01—Abstract
Summary
Summary of the 8-K filed August 27, 2026. Cited figures are marked; the original filing is the authoritative source.
Workday (WDAY) reported fiscal 2027 second-quarter results (quarter ended July 31, 2026) that were strong on the top line and profitability.
Total revenues rose 12.8% year-over-year to $2.649 billiona, and subscription revenues grew 13.9% to $2.471 billion. Non-GAAP operating margin expanded to 31.1% from 29.0%, and GAAP operating income more than doubled... rising to $313 million from $248 million. Management highlighted AI momentum, with AI contributing more than 25% of new ACV and more than 5,500 customers using at least one organic agent.
Full-year fiscal 2027 subscription revenue guidance was set at $9.940 to $9.950 billionb (about 13% growth), and non-GAAP operating margin guidance was raised to 31.0%. The third-quarter subscription revenue outlook is $2.515 billion (12% growth) with a 30.0% non-GAAP operating margin. GAAP diluted EPS of $2.57 is inflated by a one-time $1.52 per share tax benefit tied to an intra-entity transfer of intellectual property during an internal legal entity restructuring, which created a $374 million deferred tax asset.
Excluding items, non-GAAP diluted EPS was $2.75c versus $2.21 a year earlier. Investors should separate this non-recurring benefit from the underlying earnings trend. Capital allocation is a major focus.
Workday repurchased about 9.8 million Class A shares for $1.3 billiond in the quarter, and the board authorized an additional open-ended $4.0 billion buyback. Treasury stock rose to $7.151 billion from $4.220 billion at fiscal year-end, while cash and marketable securities fell to $3.403 billion and total debt (current plus noncurrent) was about $2.99 billion. Operating cash flow was $520 million, down from $616 million, and free cash flow was $460 million, down from $588 million, so buybacks are being funded in part from the balance sheet.
02—Key points
Key Highlights
- Total revenue of $2.649B, up 12.8% YoY; subscription revenue of $2.471B, up 13.9%
- GAAP operating income of $313M (11.8% margin) vs. $248M last year; non-GAAP operating margin of 31.1% vs. 29.0%
- GAAP diluted EPS of $2.57 includes a $1.52/share one-time tax benefit from an intra-entity IP transfer; non-GAAP diluted EPS of $2.75 vs. $2.21
- 12-month subscription revenue backlog of $9.034B (up 14.2%); total subscription backlog of $27.403B (up 8.0%)
- FY2027 subscription revenue guidance of $9.940–$9.950B (~13% growth) and non-GAAP operating margin raised to 31.0%
- Board authorized an additional open-ended $4.0B share repurchase; $1.3B repurchased in the quarter
- Operating cash flow fell to $520M from $616M and free cash flow to $460M from $588M; cash and marketable securities declined to $3.403B
03—Questions
Frequently Asked Questions
Why is GAAP EPS so much higher than last year?
GAAP diluted EPS of $2.57 includes a one-time tax benefit of $1.52 per share, roughly $374 million, from an intra-entity transfer of intellectual property during an internal legal entity restructuring. This non-recurring item distorts year-over-year comparisons. Non-GAAP diluted EPS, which excludes it along with other adjustments, was $2.75 versus $2.21.
Is Workday's profitability improving?
Yes. Non-GAAP operating margin rose to 31.1% from 29.0% a year earlier, and GAAP operating income increased to $313 million from $248 million. Management raised full-year non-GAAP operating margin guidance to 31.0%, indicating continued operating leverage alongside investment in agentic AI.
Is the company's cash generation keeping pace with its buybacks?
Not fully. Operating cash flow was $520 million and free cash flow was $460 million in the quarter, both lower than the prior year. Buybacks of $1.3 billion exceeded free cash flow, and cash and marketable securities fell to $3.403 billion. Investors should watch whether the $4.0 billion authorization is funded from cash generation or from the balance sheet and debt.
What is the outlook for the rest of fiscal 2027?
Management expects third-quarter subscription revenue of $2.515 billion (12% growth) and a 30.0% non-GAAP operating margin. For the full year, it expects subscription revenue of $9.940–$9.950 billion (about 13% growth) and a 31.0% non-GAAP operating margin.
How significant is AI to Workday's growth story?
Management says AI drove more than 25% of new ACV in the quarter, and more than 5,500 customers now use at least one organic agent, up more than 35% from the prior quarter. The company also launched or expanded several AI products and partnerships, including Google Cloud and AWS integrations. Investors will look for these adoption metrics to translate into sustained subscription growth.
04—Continue