Key Highlights

● Subscription revenues rose 13.9% to $2.471 billion, lifting total Revenue to $2.649 billion.

● More than 5,500 customers now use at least one Workday AI agent.

● Twelve-month subscription revenue Backlog reached $9.034 billion, up 14.2% year on year.

● Full-year subscription revenue guidance was raised to $9.940 billion to $9.950 billion.

Workday, Inc. (NASDAQ:WDAY) reported its fiscal 2027 second-quarter results on 27 August 2026, and the numbers offer a useful reading of how a large cloud software supplier is faring as customers weigh artificial intelligence spending against traditional human resources and finance budgets. Total revenues reached $2.649 billion, 12.8 per cent higher than a year earlier, while subscription revenues rose 13.9 per cent to $2.471 billion.

What Workday does

Workday supplies cloud-based software applications that organisations use to manage people and money. Its core products cover Human Capital management, payroll, financial management and planning, and are sold mainly through multi-year subscriptions. Because customers typically commit for several years and then expand usage, the company reports a measure of contracted future revenue, known as subscription revenue backlog, alongside its income statement.

The quarter in detail

The results covered the quarter ended 31 July 2026. On a GAAP basis, Operating Income was $313 million, a Margin of 11.8 per cent, compared with $248 million and 10.6 per cent a year earlier. Non-GAAP operating income was $824 million, a margin of 31.1 per cent, up from 29.0 per cent. GAAP Net Income was $632 million, or $2.57 per diluted share, against $0.84 previously; the company stated that this included a tax benefit of $374 million, equal to $1.52 per share, arising from an intra-entity intellectual property transfer.

Cash generation was softer. Operating Cash Flow was $520 million, down from $616 million, and free cash flow was $460 million, compared with $588 million. Workday ended the period with $3.403 billion in cash, cash equivalents and marketable securities. The twelve-month subscription revenue backlog stood at $9.034 billion, up 14.2 per cent, and total subscription revenue backlog was $27.403 billion, up 8.0 per cent.

Artificial intelligence and capital returns

Management emphasised AI. Chief executive Aneel Bhusri said AI accounted for more than 25 per cent of new annual contract value, and the company reported that more than 5,500 customers use at least one of its own agents, an increase of more than 35 per cent from the previous quarter. New or generally available products included a Financial Audit Agent and Workday Learning powered by Sana, and the company announced expanded cooperation with Amazon Web Services and Google Cloud.

Workday also continued to return capital. It repurchased about 9.8 million Class A shares for $1.3 billion in the quarter, and the board approved an additional open-ended authorisation of up to $4.0 billion.

Outlook and industry context

For the third quarter, ending 31 October 2026, Workday guided to subscription revenue of $2.515 billion, growth of 12 per cent, with a non-GAAP Operating Margin of 30.0 per cent. For the full fiscal year ending 31 January 2027, it updated guidance to subscription revenue of $9.940 billion to $9.950 billion, growth of 13 per cent, and a non-GAAP operating margin of 31.0 per cent. The company's release did not state its earlier guidance, so the scale of any revision cannot be judged from that document. These figures are management forecasts and may differ from actual outcomes.

Enterprise software vendors face a shifting backdrop in which AI agents may change how work is priced and delivered, and in which customers scrutinise per-seat licensing.

Workday's Agent-Adoption Checkpoint

Several uncertainties deserve attention. Free cash flow fell year on year in the quarter, and the headline Earnings figure benefited from a one-off tax item. Total backlog growth of 8.0 per cent was slower than the twelve-month measure. The company's AI claims depend on customers converting pilots into paid, lasting usage.

Investors and customers following Workday will likely watch the third-quarter report, the pace of agent adoption, backlog trends, margin delivery against the 31.0 per cent target and use of the new buyback authorisation.