Summary
Workday's fiscal 2026 second quarter revenue rose 12.6% to $2.348 billion from the prior-year quarter. GAAP operating income was $248 million, up 123.4% from the prior-year quarter. GAAP operating margin was 10.6%, up 5.2 percentage points from the prior-year quarter. Net income increased 72.7% to $228 million from the prior-year quarter. Diluted EPS was $0.84, up 71.4% from the prior-year quarter. Non-GAAP operating income was $680 million, or 29.0% of revenue, compared with $518 million, or 24.9%, in the same period last year. The gap between GAAP and non-GAAP results remains wide because share-based compensation and other items are excluded from the non-GAAP figures. Subscription services accounted for approximately 92% of total revenues in the quarter and represented 97% of total unearned revenue as of July 31, 2025. The quarter ended July 31, 2025.
Cash generation was solid. Operating cash flow for the quarter was $616 million, up 7.9% from the prior-year quarter. Free cash flow, which subtracts capital expenditures, was $588 million, compared with $516 million a year earlier. Capital expenditures were $28 million, down 49.1% from the prior-year quarter. For the first six months, capital expenditures were $64 million, down 52.9% from the prior-year period. Deferred revenue was $3.92 billion, up 8.5% from the prior-year quarter. For the first six months, operating cash flow was $1.073 billion, up 13.8% from the prior-year period. Free cash flow for the first six months was $1.009 billion. First-half GAAP operating income was $287 million, up 64.0% from the prior-year period, and first-half GAAP operating margin was 6.3%, up 2.0 percentage points from the prior-year period.
Operational metrics point to a stable customer base. Gross revenue retention was approximately 97% as of July 31, 2025. Workday says its community includes more than 11,000 organizations and more than 75 million users under contract, with more than 65% of the Fortune 500 as customers. Headcount was 19,517, down 2% from the prior-year period, reflecting a restructuring plan announced in February 2025 that cut about 7.5% of the workforce. The company agreed to acquire Paradox, a candidate experience agent, and acquired Flowise, a low-code platform for building AI agents. It also launched Workday Government and an Agent Partner Network. New customers included Banamex, Carrefour, Masan Group, Memorial Health, and Red Coats, while Google, Nationwide Insurance, Qantas Airways, Randstad, Tokyo Electron, and University of Virginia expanded their relationships. Workday was named a Leader in the 2025 Gartner Magic Quadrant for Cloud-Based ERP for U.S. Local Government.
Guidance was raised. For the full fiscal year 2026, Workday now expects subscription revenues of $8.815 billion, representing growth of 14.2%, and a non-GAAP operating margin of approximately 29.0%. For the fiscal 2026 third quarter, guidance calls for subscription revenues of $2.235 billion, up 14.1%, and a non-GAAP operating margin of 28.0%. Non-GAAP diluted net income per share was $2.21 in the quarter, compared with $1.75 in the same period last year. Management attributes the higher outlook to first-half momentum and the pending acquisition of Paradox. The company has not provided a reconciliation of its forward-looking non-GAAP operating margin to GAAP operating margin.
The risk section is familiar but carries weight. The company cites macroeconomic uncertainty from tariffs, inflation, interest rates, and foreign exchange swings, plus geopolitical instability. It flags deal scrutiny, longer sales cycles, and reduced headcount commitments upon renewals. Flexible payment terms for some customers could pressure collections. Other named risks include security breaches, service outages, delays in deployment, privacy regulation, competition, reliance on partners, and regulatory uncertainty around AI. Workday also notes that acquisitions such as Paradox and Flowise may not deliver expected benefits. The 2025 Tax Act, signed into law on July 4, 2025, is expected to reduce domestic cash tax outflows for the remainder of fiscal 2026. The company is still assessing Pillar Two rules that define a 15% global minimum tax for large multinational corporations. The restructuring plan has already weighed on GAAP results in the first half, though operating income still improved sharply.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $2.35B | $2.24B | +4.8% | $2.08B | +12.6% |
| Research & development | $660.0M | $663.0M | -0.5% | $649.0M | +1.7% |
| Sales & marketing | $641.0M | $623.0M | +2.9% | $611.0M | +4.9% |
| General & administrative | $216.0M | $212.0M | +1.9% | $203.0M | +6.4% |
| Total operating expenses | $2.10B | $2.20B | -4.6% | $1.97B | +6.4% |
| Operating income (loss) | $248.0M | $39.0M | +535.9% | $111.0M | +123.4% |
| Operating margin | 10.6% | 1.7% | +8.8 pp | 5.3% | +5.2 pp |
| Net income (loss) | $228.0M | $68.0M | +235.3% | $132.0M | +72.7% |
| Net margin | 9.7% | 3.0% | +6.7 pp | 6.3% | +3.4 pp |
| Diluted EPS | $0.84 | $0.25 | +$0.59 | $0.49 | +$0.35 |
| Customers | 11,000 | 11,000 | ±0.0% | 10,500 | +4.8% |
Risks
MD&A reports a moderation of revenue growth rates due to deal scrutiny and lengthening of certain sales cycles, particularly within net new opportunities, and reduced growth in headcount level commitments upon renewals of existing customers. The company has provided more flexible payment terms and may experience additional negative impacts on renewals and collections.
MD&A cites increased tariffs, elevated inflation, fluctuating interest rates and foreign currency exchange rates, and geopolitical instability as continuing to impact the global economy. These conditions have led to deal scrutiny, lengthening sales cycles, and reduced growth in customer headcount commitments upon renewals.
The Fiscal 2026 Restructuring Plan announced in February 2025 reduced the workforce by approximately 7.5% and could negatively impact the company's ability to attract, retain, and motivate employees. Headcount declined 2% year over year to 19,517 as of July 31, 2025, according to MD&A.
In July 2025, Workday identified an issue impacting reporting from high-volume data sources in certain customers' tenants that may have yielded incomplete queries without displaying an error message. The company notified impacted customers and remediated the issue, but such problems may damage reputation, cause customer loss, and lead to legal or regulatory liability.
Workday was recently targeted in a social engineering campaign against many large organizations, resulting in unauthorized access to some commonly available business contact information in its third-party customer relationship management platform. The company acknowledges that cybersecurity threats are increasingly automated, targeted, and coordinated, including through AI technologies.
Workday is defending against a lawsuit alleging that its products and services enable discrimination; although the majority of claims have been dismissed, the plaintiff may seek to also litigate against certain Workday customers. The company notes that AI-related legal and regulatory uncertainty could cause reputational harm and increased litigation.
The EU AI Act imposes new requirements on providers and deployers of AI technologies, and Workday is working to ensure compliance with corresponding deadlines. The evolving regulatory environment may require increased research and development costs or divert resources from other development efforts.
A final rule issued by the U.S. Department of Justice establishing a Data Security Program came into effect on April 8, 2025, prohibiting and restricting transactions that could result in access to bulk U.S. sensitive personal data by countries of concern, including China. The rule imposes diligence, security, audit and record-keeping requirements that may adversely impact certain global business operations.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Total Subscription Revenue Backlog
Gross Revenue Retention
Total Customers
12-Month Subscription Revenue Backlog
Free Cash Flow
Users under contract
Summary, forecast, risks and KPIs are extracted from Workday, Inc.'s SEC filings for Q2 FY2026 (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.