Key Highlights

● Total revenue was $2.649 billion, up 12.8% year on year.

● Subscription revenue rose 13.9% to $2.471 billion.

● Workday repurchased about 9.8 million Class A shares for $1.3 billion.

● More than 5,500 customers use at least one organic agent.

Workday, Inc. (NASDAQ:WDAY) reported fiscal 2027 second-quarter results on 27 August 2026 that show how an established human capital management and finance software supplier is positioning itself around artificial intelligence agents. Total revenue was $2.649 billion, up 12.8%, and the company updated its full-year subscription revenue outlook, which now implies growth of about 13%. The report also contained a large increase in share repurchases, alongside a new $4.0 billion authorisation.

Business and sector

Workday sells cloud applications for human resources, payroll, financial management and planning to large organisations, mostly through multi-year subscription contracts. Those contracts give the company a visible backlog, which is why many investors in enterprise software focus on subscription revenue and backlog rather than on one-off sales. The sector is now debating how far AI agents will change the number of software seats organisations buy. Workday's response has been to build agents into its own platform and to extend its partnerships with major cloud providers.

Latest reported results

For the quarter ended 31 July 2026, subscription revenue was $2.471 billion, up 13.9%. GAAP operating income was $313 million, a margin of 11.8%, and non-GAAP operating income was $824 million, a margin of 31.1%, compared with 29.0% a year earlier. Net income was $632 million, against $228 million in the prior-year quarter, although the company stated that GAAP earnings per share of $2.57 included a $1.52 per share tax benefit from an intra-entity intellectual property transfer. Non-GAAP earnings per share were $2.75, compared with $2.21. The twelve-month subscription revenue backlog was $9.034 billion, up 14.2%.

Financial performance and industry context

Operating cash flow was $520 million, down from $616 million, and free cash flow was $460 million, compared with $588 million. Cash, cash equivalents and marketable securities were $3.403 billion. Workday repurchased about 9.8 million Class A shares for $1.3 billion during the quarter, and its board authorised a further open-ended repurchase programme of up to $4.0 billion. Management said more than 5,500 customers use at least one organic agent, up more than 35% from the previous quarter, and that AI contributed more than 25% of new annual contract value. For the third quarter it guided subscription revenue to $2.515 billion and a non-GAAP operating margin of 30.0%. For fiscal 2027 it now expects subscription revenue of $9.940 billion to $9.950 billion and a non-GAAP operating margin of 31.0%.

Risks and uncertainties

The tax benefit that lifted GAAP earnings is not expected to recur. Free cash flow fell year on year, even as profit measures rose, and the large repurchase consumed a substantial share of the company's liquidity. The 8.0% growth in total subscription backlog trails the faster growth in the twelve-month figure, which investors may read as a signal about contract duration. AI adoption metrics are company-defined, and the effect of agents on pricing, seat counts and competition from other platforms remains largely unproven.

Agent adoption and the next quarter

The next report will cover the quarter ending 31 October 2026 and will test the third-quarter guidance. Useful indicators include conversion of organic agent usage into revenue, cash flow relative to non-GAAP profit, the pace of repurchases under the new authorisation, and customer response to the Financial Audit Agent and Workday Learning, powered by Sana, both of which became generally available. The newly announced Amazon Web Services partnership and expanded Google Cloud relationship may also affect how Workday reaches customers.