses and other current liabilities	872		5,244
Non-designated hedges	Other liabilities	2		1
Total derivative liabilities		$	38,943	$	33,972


	Three Months Ended July 31,
Condensed Consolidated Statements of Operations Location	2023				2022
	Total		Gains (losses) related to cash flow hedges		Total		Gains (losses) related to cash flow hedges
Revenues	$	1,786,766	$	17,266	$	1,535,798	$	1,495
Costs and expenses	1,750,509		1,640		1,569,876		(5,955)


	Six Months Ended July 31,
Condensed Consolidated Statements of Operations Location	2023				2022
	Total		Gains (losses) related to cash flow hedges		Total		Gains (losses) related to cash flow hedges
Revenues	$	3,471,078	$	33,592	$	2,970,455	$	338
Costs and expenses	3,454,621		942		3,077,376		(6,784)


	Condensed Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) Locations	Three Months Ended July 31,				Six Months Ended July 31,
		2023		2022		2023		2022
Gains (losses) recognized in OCI	Net change in unrealized gains (losses) on cash flow hedges	$	(14,703)	$	17,734	$	(12,707)	$	61,994
Gains (losses) reclassified from AOCI into income (effective portion)	Revenues	17,266		1,495		33,592		338
Gains (losses) reclassified from AOCI into income (effective portion)	Costs and expenses	1,640		(5,955)		942		(6,784)


	Condensed Consolidated Statements of Operations Location	Three Months Ended July 31,				Six Months Ended July 31,
		2023		2022		2023		2022
Gains (losses) related to non-designated hedges	Other income (expense), net	$	(1,002)	$	2,135	$	1,432	$	6,101

We are subject to netting agreements with all of the counterparties of the foreign exchange contracts, under which we are permitted to net settle transactions of the same currency with a single net amount payable by one party to the other. It is our policy to present the derivatives gross on the Condensed Consolidated Balance Sheets. Our foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. We manage our exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.


	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Condensed Consolidated Balance Sheets		Net Amounts of Assets Presented on the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets				Net Assets Exposed
							Financial Instruments		Cash Collateral Received
Derivative assets:
Counterparty A	$	14,550	$	—	$	14,550	$	(8,966)	$	—	$	5,584
Counterparty B	8,420		—		8,420		(7,219)		—		1,201
Counterparty C	2,099		—		2,099		(301)		—		1,798
Counterparty D	19,769		—		19,769		(19,876)		—		(107)
Counterparty E	2,353		—		2,353		(2,581)		—		(228)
Total	$	47,191	$	—	$	47,191	$	(38,943)	$	—	$	8,248


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Condensed Consolidated Balance Sheets		Net Amounts of Liabilities Presented on the Condensed Consolidated Balance Sheets		Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets				Net Liabilities Exposed
							Financial Instruments		Cash Collateral Pledged
Derivative liabilities:
Counterparty A	$	8,966	$	—	$	8,966	$	(8,966)	$	—	$	—
Counterparty B	7,219		—		7,219		(7,219)		—		—
Counterparty C	301		—		301		(301)		—		—
Counterparty D	19,876		—		19,876		(19,876)		—		—
Counterparty E	2,581		—		2,581		(2,581)		—		—
Total	$	38,943	$	—	$	38,943	$	(38,943)	$	—	$	—