Workday, Inc.

What they do

Workday sells cloud-based, AI-powered applications for human capital management (HCM), financial management, spend management, and planning, with Workday AI built into the platform. It sells worldwide through direct field sales, partners, reselling, co-selling, and Workday Marketplace, and also offers professional services to help customers deploy and adopt solutions. More than 75 million users are under contract, and its customer base ranges from emerging and medium-sized businesses to more than 65% of the Fortune 500.

Revenue drivers

• Subscription services — The core revenue line: Q2 FY2027 subscription revenues were $2.471B, up 13.9% year-over-year, versus total revenues of $2.649B. It is driven by new customers and expansion of existing customer relationships.
• Subscription revenue backlog — 12-month backlog was $9.034B as of July 31, 2026, up 14.2% year-over-year, and total backlog was $27.403B, up 8.0%. These are contracted amounts not yet recognized as revenue.
• AI agents — Management said AI drove more than 25% of new ACV in Q2 FY2027, with more than 5,500 customers using at least one organic agent, up more than 35% from the prior quarter.
• Professional services and partners — Workday offers professional services and works with Workday Services Partners to help customers deploy solutions; the company names new customers including BWX Technologies, Guess, KPMG LLP, and S-E-B, and expanded relationships with Caterpillar, Delivery Hero, Lithia Driveway, Merck & Co., Inc., and Novartis.

Recent performance

Fiscal 2027 second-quarter total revenues were $2.649B, up 12.8% year-over-year, with subscription revenues of $2.471B, up 13.9%. GAAP operating income was $313M (11.8% margin) versus $248M (10.6%) a year earlier, and non-GAAP operating income was $824M (31.1%) versus $680M (29.0%). Diluted net income per share was $2.57, which included a tax benefit of $1.52 per share from an intra-entity transfer of intellectual property; non-GAAP diluted EPS was $2.75 versus $2.21. Operating cash flow was $520M and free cash flow was $460M, compared to $616M and $588M in the same quarter last year, and Workday repurchased about 9.8 million Class A shares for $1.3B.

Strategy

Workday is focused on sustainable subscription revenue growth by adding customers and expanding existing relationships, with stated investment in AI solutions, international expansion, partner ecosystem, industry verticals, medium enterprise, and selective acquisitions. In fiscal 2026 it acquired FlowiseAI, Paradox, Sana Labs, and Pipedream to expand AI capabilities, and announced Workday Build, Developer Agent, Agent Passport, Workday Data Cloud, and Adaptive Decision Intelligence. Workday Learning powered by Sana became generally available, and the Financial Audit Agent became generally available in Q2. Management also aims to expand operating margin over the longer term by scaling and building efficiencies, and repurchased shares under its repurchase programs, with an additional $4.0B authorization.

Risks

• Macroeconomic sales-cycle pressure — Workday cites deal scrutiny, lengthening sales cycles particularly in net new opportunities, and reduced headcount-level commitments on renewals, with extended cycles especially in government, higher education, and healthcare tied to federal funding.
• Customer payment flexibility — The company states it has provided and may continue to provide certain customers with more flexible payment terms.
• Competitive and rapidly changing AI environment — Workday describes operating in a very competitive and rapidly changing environment and is addressing shifts in customer buying behavior and demand through new pricing models and sales and marketing strategies.
• Information technology system compromise — Workday's risk factor summary lists compromise of its information technology systems or security among the material risks it faces.

Outlook

For fiscal 2027, management expects subscription revenue of $9.940B to $9.950B, growth of 13%, and raised its fiscal 2027 non-GAAP operating margin guidance to 31.0%. Management said it will continue to prioritize investment in its agentic AI roadmap and platform opportunity while driving operational efficiencies as it scales. It described AI as an emerging strategic driver of customer expansion but noted continued macroeconomic uncertainty and sales-cycle moderation.