fiscal 2027 second quarter
Filed Aug 27, 2026Fiscal Second Quarter Total Revenues of $2.649 Billion, Up 12.8% Year-Over-Year Subscription Revenues of $2.471 Billion, Up 13.9% Year-Over-Year
Revenue, subscription revenue, GAAP operating income, non-GAAP operating income, and non-GAAP diluted net income per share increased year-over-year, while the company raised fiscal 2027 non-GAAP operating margin guidance to 31.0%.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenuesGAAP | $2.649 billion | – | 12.8% |
| Subscription services revenuesGAAP | $2.471 billion | – | 13.9% |
| Professional services revenuesGAAP | $178 million | – | – |
| Costs of subscription servicesGAAP | $436 million | – | – |
| Costs of professional servicesGAAP | $216 million | – | – |
| Product developmentGAAP | $747 million | – | – |
| Sales and marketingGAAP | $706 million | – | – |
| General and administrativeGAAP | $231 million | – | – |
| RestructuringGAAP | $0 million | – | – |
| Total costs and expensesGAAP | $2.336 billion | – | – |
| Operating incomeGAAP | $313 million | – | – |
| Operating marginGAAP | 11.8% | – | – |
| Non-GAAP operating incomenon-GAAP | $824 million | – | – |
| Non-GAAP operating marginnon-GAAP | 31.1% | – | – |
| Other income, netGAAP | $14 million | – | – |
| Income before provision for (benefit from) income taxesGAAP | $327 million | – | – |
| Provision for (benefit from) income taxesGAAP | $(305) million | – | – |
| Net incomeGAAP | $632 million | – | – |
| Non-GAAP net incomenon-GAAP | $677 million | – | – |
| Net income per share, basicGAAP | $2.58 | – | – |
| Diluted net income per shareGAAP | $2.57 | – | – |
| Non-GAAP diluted net income per sharenon-GAAP | $2.75 | – | – |
| Share-based compensation expenseGAAP | $462 million | – | – |
| 12-month subscription revenue backlogother | $9.034 billion | – | 14.2% |
| Total subscription revenue backlogother | $27.403 billion | – | 8.0% |
| Net cash provided by operating activitiesGAAP | $520 million | – | – |
| Capital expendituresGAAP | $(60) million | – | – |
| Free cash flowsnon-GAAP | $460 million | – | – |
| Cash and cash equivalentsGAAP | $661 million | – | – |
| Marketable securitiesGAAP | $2.742 billion | – | – |
| Debt, currentGAAP | $999 million | – | – |
| Debt, noncurrentGAAP | $1.990 billion | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Subscription servicesAI drove more than 25% of new ACV, according to the CEO. | $2.471 billion | – | 13.9% |
| Professional servicesNo segment driver was quantified in the release. | $178 million | – | – |
fiscal 2027 third quarter ending October 31, 2026 and fiscal 2027 full year ending January 31, 2027 outlook
- RevenueFiscal 2027 third quarter subscription revenues of $2.515 billion, representing growth of 12%; fiscal 2027 full year subscription revenues of $9.940 billion to $9.950 billion, representing growth of 13%
- NoteFiscal 2027 third quarter non-GAAP operating margin of 30.0%
- NoteFiscal 2027 full year non-GAAP operating margin of 31.0%
Capital returns
- Repurchased approximately 9.8 million shares of Class A common stock for $1.3 billion as part of its share repurchase programs.
- Repurchases of common stock were $(1.337) billion for the three months ended July 31, 2026.
- The Board of Directors authorized the open-ended repurchase of up to an additional $4.0 billion of outstanding Class A common stock.
What drove it
- AI drove more than 25% of new ACV.
- More than 5,500 customers used at least one Workday organic agent.
- Customers using one or more Workday organic agents increased more than 35% from last quarter.
- Management cited continued momentum across the platform and AI as a strategic driver of customer expansion.
- Workday announced partnerships with AWS and Google Cloud related to Workday Data Cloud and Workday agents.
Concerns
- Operating cash flows were $520 million compared to $616 million in the same period last year.
- Free cash flows were $460 million compared to $588 million in the same period last year.
- Professional services revenues were $178 million compared to $179 million in the same period last year.
- GAAP diluted net income per share included a tax benefit of $1.52 per share related to an intra-entity transfer of certain intellectual property rights as part of an internal legal entity restructuring.
- The reconciliation identifies a deferred tax asset and related tax benefit of $374 million from the intra-entity transfer.
What to watch
- Fiscal 2027 third-quarter subscription revenues guidance of $2.515 billion, representing growth of 12%.
- Fiscal 2027 third-quarter non-GAAP operating margin guidance of 30.0%.
- Fiscal 2027 full-year subscription revenues guidance of $9.940 billion to $9.950 billion, representing growth of 13%.
- Fiscal 2027 full-year non-GAAP operating margin guidance of 31.0%.
- Subscription backlog growth, including 12-month subscription revenue backlog of $9.034 billion and total subscription revenue backlog of $27.403 billion.
- Adoption and expansion of Workday organic agents.
Balance sheet and cash flow
- Cash, cash equivalents, and marketable securities were $3.403 billion as of July 31, 2026.
- Cash and cash equivalents were $661 million as of July 31, 2026, compared with $1.501 billion as of January 31, 2026.
- Marketable securities were $2.742 billion as of July 31, 2026, compared with $3.942 billion as of January 31, 2026.
- Debt, current was $999 million as of July 31, 2026.
- Debt, noncurrent was $1.990 billion as of July 31, 2026, compared with $2.987 billion as of January 31, 2026.
- Operating cash flows were $520 million compared to $616 million in the same period last year.
- Free cash flows were $460 million compared to $588 million in the same period last year.
- Unearned revenue was $4.387 billion as of July 31, 2026, compared with $5.010 billion as of January 31, 2026.
Analysis
Workday reported fiscal 2027 second-quarter total revenues of $2.649 billion, up 12.8% year-over-year, led by subscription services revenues of $2.471 billion, up 13.9%. Professional services revenues were $178 million, compared with $179 million in the same period last year. The subscription mix and the reported $9.034 billion of 12-month subscription revenue backlog, up 14.2%, point to continued recurring-revenue momentum. Total subscription revenue backlog was $27.403 billion, increasing 8.0% year-over-year.
Profitability improved on both reported bases. GAAP operating income was $313 million, or 11.8% of revenues, compared with $248 million, or 10.6% of revenues. Non-GAAP operating income was $824 million, or 31.1% of revenues, compared with $680 million, or 29.0% of revenues. Share-based compensation expense was $462 million, compared with $391 million, and remains the largest reconciling item between GAAP and non-GAAP operating income.
GAAP net income was $632 million and diluted net income per share was $2.57, compared with $228 million and $0.84. The release states that current-quarter GAAP diluted net income per share included a tax benefit of $1.52 per share from an intra-entity transfer of certain intellectual property rights as part of an internal legal entity restructuring. Non-GAAP net income was $677 million, while non-GAAP diluted net income per share was $2.75, compared with $598 million and $2.21, respectively.
Cash generation was lower year-over-year. Net cash provided by operating activities was $520 million compared with $616 million, and free cash flows were $460 million compared with $588 million. Workday repurchased approximately 9.8 million Class A shares for $1.3 billion and received authorization for an additional $4.0 billion open-ended repurchase program. Cash, cash equivalents, and marketable securities were $3.403 billion as of July 31, 2026.
The outlook calls for fiscal 2027 third-quarter subscription revenues of $2.515 billion, representing growth of 12%, and a non-GAAP operating margin of 30.0%. For fiscal 2027, Workday updated guidance to subscription revenues of $9.940 billion to $9.950 billion, representing growth of 13%, and a non-GAAP operating margin of 31.0%. Management described AI as a strategic driver of customer expansion, with more than 5,500 customers using at least one organic agent and AI driving more than 25% of new ACV.
Management, verbatim
We had a strong Q2, with AI driving more than 25% of our new ACV and more than 5,500 customers now using at least one of our organic agents.
Aneel Bhusri, co-founder, CEO, and chair
We now expect fiscal 2027 subscription revenue of $9.940 billion to $9.950 billion, growth of 13%, while increasing our fiscal 2027 non-GAAP operating margin guidance to 31.0%.
Zane Rowe, CFO
Not in the filing
stated, not guessed- GAAP gross margin and non-GAAP gross margin
- GAAP gross profit and non-GAAP gross profit
- Prior-quarter comparisons for revenue, operating income, net income, EPS, cash flow, backlog, and segment revenue
- Professional services revenue year-over-year percentage change
- GAAP and non-GAAP effective tax rates
- Forward guidance for total revenues, gross margin, operating expenses, tax rate, GAAP operating margin, GAAP EPS, operating cash flow, free cash flow, capital expenditures, and capital returns
- Prior-period outlook for comparison with actual results
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.