Summary
Workday's fiscal 2027 first quarter, ended April 30, 2026, produced total revenues of $2.542 billion, up 13.5% from the prior-year quarter. Subscription services did most of the work, growing 14.3% and accounting for approximately 93% of total revenues, while professional services revenues rose 4% as the company leaned harder on partner firms to run deployments. Management cited a gross revenue retention rate of approximately 97% as of April 30, 2026. That number says churn is not the problem. Finding net new business is where the friction sits.
Profitability expanded quickly. GAAP operating income was $338 million, or 13.3% of revenues, up from $39 million a year earlier, a period that absorbed restructuring charges which did not repeat. Non-GAAP operating income was $809 million, or 31.8% of revenues, against $677 million, or 30.2%. Net income was $222 million, up from $68 million, and diluted EPS was $0.87, up from $0.25. Non-GAAP diluted EPS reached $2.66, up from $2.23. Share-based compensation fell to 16.1% of total revenues from 20.5%. Product development expenses rose 6%, sales and marketing 9%, and general and administrative costs 2%, all slower than the 13% revenue growth.
Cash was the cleanest part of the quarter. Operating cash flow was $696 million, up from $457 million, and capital expenditures rose to $80 million from $36 million. Free cash flows, which the company defines as operating cash flow minus capital expenditures, were $616 million, up from $421 million. Deferred revenue stood at $4.395 billion, up 13.4%. Total subscription revenue backlog was $27.294 billion, up 10.9%, with $8.806 billion of that expected to be recognized over the next 12 months, up 15.5%. Workday repurchased roughly 12.0 million Class A shares for $1.6 billion and had $1.3 billion remaining under its authorizations as of April 30, 2026. Cash, cash equivalents, and marketable securities totaled $4.353 billion, down from $7.970 billion a year earlier after buybacks and debt repayment. Headcount ended the quarter at 20,834, up 2%.
The AI story is moving from slides to usage. More than 4,000 customers now use at least one of Workday's organically developed agents, more than double the prior quarter, and the Recruiting Agent supported 14 million hiring processes in the quarter, up 44% year over year. The customer community now covers more than 80 million users under contract. New customers included ACHM Hotels by Marriott, Del Monte Fresh Produce Company, Smiths Group, and the State of Delaware, while Bank OZK, GE Vernova, and Queensland University of Technology expanded. Sana is now available worldwide, and the Agent System of Record is generally available, giving customers visibility over their AI agents.
Guidance holds the line on growth. For the fiscal 2027 second quarter ending July 31, 2026, Workday guided subscription revenues of $2.455 billion, growth of 13%, and a non-GAAP operating margin of 30.0%. For the full fiscal year 2027, it reiterated subscription revenue guidance of $9.925 billion to $9.950 billion, growth of 12% to 13%, and raised its non-GAAP operating margin target to 30.5%. Capital expenditures are expected to be about $270 million for fiscal 2027. The risk discussion is candid about demand. Management points to deal scrutiny and lengthening sales cycles, particularly in net new opportunities, plus reduced growth in headcount-level commitments when existing customers renew. Extended cycles are most visible in government, higher education, and healthcare, where federal funding is a factor. Workday has also offered certain customers more flexible payment terms. Security breaches, service outages, competitive pricing pressure, and evolving AI regulation round out the list, and any of them could disrupt a subscription model that recognizes revenue over contracts of three years or longer.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2027 | Q4 FY2026 | QoQ | Q1 FY2026 | YoY |
|---|---|---|---|---|---|
| Revenue | $2.54B | $2.53B | +0.4% | $2.24B | +13.5% |
| Research & development | $705.0M | $691.0M | +2.0% | $663.0M | +6.3% |
| Sales & marketing | $679.0M | $675.0M | +0.6% | $623.0M | +9.0% |
| General & administrative | $216.0M | $250.0M | -13.6% | $212.0M | +1.9% |
| Total operating expenses | $2.20B | $2.36B | -6.5% | $2.20B | +0.1% |
| Operating income (loss) | $338.0M | $174.0M | +94.3% | $39.0M | +766.7% |
| Operating margin | 13.3% | 6.9% | +6.4 pp | 1.7% | +11.6 pp |
| Net income (loss) | $222.0M | $145.0M | +53.1% | $68.0M | +226.5% |
| Net margin | 8.7% | 5.7% | +3.0 pp | 3.0% | +5.7 pp |
| Diluted EPS | $0.87 | $0.54 | +$0.33 | $0.25 | +$0.62 |
| Customers | 11,500 | — | — | 11,000 | +4.5% |
Risks
Workday faces intensifying competition from non-specialist AI-native solutions, generic LLMs, generative AI, general-purpose agents, and vibe coding, alongside Oracle and SAP. If competitors' AI products become more accepted or reach market earlier, Workday's revenues and margins could be adversely affected.
MD&A states total revenues increased 13% to $2.5 billion for the three months ended April 30, 2026, but it also cites moderation of revenue growth due to deal scrutiny and lengthening sales cycles, particularly in net new opportunities, and reduced headcount-level commitments on renewals. Extended sales cycles are especially evident in government, higher education, and healthcare industries tied to federal funding.
In February 2026, Aneel Bhusri assumed the CEO role and Carl Eschenbach ceased to serve as CEO. The filing warns that key employee and executive leadership changes may disrupt the business, harm culture, and negatively affect the ability to attract and retain talent.
The filing discloses concrete security events, including an August 2025 social engineering campaign that resulted in unauthorized access to some internal systems and a July 2025 issue impacting high-volume data reporting for certain customers. It also notes co-location data center disruptions from high temperatures and power outages.
Workday is working to comply with the EU AI Act and is defending a lawsuit alleging that certain AI-related products enable discrimination, though the majority of claims have been dismissed. The filing notes AI litigation and regulation could cause reputational harm, regulatory action, and increased costs.
Workday has made significant investments in the U.S. federal government market and relies on FedRAMP authorization. Government contracts carry risks from budgeting and appropriations, spending cuts, shutdowns, termination rights, and competitive bidding, and MD&A cites extended sales cycles in government, higher education, and healthcare tied to federal funding.
Workday's strategy includes acquiring and investing in open-source AI platforms and models, which may have novel or untested licenses, copyleft risk, and data of unknown provenance. These could require releasing proprietary source code, re-engineering technologies, or expose Workday to copyright and data poisoning claims.
Workday depends on its partner network for additional revenue growth and implementation services. Partner disruptions, competitor acquisitions of partners, conflicts with direct go-to-market models, or partner misconduct could harm sales, operating results, and growth rate.
The filing highlights evolving and fragmented privacy rules, including GDPR, the EU Data Act, CCPA/CPRA, and the U.S. DOJ Data Security Program. Noncompliance can lead to penalties of up to 4% of worldwide revenue, litigation, and costly changes to services or sales processes.
Workday cites increased tariffs, elevated inflation and energy prices, fluctuating interest rates and foreign currency exchange rates, and geopolitical instability. These conditions have led to delays in purchasing decisions, increased demand for price concessions and delayed payment terms, and reduced customer demand.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Non-GAAP Operating Income
Total Customers
12-Month Subscription Revenue Backlog
Free Cash Flow
Gross Revenue Retention Rate
Operating Cash Flow
Total Subscription Revenue Backlog (RPO)
Summary, forecast, risks and KPIs are extracted from Workday, Inc.'s SEC filings for Q1 FY2027 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.