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    WDAY
    Earnings call· Jul 2025(Q2 FY26)

    Workday, Inc. WDAY

    Aug 21, 2025 Source

    Executive summary

    Workday Q2 FY26 — Strong Subscription Revenue Growth and AI Adoption

    Workday delivered a solid Q2 FY26, marked by robust subscription revenue growth and significant customer adoption of its AI products. The company's unified platform, expanding ecosystem, and strategic acquisitions like Paradox are fueling its momentum. Management remains confident in its long-term strategy, leveraging AI to unlock new potential for customers and drive continued value.

    Highlights

    5

    • Subscription revenue grew 14% to $2.169 billion, demonstrating solid top-line performance.

    • Non-GAAP operating margin reached 29%, reflecting ongoing efficiency improvements.

    • Net new ACV from AI products more than doubled year-over-year, indicating strong AI solution adoption.

    • 12-month subscription revenue backlog (cRPO) increased 16.4% to $7.91 billion, driven by renewal activity and new ACV.

    • Gross revenue retention rates remained healthy at 97%, showcasing strong customer loyalty.

    Concerns

    2

    • Experienced a slight headwind in the state and local government market due to funding slowdowns.

    • Higher education market is under pressure from reduced federal funding, impacting some university systems.

    Guidance & targets

    13
    CategoryTargetConfidence
    FY26 Subscription Revenue
    $8.815 billion
    high materiality
    High
    Q3 FY26 Subscription Revenue
    approximately $2.235 billion
    medium materiality
    High
    Q3 FY26 cRPO Growth
    between 15% and 16%
    high materiality
    High
    FY26 Professional Services Revenue
    approximately $700 million
    medium materiality
    High
    Q3 FY26 Professional Services Revenue
    $180 million
    medium materiality
    High
    FY26 Non-GAAP Operating Margin
    approximately 29%
    high materiality
    High
    Q3 FY26 Non-GAAP Operating Margin
    28%
    medium materiality
    High
    FY26 GAAP Operating Margin (vs Non-GAAP)
    21 points lower
    low materiality
    High
    Q3 FY26 GAAP Operating Margin (vs Non-GAAP)
    17 points lower
    low materiality
    High
    FY26 Non-GAAP Tax Rate
    19%
    low materiality
    High
    FY26 Operating Cash Flow
    $2.85 billion
    high materiality
    High
    FY26 Capital Expenditures
    approximately $200 million
    medium materiality
    High
    FY26 Free Cash Flow
    $2.65 billion
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    U.S.
    U.S. revenue in Q2 totaled $1.76 billion, up 13%.
    		$1.76 billion13%——
    International
    International revenue totaled $584 million, up 11%. This includes a 3-point impact year-over-year from an increased mix of international partner deployments.
    		$584 million11%——

    Operational metrics

    18
    Non-GAAP operating margin
    29%
    Q2 FY26

    Workday delivered a non-GAAP operating margin of 29%.

    Shares repurchased
    $299 million
    Q2 FY26

    Workday repurchased $299 million of its shares during the quarter.

    Remaining share repurchase authorization
    $1.2 billion
    as of July 31

    Workday had $1.2 billion in remaining authorization as of July 31.

    Cash and marketable securities balance
    $8.2 billion
    as of July 31

    Workday ended the quarter with $8.2 billion in cash and marketable securities.

    Headcount
    approximately 19,500
    as of July 31

    Workday's headcount as of July 31 stood at approximately 19,500 Workmates around the globe.

    Net new ACV from AI products
    more than doubledYoY
    Q2 FY26

    Net new ACV from AI products once again more than doubled year-over-year.

    Net new ACV from Extend Pro
    more than doubledYoY
    Q2 FY26

    New ACV from Extend Pro more than doubled year-over-year.

    Marketplace apps
    more than 100doubled since start of FY26
    Q2 FY26

    Workday now has more than 100 marketplace apps live on Workday Marketplace, which has doubled since the start of FY '26.

    Developer community size
    doubledYoY
    Q2 FY26

    Workday's developer community has now doubled in size year-over-year.

    Full suite net new deals
    roughly 30%
    Q2 FY26

    Roughly 30% of net new deals were full suite.

    Full suite net new deals
    50% or more
    Q2 FY26

    Full suite net new deals rising to 50% or more in industries like SLED and health care.

    Net new deals including AI products
    more than 75%
    Q2 FY26

    More than 75% of our net new deals included one or more of our AI products.

    Customer base deals including AI products
    more than 30%
    Q2 FY26

    More than 30% of our customer base deals included one or more of our AI products.

    Workday Illuminate adoption
    More than 70%
    Q2 FY26

    More than 70% of our core customers are now leveraging Workday Illuminate.

    Partner-sourced net new ACV
    more than 20%
    Q2 FY26

    For the second quarter in a row, more than 20% of our net new ACV signed in the quarter was sourced from partners.

    Customer base headcount growth
    upYoY
    Q2 FY26

    On a net basis, our headcount growth in our customer base was up year-over-year.

    Evisort growth
    more than 100%QoQ
    Q2 FY26

    Evisort, which is a company we acquired last year, is growing more than 100% quarter-over-quarter.

    Paradox time to hire reduction
    75%
    current

    Paradox delivers real ROI, with about a 75% reduction in time to hire.

    Industry KPIs

    10
    MetricValueDetails
    Capacity CAPEX$200 millionUSD
    Revenue growth$2.169 billionUSD
    Arr net new arr$1 billionUSD
    Rpo current rpo$7.91 billionUSD
    Bookings billingsgreater than 20%%
    Customer account count>11,000customers
    Gross retention renewal rate97%%
    Multi product platform attachMore than 70%%
    Operating FCF margin rule of 4029%%
    Ai product adoption monetizationmore than doubled%

    Orderbook & backlog

    2
    12-month subscription revenue backlog (cRPO)$7.91 billionend of Q2 FY26

    increasing 16.4% YoY

    Driven by elevated volume of renewal activity, including higher-than-expected early renewals, and continued momentum in new ACV and strong partner growth. Approximately 1 point of cRPO growth came from tenants.

    Total subscription revenue backlog$25.37 billionend of Q2 FY26

    up 18% YoY

    Product announcements

    3
    ProductTypeDetails
    Paradox acquisitionexpansion
    Flowise acquisitionexpansion
    Workday Governmentlaunch

    Deals & partnerships

    41
    CarrefourNew HCM relationship

    Formed new HCM relationship.

    Memorial HealthNew HCM relationship

    Formed new HCM relationship.

    Smurfit WestrockNew HCM relationship

    Formed new HCM relationship.

    BanamexNew HCM relationship

    Formed new HCM relationship.

    SanofiHCM expansion

    Impressive expansion.

    Blue OriginHCM expansion

    Impressive expansion.

    GoogleHCM expansion

    Impressive expansion.

    Red CoatsFull suite win

    Full suite win in the quarter.

    MichelsFull suite win

    Full suite win in the quarter.

    U.S. Physical TherapyFull suite win

    Full suite win in the quarter.

    SalesforceGo-live on Workday Financial Management and Accounting Center

    A long-time HCM customer, went live on Workday Financial Management and Accounting Center, unifying HR and financial data.

    Advocate HealthFull suite go-live

    Full suite go-live.

    Honor HealthFull suite go-live

    Full suite go-live.

    University of MelbourneFull suite go-live

    Full suite go-live.

    Trinity HealthAI product win

    Fantastic AI win.

    ChipotleAI product win

    Fantastic AI win.

    Cox HealthAI product win

    Fantastic AI win.

    Nationwide InsuranceFinancial Services expansion

    Expansion which added core financials.

    Guaranteed RateFinancial Services win

    Financial Services win.

    HandelsbankenFinancial Services win

    Financial Services win.

    Miller Insurance ServicesFinancial Services win

    Financial Services win.

    State of Rhode IslandFirst state go-live on financial management

    First state go-live on financial management in Q2.

    University of Virginia and UVA HealthCompetitive win for HCM, Financials, and Student

    Huge competitive win for an academic health system including medical center, school of medicine, and community hospitals.

    Haven LeisureEMEA win/expansion

    Win/expansion in Germany and UKI.

    Johnston Carmichael ScotlandEMEA win/expansion

    Win/expansion in Germany and UKI.

    DQS HoldingEMEA win/expansion

    Win/expansion in Germany and UKI.

    QantasAPAC win

    Great win in APAC.

    Lumus ImagingAPAC win

    Great win in APAC.

    Masan GroupFirst deal in Vietnam

    Signed first deal in Vietnam with a top conglomerate spanning retail, banking, and infrastructure.

    Tokyo ElectronJapan expansion

    Continued momentum and expansion in Japan.

    AstemoJapan expansion

    Continued momentum and expansion in Japan.

    DailyPayExpanded partnership for earned wage access

    Expanded partnership giving employees easier access to earned wages before payday.

    EquifaxEmployment verification connector

    Employment verification connector announced a few quarters ago.

    BenepassWorkday Wellness financial benefits partner

    Joined Workday Wellness in the financial benefits category.

    ChimeWorkday Wellness financial benefits partner

    Joined Workday Wellness in the financial benefits category.

    NY LifeWorkday Wellness financial benefits partner

    Joined Workday Wellness in the financial benefits category.

    VoyaWorkday Wellness health benefits partner

    Joined Workday Wellness in the health benefits category.

    AWSAI Agent Partner Network member

    Among the first to sign on to the AI Agent Partner Network and AI Agent Gateway.

    Google CloudAI Agent Partner Network member

    Among the first to sign on to the AI Agent Partner Network and AI Agent Gateway.

    PwCAI Agent Partner Network member

    Among the first to sign on to the AI Agent Partner Network and AI Agent Gateway.

    GleanAI Agent Partner Network member

    Among the first to sign on to the AI Agent Partner Network and AI Agent Gateway.

    Risks & headwinds

    2
    Headwind in state and local government marketcontinue to see that

    a little bit of headwind

    Mitigation: as people are trying to figure out what the funding slowdown is going to look like all the way to the state level

    Higher education market pressure

    clearly under pressure. They've lost some of their federal funding.

    Mitigation: if it's a higher ed university that includes a health care system, they too are getting a little pullback in funding.

    What to watch in Q3 FY26

    5

    Paradox acquisition close

    later in Q3
    Currentsigned a definitive agreement
    Targetclosed

    Why it matters

    The acquisition is expected to enhance Workday's talent acquisition suite and contribute to subscription revenue growth.

    Following our first half momentum and incorporating the acquisition of Paradox, which we expect to close later in Q3, we're increasing our FY '26 subscription revenue guidance to $8.815 billion, growth of 14%.

    Q&A highlights

    6

    What is Workday's perspective on concerns that AI startups will disrupt traditional SaaS, particularly seat-based models, given Workday's position as an incumbent SaaS player?

    Carl Eschenbach stated that concerns about AI disruption to seat-based models are 'completely overblown.' He emphasized Workday's entrenched market position with over 11,000 customers (65% of Fortune 500), high 90s gross retention, and platform stickiness. He highlighted that over 70% of customers use Workday Illuminate, and more than 70% of net new deals include an AI SKU, driving over 100% YoY growth in net new AI SKUs. Customers view Workday investment as an AI strategy investment.

    “I think this whole concern around AI disruption and the potential negative impact on seat-based models are completely overblown.”

    asked by Kasthuri Rangan · answered by Carl Eschenbach

    2 min read6 chapters

    Detailed Narrative

    01

    AI Strategy and Adoption

    Workday's AI value proposition is highly relevant, fueled by its extensive finance and HR data set, processing over 1 trillion transactions last year. More than 70% of core customers now leverage Workday Illuminate, and over 75% of net new deals included one or more AI products, leading to a doubling of net new ACV from AI products year-over-year. The company emphasizes its platform approach and trusted partner status for AI solutions, with customers viewing Workday investment as integral to their AI strategy.

    02

    Customer Momentum and Full Suite Wins

    Workday achieved strong customer adoption across key verticals, geographies, and segments, forming new HCM relationships with Carrefour, Memorial Health, Smurfit Westrock, and Banamex, and expanding with Sanofi, Blue Origin, and Google. Roughly 30% of net new deals were full suite, increasing to 50% or more in industries like SLED and healthcare. Salesforce, a long-time HCM customer, successfully went live on Workday Financial Management and Accounting Center, unifying its HR and financial data.

    03

    Industry-Specific Growth

    The Financial Services sector had a standout quarter, marked by an expansion at Nationwide Insurance to include core financials, and new wins with Guaranteed Rate, Handelsbanken, and Miller Insurance Services. In the SLED market, Workday celebrated its first state go-live on financial management with the State of Rhode Island and secured a significant competitive win at the University of Virginia and UVA Health. The tech and media industry also continued its strong performance, having crossed $1 billion in ARR.

    04

    Platform and Ecosystem Expansion

    Workday continues to evolve its platform, with new ACV from Extend Pro more than doubling year-over-year, driven by demand for custom applications. The company launched enhancements to Workday Developer Copilot and the AI Agent Gateway, attracting partners like AWS, Google Cloud, PwC, and Glean. The developer community has doubled year-over-year, and the Workday Marketplace now hosts over 100 apps, doubling since the start of FY26.

    05

    Strategic Acquisitions

    Workday announced a definitive agreement to acquire Paradox, a conversational AI agent designed to reimagine the job application experience, particularly for frontline industries. This acquisition aims to create a powerful AI-powered talent acquisition suite when combined with Workday Recruiting and HiredScore. Additionally, Workday recently acquired Flowise, a leading low-code platform for building powerful AI agents, to accelerate customers' ability to create and deploy new AI agents at scale.

    06

    International Expansion

    The international business delivered a solid Q2, with notable strength in EMEA, particularly in Germany and the UKI region, securing wins and expansions with companies like Haven Leisure and DQS Holding. In APAC, Workday achieved wins with Qantas and Lumus Imaging, and signed its first deal in Vietnam with Masan Group. Investments in Japan are yielding positive results, and Workday is strategically expanding into the India market by hiring a President for India and planning local data center services.

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