01—Abstract
Summary
Summary of the 8-K filed August 21, 2025. Cited figures are marked; the original filing is the authoritative source.
Workday reported fiscal 2026 second-quarter results (quarter ended July 31, 2025) that showed solid top-line growth and substantial margin expansion.
Total revenues rose 12.6% year-over-year to $2.348 billiona, and subscription revenues grew 14.0% to $2.169 billion. GAAP operating income more than doubled to $248 million (10.6% margin, versus 5.3% a year earlier), while non-GAAP operating income reached $680 million, or 29.0% of revenues. GAAP diluted EPS was $0.84 and non-GAAP diluted EPS was $2.21, up from $1.75.
12-month subscription revenue backlog grew 16.4% to $7.91 billionb, and total subscription backlog grew 17.6% to $25.37 billion. Cash generation remained healthy, with operating cash flow of $616 million and free cash flow of $588 million for the quarter. Workday repurchased about 1.2 million shares for $299 million and ended the quarter with $8.19 billion in cash and marketable securities against roughly $2.99 billion of noncurrent debt.
Management raised fiscal 2026 subscription revenue guidance to $8.815 billionc (about 14% growth) and lifted the non-GAAP operating margin outlook to approximately 29%. The guidance update incorporates the pending Paradox acquisition, so investors should note that part of the revenue lift may be inorganic.
The six-month GAAP results were weighed down by restructuring charges of $167 milliond tied to the February 2025 plan, which reduced the workforce by about 7.5%. Investors should also watch the sharp decline in unearned revenue year-to-date and the widening gap between GAAP and non-GAAP profitability, driven largely by stock-based compensation of $391 million in the quarter.
02—Key points
Key Highlights
- Total revenue of $2.348B, up 12.6% YoY; subscription revenue of $2.169B, up 14.0% YoY
- GAAP operating margin improved to 10.6% from 5.3%; non-GAAP operating margin rose to 29.0% from 24.9%
- 12-month subscription revenue backlog of $7.91B (+16.4%); total subscription backlog of $25.37B (+17.6%)
- Free cash flow of $588M vs. $516M a year earlier; $299M of share repurchases in the quarter
- FY2026 subscription revenue guidance raised to $8.815B (~14% growth), including the Paradox acquisition; non-GAAP operating margin guidance raised to ~29%
- Six-month GAAP results include $167M of restructuring charges from the Fiscal 2026 Restructuring Plan (about 7.5% workforce reduction)
- Cash, cash equivalents and marketable securities of $8.19B at July 31, 2025
03—Questions
Frequently Asked Questions
How strong was Workday's growth in the second quarter?
Total revenue grew 12.6% to $2.348 billion and subscription revenue grew 14.0% to $2.169 billion. Backlog growth of 16.4% (12-month) and 17.6% (total) suggests continued momentum in future revenue.
Why did GAAP operating income rise so sharply?
GAAP operating income increased to $248 million from $111 million, mainly because operating expenses grew more slowly than revenue and the prior-year quarter was lower. Restructuring costs in the quarter were minimal ($1 million), while the large first-half restructuring charges fell in the earlier months of the fiscal year.
Is the raised guidance organic growth?
Not entirely. The revised full-year subscription revenue guidance of $8.815 billion explicitly incorporates the pending Paradox acquisition, so part of the increase reflects acquired revenue rather than organic performance. Investors should check the company's commentary on Paradox's contribution.
How is Workday's cash position and capital return?
Operating cash flow was $616 million and free cash flow was $588 million in the quarter. Workday repurchased about $299 million of stock and held $8.19 billion in cash and marketable securities, against about $2.99 billion of noncurrent debt.
What are the main concerns in the filing?
Unearned revenue fell from $4.467 billion to $3.852 billion (current) year-to-date, stock-based compensation remains large at $391 million in the quarter, and the GAAP-to-non-GAAP gap is significant. The restructuring program and the Paradox integration also carry execution risk.
04—Continue