US ▾
WDAY
Earnings call · Jul 2026 (Q2 FY27)

Workday Q2 FY27 earnings call WDAY

Aug 27, 2026 Source

Executive summary

Workday Q2 FY27 — Strong AI Product Adoption and Revenue Growth

Workday delivered a strong Q2 FY27, marked by significant AI product adoption and robust revenue growth, with AI products contributing substantially to new ACV. The company is strategically focused on driving customer success and monetization through its agentic AI platform, which is deeply integrated into its core HR and finance offerings. Management expressed confidence in its AI strategy and its potential to drive future growth and margin expansion, despite some near-term impacts from consumption-based models.

Highlights

5

  • AI products drove over $100 million in new ACV, accounting for more than 25% of all new ACV closed in the quarter.

  • Over 5,500 customers are using one or more organic AI agents, up more than 35% from last quarter.

  • AI ARR reached nearly $600 million, up over 200% year-over-year and over 20% from last quarter.

  • Non-GAAP operating margin was 31.1% for the quarter, driven by revenue outperformance and cost discipline.

  • The $5 billion share repurchase plan was completed 6 months ahead of target, with a new $4 billion program approved.

Concerns

3

  • Operating cash flow declined year-over-year to $520 million due to timing of the payroll calendar.

  • Free cash flow declined year-over-year to $460 million due to timing of the payroll calendar.

  • Total subscription revenue backlog growth slowed to 8% year-over-year, impacted by a mix shift towards customer-based bookings.

Guidance & targets

CategoryTargetConfidence
FY27 Subscription Revenue
$9.94 billion to $9.95 billion
high materiality
High
Q3 FY27 Subscription Revenue
approximately $2.515 billion
medium materiality
High
Q3 FY27 CRPO Growth
11% to 12%
medium materiality
High
Q3 FY27 Professional Services Revenue
$175 million
low materiality
High
FY27 Professional Services Revenue
$710 million
low materiality
High
FY27 Non-GAAP Operating Margin
31%
high materiality
High
Q3 FY27 Non-GAAP Operating Margin
approximately 30%
medium materiality
High
FY27 Non-GAAP Tax Rate
19%
low materiality
High
FY27 Operating Cash Flow
$3.45 billion
high materiality
High
FY27 Capital Expenditures
approximately $270 million
medium materiality
High
FY27 Free Cash Flow
$3.18 billion
high materiality
High
FY28 Non-GAAP Operating Margin Expansion
at least 2 percentage points
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
U.S.
Anchored by U.S. large enterprise, had an exceptional quarter.
$1.97 billion12%——
International
Benefiting from stronger performance over the last few quarters.
$682 million17%——
EMEA
Drove solid growth, with strong performance in France, Germany and the Nordics. AI now accounts for nearly 1/3 of new ACV in EMEA.
AI new ACV: nearly 1/3 of total
—solid growth——
Japan
Further proof that our continued investment there is paying off.
—standout quarter——

WDAY operating KPIs by quarter

WDAY operating KPIs stated on its earnings calls, by fiscal quarter
KPI Jan 2025 Q4 FY25 Jul 2025 Q2 FY26 Oct 2025 Q3 FY26 Jan 2026 Q4 FY26 Apr 2026 Q1 FY27This call Jul 2026 Q2 FY27Change vs prior quarter
Customers
11K+ Workday now serves more than 11,000 customers across industries and geographies, including more than 60% of the Fortune 500 and 30% of the Global 2000. Source transcript
11K+ We have over 11,000 customers today, a strong installed base that includes 65% of the Fortune 500. Source transcript
—
11.5K+ With over 11,500 global customers, expansions remain our largest growth engine. Source transcript
11.5K+ We're start-up sitting on one of the most important enterprise platforms ever built and the trust of more than 11,500 customers. Source transcript
——
Remaining performance obligation (RPO) 12-month subscription revenue backlog
$7.63B 12-month subscription revenue backlog, or cRPO, was $7.63 billion at the end of Q4, growing 15%. Source transcript
$7.91B 12-month subscription revenue backlog, or cRPO, was $7.91 billion at the end of Q2, increasing 16.4%. Source transcript
$8.21B 12-month subscription revenue backlog or cRPO, was $8.21 billion at the end of Q3, increasing 17.6%. Source transcript
$8.83B 12-month subscription revenue backlog or cRPO was $8.83 billion at the end of Q4, growing 15.8%. Source transcript
$8.81B 12-month subscription revenue backlog or cRPO, was $8.81 billion at the end of Q1, growing 15.5%. Source transcript
$9.03B 12-month subscription revenue backlog or CRPO, ended the quarter at $9.03 billion, an increase of 14.2%. Source transcript
+2.5%
Remaining performance obligation (RPO) Subscription revenue backlog
$25.06B Total subscription revenue backlog at the end of Q4 was $25.06 billion, up 20%, and gross revenue retention rates remained strong at 98%. Source transcript
$25.37B Total subscription revenue backlog at the end of the quarter was $25.37 billion, up 18%, and gross revenue retention rates remained healthy at 97%. Source transcript
$25.96B Total subscription revenue backlog at the end of the quarter was $25.96 billion, up 17%, and gross revenue retention rates remained healthy at 97%. Source transcript
$28.1B Total subscription revenue backlog at the end of Q4 was $28.1 billion, up 12%. Source transcript
$27.29B Total subscription revenue backlog at the end of Q1 was $27.29 billion, up 11%. Source transcript
$27.4B Total subscription revenue backlog ended Q2 at $27.4 billion, up 8% from a year ago. Source transcript
+0.4%
Employees
~20.4K Our head count as of January 31 was approximately 20,400 Workmates, not reflecting the restructuring that took place in early February, which we expect will reduce our workforce by approximately 8%. Source transcript
~19.5K Our headcount as of July 31 stood at approximately 19,500 Workmates around the globe. Source transcript
20.588K Our head count as of October 31, stood at 20,588 workmates around the globe, including roughly 600 workmates from the Paradox acquisition. Source transcript
21.07K Our head count as of January 31 was 21,070 workmates around the globe. Source transcript
20.834K Our headcount as of quarter end stood at 20,834 workmates around the globe. Source transcript
20.896K Our headcount as of quarter end stood at 20,896 workmates around the globe. Source transcript
+0.3%

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

12-month subscription revenue backlog (CRPO) $9.03 billion Q2 FY27 end

increase of 14.2%

Growth fueled by expansion within existing customer base with AI increasingly a driver, alongside steady contribution from new logos.

Total subscription revenue backlog $27.4 billion Q2 FY27 end

up 8% from a year ago

Year-over-year growth rate impacted by a continued mix shift towards customer-based bookings versus net new and the mix of industries that drove net new bookings.

Product announcements

ProductTypeDetails
Sana Enterpriseupdate
Workday Learning and Sana Learnlaunch
Sana Workdayroadmap
Adaptive Decision Intelligencelaunch
Adoption Agentlaunch
Data Cloud Pro Editionupdate
Agent Ready Toolslaunch
Developer Agentlaunch
Agent Passportlaunch
Travel Agent and Sana for ITSMmilestone

Deals & partnerships

BMO Piloted and rolled out Workday Self-Service Agent

Piloted self-service agent with 500 employees in May and successfully rolled it out to all 55,000 employees in June. SSA gives BMO employees and managers a personal, intuitive way to get HR questions answered and work done faster and easier.

Leidos Signed for Sana Enterprise program one year

Signed as part of the Leidos program, which gives strategic customers Sana Enterprise free for a year.

KPMG U.S. New relationship

Formed a new relationship in Q2.

Danske Bank New relationship

Formed a new relationship in Q2.

BWX Technologies New relationship

Formed a new relationship in Q2.

Guidehouse New relationship

Formed a new relationship in Q2.

Genesis Using new financial audit agent

Using Workday's new financial audit agent, described as a first step towards a touchless audit.

Seminal Hard Rock Services Using payroll agent

Using payroll agent to automate complex back and compliance calculations for 28,000 employees.

[indiscernible] Investment Added Sana Enterprise and other AI agents

One of Workday's first 20 customers (since 2007), added Sana Enterprise to power an AI layer over the employee experience, building on recently added recruiting, contract intelligence, and planning AI agents.

AstraZeneca New Sana Enterprise customer

New customer for Sana Enterprise.

Novartis New Sana Enterprise customer

New customer for Sana Enterprise.

Caterpillar New Sana Enterprise customer

New customer for Sana Enterprise.

Delivery Hero Group New Sana Enterprise customer

New customer for Sana Enterprise.

Cisco Launch partner for Agent Passport

Joined as a launch partner for Agent Passport, bringing Cisco AI Defense to test agents against leading standards and protect them in production.

Risks & headwinds

Payroll calendar timing Q2 FY27

Operating cash flow declined to $520 million; Free cash flow declined to $460 million

Mitigation:Not explicitly stated as a risk to mitigate, but rather a timing impact on reported cash flow.

Mix shift in subscription revenue backlog growth Q2 FY27

Total subscription revenue backlog growth 8% year-over-year

Mitigation:Management noted it was impacted by a mix shift towards customer-based bookings versus net new and the mix of industries, implying a natural evolution rather than a specific headwind to mitigate.

What to watch in Q3 FY27

Flex Credits Customer Growth

second half of the year
Current 200 customers signed this quarter
Target significantly grow that number

Why it matters

Flex credits are key to monetizing Workday's AI agents, and significant growth indicates successful transition to consumption-based models and future revenue tailwinds.

We've already signed 200 customers this quarter, and we expect to significantly grow that number in the second half as R2 adds more GA agents and [indiscernible] platform and data cloud capabilities.

Q&A highlights

How will Workday monetize AI used via APIs/Data Cloud, and will new AI functionality lead to customers negotiating harder or exerting pricing pressure on existing core Workday products?

Workday is indifferent to how AI is used (API, Data Cloud, Extend AI) as all paths are monetized. AI is seen as growing the market opportunity and improving win rates, not causing core product compression. Customers are making long-term platform decisions based on AI vision, and Workday's integrated AI is a strong differentiator against legacy competitors.

“We don't see compression on the call. What I see is customers starting with the AI discussion and wanting us to be the AI platform for agentics on HCM and on finance.”

asked by Gabriela Borges · answered by Robert Enslin

2 min read 6 chapters

Detailed narrative

AI Product Momentum and Adoption

Workday's AI products are gaining significant traction, with over $100 million in new ACV in Q2, representing more than 25% of total new ACV. Over 5,500 customers are actively using organic AI agents, a 35% increase from last quarter. The company's AI ARR has reached nearly $600 million, demonstrating over 200% year-over-year growth and 20% quarter-over-quarter growth, indicating strong early monetization and customer value.

Strategic AI Platform Development

Workday is building an open and extensible AI platform, leveraging its unique single data model and security framework. Key innovations include Data Cloud for zero-copy access to HR and finance data, Developer Agent for natural language workflow creation, and Agent Passport for verified, auditable agent deployments. These initiatives aim to enable customers to build and integrate AI solutions securely and efficiently, whether using Workday's agents or their own.

Sana Enterprise and Decision Intelligence

Sana Enterprise, Workday's AI workbench, saw 23 new capabilities shipped in Q2, including Agent Builder and a shared agent task inbox. Internally, 12,000 Workmates built 22,000 custom agents in three weeks. Adaptive Decision Intelligence, an AI agent for analytics and planning, entered GA in Q2, with 170 customers already purchasing it. This product allows for analysis, plan generation, and action directly within Workday, with audit trails and governance.

Deployment and Adoption Agents

The Deployment Agent has seen strong momentum, with over 4,600 customers and query volumes surging nearly 500% in Q2, aiming to reduce deployment time by 80-90%. The Adoption Agent, which entered GA recently, helps customers stay current with releases, evaluating 20,000 release notes and achieving a 94% customer satisfaction rate. These agents contribute to faster deployments, quicker adoption, and lower cost to serve.

Customer Trust and Competitive Advantage

Workday emphasizes its "deterministic rails" approach, where AI agents operate within existing permissions, policies, and business processes, fostering customer trust. This approach, combined with a unified data model, provides a significant competitive advantage over legacy systems that struggle to aggregate data for AI. The company reports increased win rates and strong demand for its AI offerings, with over half of new wins in Q2 signing up for AI solutions.

Capital Allocation and Margin Expansion

Workday completed its $5 billion share repurchase plan six months ahead of schedule and approved a new $4 billion open-ended program, underscoring its commitment to capital returns. The company also raised its FY27 non-GAAP operating margin guidance to 31% and expects at least 2 percentage points of expansion in FY28, reflecting disciplined cost management and internal AI leverage.

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