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    WDAY
    Earnings call· Jan 2026(Q4 FY26)

    Workday Q4 FY26 earnings call WDAY

    Feb 24, 2026 Source

    Executive summary

    Workday Q4 FY26 — AI-driven Innovation and Strong Customer Expansion

    Workday is entering "Chapter 4," a renewed focus on AI-driven innovation to reaccelerate growth by marrying deterministic enterprise applications with probabilistic AI. While near-term growth and margin expansion are impacted by strategic investments in AI and some deal elongation, the company is optimistic about the long-term potential of its organic and acquired agentic solutions, particularly as the Flex Credits consumption model gains traction in the second half of FY27 and beyond.

    Highlights

    5

    • Q4 subscription revenue was $2.360 billion, up 16% year-over-year.

    • Full year FY26 subscription revenue reached $8.833 billion, growing 14% year-over-year.

    • New ACV from emerging AI products exceeded $100 million in Q4, growing over 100% year-over-year, with overall AI ARR now over $400 million.

    • Non-GAAP operating margin for Q4 was 30.6%, and 29.6% for the full year FY26.

    • Full year FY26 free cash flow grew 27% to $2.78 billion, with Q4 free cash flow at $1.22 billion.

    Concerns

    4

    • Some net new large enterprise deals took longer to close in Q4, particularly in Fed, SLED, and healthcare.

    • FY27 subscription revenue guidance of 12% to 13% growth implies a slower pace than previous targets, impacted by increased AI investments.

    • Q1 FY27 subscription revenue is expected to decline sequentially due to the non-recurrence of the DIA contract and deal elongation.

    • FY27 non-GAAP operating margin guidance of 30% reflects a slower pace of expansion than previously communicated due to accelerated AI investments.

    Guidance & targets

    16
    CategoryTargetConfidence
    FY27 Subscription Revenue
    $9.925 billion to $9.950 billion
    high materiality
    High
    Q1 FY27 Subscription Revenue
    approximately $2.335 billion
    medium materiality
    High
    Q1 FY27 cRPO Growth
    between 14.5% and 15.5%
    medium materiality
    High
    Q2 FY27 Subscription Revenue Sequential Growth
    roughly 5% sequentially
    medium materiality
    High
    FY27 Professional Services Revenue
    approximately $710 million
    low materiality
    High
    Q1 FY27 Professional Services Revenue
    $180 million
    low materiality
    High
    FY27 Non-GAAP Operating Margin
    approximately 30%
    high materiality
    High
    Q1 FY27 Non-GAAP Operating Margin
    30.5%
    medium materiality
    High
    FY27 GAAP Operating Margin
    approximately 18 to 19 points lower than our non-GAAP operating margin
    low materiality
    High
    Q1 FY27 GAAP Operating Margin
    approximately 19 points lower than our non-GAAP operating margin
    low materiality
    High
    FY27 Non-GAAP Tax Rate
    19%
    low materiality
    High
    FY27 Operating Cash Flow
    $3.450 billion
    medium materiality
    High
    FY27 Capital Expenditures
    approximately $270 million
    low materiality
    High
    FY27 Free Cash Flow
    $3.180 billion
    medium materiality
    High
    Medium-term Subscription Revenue Growth Targets
    12% to 15%
    high materiality
    Medium
    Medium-term Operating Margin Target (FY28)
    update later on in the year
    high materiality
    Low

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    U.S. Revenue
    Q4 FY26 revenue for the U.S. market.
    		$1.91 billion15%——
    U.S. Revenue
    Full year FY26 revenue for the U.S. market.
    		$7.18 billion13%——
    International Revenue
    Q4 FY26 revenue for international markets.
    		$626 million13%——
    International Revenue
    Full year FY26 revenue for international markets.
    		$2.38 billion12%——

    Operational metrics

    15
    Non-GAAP Operating Income
    $774 million
    Q4 FY26

    Non-GAAP operating income for the fourth quarter.

    Non-GAAP Operating Income
    $2.82 billion
    FY26

    Non-GAAP operating income for the full fiscal year.

    Shares Repurchased
    $1.5 billion
    Q4 FY26

    Amount of shares repurchased during the fourth quarter.

    Shares Repurchased
    $2.9 billion
    FY26

    Amount of shares repurchased during the full fiscal year.

    Remaining Share Repurchase Authorization
    $2.9 billion
    Q4 FY26

    Remaining authorization for share repurchases as of quarter end.

    Cash and Marketable Securities
    $5.4 billion
    Q4 FY26

    Total cash and marketable securities at the end of the fiscal year.

    Headcount
    21,070
    Jan 31

    Total number of employees globally.

    Average Contract Duration
    downyear-over-year
    Q4 FY26

    Driven by a higher mix of renewal and customer base activity.

    Net Expansion Rates Contribution
    60%
    Q4 FY26

    Contribution to subscription revenue growth for the quarter and full year.

    Net New Medium Enterprise Deals
    60%
    FY26

    Percentage of net new ACV driven by medium enterprise customers.

    Partner Ecosystem Sourced ACV
    25%
    Q4 FY26

    Percentage of net new ACV sourced through the partner ecosystem.

    AI-Inclusive Expansion Deals
    nearly 50%larger on average
    Q4 FY26

    Expansion deals that included AI were nearly 50% larger on average.

    AI Coding Assistance Usage
    75%
    Q4 FY26

    Percentage of software engineers using AI coding assistance.

    AI Generated Code
    50%
    Q4 FY26

    Percentage of committed code that is AI generated.

    API Development Acceleration
    30x
    Q4 FY26

    Acceleration of key API development on Workday's core platform using AI.

    Industry KPIs

    9
    MetricValueDetails
    Revenue growth$2.360 billionUSD
    Arr net new arr$400 millionUSD
    Rpo current rpo$8.83 billionUSD
    Bookings billings$100 millionUSD
    Customer account count11,500+customers
    Gross retention renewal rate97%%
    Operating FCF margin rule of 4030.6%%
    Ai product adoption monetization1.7 billionactions
    Headcount internal ai productivity21,070workmates

    Orderbook & backlog

    2
    12-month subscription revenue backlog (cRPO)$8.83 billionQ4 FY26

    up 15.8%

    Total subscription revenue backlog$28.1 billionQ4 FY26

    up 12%

    Product announcements

    3
    ProductTypeDetails
    Sana Core and Sana Enterpriselaunch
    12 New Organically Developed Role-Based Agentsmilestone
    Self-Service Agent, Planning Agent, Deployment Agent, Payroll Agent, Business Process Optimize Agentlaunch

    Deals & partnerships

    12
    Anthropiccustomer contract

    Workday expanded its relationship with Anthropic in Q4.

    Ally Financialcustomer contract

    Workday expanded its relationship with Ally Financial in Q4.

    Otis Elevatorcustomer contract

    Workday expanded its relationship with Otis Elevator in Q4.

    Accenturepartnership

    Accenture is a key design partner for Workday's Agent System of Record and is among the first customers to sign on to use the new Flex Credits pricing model.

    Nikecustomer contract

    Nike is among the first of nearly 50 customers signing on to use Workday's new Flex Credits pricing model.

    Merckcustomer contract

    Merck is among the first of nearly 50 customers signing on to use Workday's new Flex Credits pricing model.

    Boston Children's Hospitalcustomer contract

    Workday formed a new strategic relationship with Boston Children's Hospital in Q4.

    State of New York Unified Court Systemcustomer contract

    Workday formed a new strategic relationship with the State of New York Unified Court System in Q4.

    Sargent & Lundicustomer contract

    Workday formed a new strategic relationship with Sargent & Lundi in Q4.

    Lyra Healthpartnership

    Lyra Health was welcomed to the Workday Wellness program in Q4, expanding employee services.

    Empathypartnership

    Empathy was welcomed to the Workday Wellness program in Q4, expanding employee services.

    Airvetpartnership

    Airvet was welcomed to the Workday Wellness program in Q4, expanding employee services.

    Risks & headwinds

    3
    Elongation of large enterprise dealsQ4 FY26, extending into FY27

    Impacted the volume of net new deals that closed in Q4, particularly in Fed, SLED, healthcare, and parts of the commercial market.

    Mitigation: Most opportunities remain active in the pipeline, and some have already closed in Q1 FY27. Workday is focused on accelerating time to value and broader adoption of its platform.

    Slower pace of non-GAAP operating margin expansionFY27

    FY27 non-GAAP operating margin expected to be approximately 30%, a slower pace than previously communicated.

    Mitigation: This is a strategic decision to prioritize accelerated AI investment across both product and go-to-market, aiming for a more durable growth profile and long-term operating profit and free cash flow optimization.

    Sequential decline in Q1 FY27 subscription revenueQ1 FY27

    Q1 FY27 subscription revenue anticipated to be approximately $2.335 billion, a sequential decline from Q4 FY26's $2.360 billion.

    Mitigation: The decline is primarily due to the DIA contract, which added nearly 1 point to Q4 subscription revenue growth and is not expected to continue in Q1, combined with fewer days in Q1 and deals that pushed from Q4.

    Q&A highlights

    7

    How is Aneel shaping Workday's AI strategy, differentiating it, and pushing for a more aggressive organic AI product roadmap, potentially achieving 'zero-day close' or 'agentic consolidation'?

    Aneel expressed optimism about agentic solutions, highlighting the rapid growth of acquired solutions and the potential of deeply embedded organic solutions. Gerrit elaborated on the 'lights out finance' vision, which involves continuous AI for finance processes like compliance autopilot and real-time bookings, all integrated through the Sana AI user experience for both back-end automation and front-end innovation.

    “It's like peanut butter and jelly, they just go together.”

    asked by Mark Murphy · answered by Aneel Bhusri

    2 min read6 chapters

    Detailed Narrative

    01

    Workday's Chapter 4: Return to Innovation with AI

    Aneel Bhusri's return to the CEO role marks "Chapter 4" for Workday, signaling a renewed focus on innovation, particularly with AI. He emphasizes that AI will transform HR and finance by marrying deterministic enterprise applications with probabilistic AI, leading to redefined user experiences, improved business process automation, and deeper AI-generated insights. This hybrid approach is crucial for systems of record that require 100% accuracy, unlike purely probabilistic AI outcomes.

    02

    AI Strategy & Agentic Solutions Momentum

    Workday is building a "context and tools engine for AI" leveraging its deep HR and finance data, business process framework, and robust security model. The company delivered 1.7 billion AI actions across its platform in FY26. Commercially, new ACV from emerging AI products exceeded $100 million in Q4, growing over 100% year-over-year, with the overall ARR from these solutions now surpassing $400 million, demonstrating significant early traction.

    03

    Organic vs. Acquired AI Growth & Product Rollouts

    While acquired solutions like HiredScore, Evisort, Paradox, and Sana have shown rapid growth, Workday's primary focus for FY27 and beyond is on organically built agents. Twelve new role-based agents are moving into general availability, with over 400 customers already using them. Key agents like Self-Service Agent, Planning Agent, Deployment Agent, Payroll Agent, and Business Process Optimize Agent are entering general availability with the R1 release in March.

    04

    Sana Integration and Internal AI Acceleration

    Sana Core and Sana Enterprise achieved general availability on February 15, just three months post-acquisition, showcasing rapid integration. Sana brings conversational AI directly into Workday and extends to other enterprise tools, creating new engagement methods for 75 million users. Internally, Workday uses AI to dramatically accelerate product innovation, with over 75% of software engineers using AI coding assistance and more than 50% of committed code being AI-generated, resulting in a 22% growth in engineering output over the last six months.

    05

    Customer Trust, Expansion, and Market Dynamics

    Workday continues to benefit from high customer trust, evidenced by a 97% gross revenue retention rate. Expansions remain the largest growth engine, with AI-inclusive deals being nearly 50% larger on average in Q4. The new Flex Credits pricing model, designed to align spend with value, is gaining traction with nearly 50 customers. While net new medium enterprise deals are strong, some large enterprise deals are experiencing longer sales cycles, particularly in government and healthcare sectors.

    06

    Monetization of AI and Ecosystem Strategy

    Workday plans to monetize programmatic access to its platform, including third-party agents, through a tiered pricing structure based on Flex Credits and API calls. This strategy ensures Workday captures value from its underlying intelligence layer, metadata, security model, and business process framework, regardless of whether applications are built by Workday or third parties. This approach positions Workday as a foundational layer for the AI ecosystem, similar to hyperscalers.

    AI-generated summary of the company’s earnings call. Not investment advice.