Workday, Inc.
WDAY · Nasdaq
WDAY · Nasdaq
Expected to report Nov 24, 2026 — estimated from last year’s reporting date.
Consensus is $1.27 EPS for Oct 2026 across 9 estimates, ranging $1.05 to $1.54.
Workday’s Q2 FY2027 was primarily a steady subscription-growth and AI-adoption quarter, with an unusually large tax benefit making the headline EPS result look much stronger than the underlying operating performance. Revenue of $2.649 billion rose 12.8% from $2.348 billion a year ago and 4.3% sequentially, while diluted EPS of $2.57, or basic EPS of $2.58, was far above the $1.26 consensus. However, $1.52 of diluted EPS came from a $374 million deferred tax benefit tied to an internal intellectual-property transfer. Non-GAAP diluted EPS was $2.75, versus $2.21 a year ago.
The operating business improved modestly against the prior year but softened sequentially. GAAP operating income rose to $313 million from $248 million a year ago, though it declined from $338 million in Q1; non-GAAP operating margin improved to 31.1% year over year but slipped from 31.5% in the prior quarter. Subscription revenue represented 93% of total revenue, with approximately 60% of the increase coming from existing customers. AI was the strategic centerpiece: more than 5,500 customers use organic agents and AI generated over 25% of new ACV. Backlog growth remained healthy, although operating cash flow fell to $520 million from $616 million a year ago and free cash flow fell to $460 million. Management raised full-year subscription revenue and margin guidance while continuing heavy investment in AI and buybacks.
The core subscription business continued to expand at a double-digit rate, with subscription revenue up 13.9% year over year to $2.471 billion. Approximately 60% of the increase came from expansion within customers existing at the beginning of the comparable prior-year period, and 40% came from customers added afterward. Gross revenue retention was approximately 97%, supporting the durability of the installed base. Professional services remained broadly flat at $178 million, down 1% year over year as Workday continued leveraging service partners.
AI was the defining strategic theme of the quarter. Management said AI contributed more than 25% of new ACV, and the installed base using Workday’s organic agents expanded to more than 5,500 customers, up more than 35% from Q1. Workday is positioning its trusted HR and finance data, workflow controls, and “deterministic rails” as an advantage in deploying agents for consequential enterprise work.
Workday continued to generate operating leverage, though the sequential picture was less strong. GAAP operating income rose 26% year over year to $313 million, lifting GAAP margin to 11.8% from 10.6%. Non-GAAP operating income increased 21% to $824 million and margin expanded 210 basis points year over year to 31.1%, but declined from 31.5% in Q1. Revenue growth outpaced headcount growth and operating expenses, while the prior-year period also included a small restructuring charge.
The headline GAAP earnings increase was not representative of the operating improvement. Net income was $632 million versus $228 million a year ago and $222 million in Q1, but the quarter included a $374 million deferred tax asset created by an intra-entity transfer of intellectual property during an internal legal-entity restructuring. The resulting $305 million income tax benefit added approximately $1.52 to diluted EPS. Non-GAAP diluted EPS of $2.75 provides a cleaner comparison, up from $2.21 a year ago, although it also excludes the tax effect and other items including $462 million of share-based compensation.
Workday generated $520 million of operating cash flow and $460 million of free cash flow in Q2, down from $616 million and $588 million a year ago. For the first six months, operating cash flow increased 13% to $1.215 billion and free cash flow increased 7% to $1.076 billion. The quarter’s cash generation was more than offset by aggressive capital returns: Workday spent $1.337 billion on repurchases in Q2, while the first-half total reached $2.924 billion.
