Summary
Workday closed fiscal 2027 second quarter with total revenues of $2.649 billion, up 12.8% from the prior-year quarter, and year-to-date revenues of $5.191 billion, up 13.1%. Subscription services revenues did the heavy lifting at $2.471 billion, a 13.9% increase, while professional services revenues slipped to $178 million, a 1% decline, as the company continued to push deployment work to its partner ecosystem. The mix matters. Subscription services accounted for approximately 93% of total revenues in the quarter, according to the 10-Q.
Profitability improved faster than the top line. GAAP operating income for the quarter was $313 million, or 11.8% of revenues, up 26.2% from $248 million and 10.6% of revenues a year earlier. That is a 1.3 percentage point gain in operating margin. On a year-to-date basis, GAAP operating income reached $651 million, up 126.8% from $287 million, with operating margin at 12.5% versus 6.3%. Net income for the quarter was $632 million, up 177.2% from $228 million, and diluted EPS was $2.57 against $0.84. A large part of that jump came from taxes, not operations. The quarter included a $374 million deferred tax asset and a tax benefit of $1.52 per share tied to an intra-entity transfer of certain intellectual property rights as part of an internal legal entity restructuring. Year-to-date net income was $854 million, up 188.5%, with diluted EPS of $3.41 versus $1.09. Non-GAAP diluted net income per share, which strips out that tax effect, was $2.75 versus $2.21, and non-GAAP operating margin was 31.1% versus 29.0%.
Cash generation was mixed. Operating cash flow for the quarter was $519 million, down 15.7% from $616 million a year earlier, though year-to-date operating cash flow rose 13.2% to $1.215 billion. Free cash flows, a different measure that subtracts capital expenditures, were $460 million for the quarter versus $588 million, and $1.076 billion for the first half versus $1.009 billion. Capital expenditures climbed to $59 million in the quarter, up 110.7% from $28 million, and to $139 million year to date, up 117.2%. Management expects capital expenditures of approximately $270 million for fiscal 2027, mostly for office facilities. Deferred revenue stood at $4.459 billion, up 13.8%. Backlog stayed healthy: 12-month subscription revenue backlog was $9.034 billion, up 14.2%, and total subscription revenue backlog was $27.403 billion, up 8.0%. Headcount reached 20,896, up 7%, and gross revenue retention was approximately 97%.
The AI story is now a revenue story in management's telling. More than 25% of new ACV came from AI, and more than 5,500 customers use at least one organic agent, up more than 35% from last quarter. Workday also shipped a Developer Agent, Agent Passport and Adaptive Decision Intelligence, and expanded partnerships with Amazon Web Services and Google Cloud. Capital returns stayed aggressive. The company repurchased about 9.8 million Class A shares for $1.3 billion in the quarter, and the board authorized up to an additional $4.0 billion of repurchases in August 2026. Cash, cash equivalents and marketable securities totaled $3.403 billion as of July 31, 2026, down from $5.443 billion at January 31, 2026.
Guidance points to a modest sequential slowdown. For the fiscal 2027 third quarter, Workday guides subscription revenues of $2.515 billion, growth of 12%, with a non-GAAP operating margin of 30.0%. For the full fiscal year 2027, subscription revenue guidance is $9.940 billion to $9.950 billion, growth of 13%, with the non-GAAP operating margin raised to 31.0%.
Risks are mostly the familiar ones. Management cites deal scrutiny and lengthening sales cycles, especially in net new opportunities, plus reduced growth in headcount-level commitments when existing customers renew. The extended cycles show up most in government, higher education and healthcare, where budgets depend on federal funding. Workday has also offered more flexible payment terms to some customers. The 10-Q lists competitive pricing pressure, security breaches, service outages, AI regulatory risk, reliance on partners and the loss of key employees among the risks that could change the trajectory. The tax benefit lifts reported earnings this quarter; the core operating trend still rests on subscription growth holding near current levels.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2027 | Q1 FY2027 | QoQ | Q2 FY2026 | YoY |
|---|---|---|---|---|---|
| Revenue | $2.65B | $2.54B | +4.2% | $2.35B | +12.8% |
| Research & development | $747.0M | $705.0M | +6.0% | $660.0M | +13.2% |
| Sales & marketing | $706.0M | $679.0M | +4.0% | $641.0M | +10.1% |
| General & administrative | $231.0M | $216.0M | +6.9% | $216.0M | +6.9% |
| Total operating expenses | $2.34B | $2.20B | +6.0% | $2.10B | +11.2% |
| Operating income (loss) | $313.0M | $338.0M | -7.4% | $248.0M | +26.2% |
| Operating margin | 11.8% | 13.3% | -1.5 pp | 10.6% | +1.3 pp |
| Net income (loss) | $632.0M | $222.0M | +184.7% | $228.0M | +177.2% |
| Net margin | 23.9% | 8.7% | +15.1 pp | 9.7% | +14.1 pp |
| Diluted EPS | $2.57 | $0.87 | +$1.70 | $0.84 | +$1.73 |
| Customers | 11,500 | 11,500 | ±0.0% | 11,000 | +4.5% |
Risks
MD&A states Workday has experienced a moderation of revenue growth rates due to deal scrutiny and lengthening of certain sales cycles, particularly within net new opportunities, as well as reduced growth in headcount-level commitments upon renewals. Extended sales cycles are particularly evident in government, higher education, and healthcare industries tied to federal funding.
Risk Factors say the markets for enterprise cloud and AI-powered applications are intensely competitive with relatively low barriers to entry, and Workday faces greater competition from non-specialist solutions relying on generic LLMs, generative AI, and general-purpose agents. Competitors may also offer lower prices or more favorable terms.
Workday is defending a lawsuit alleging certain AI-related products and services enable discrimination, though the majority of claims have been dismissed, and is working to comply with EU AI Act deadlines. The evolving technical, legal, and regulatory environment for AI could increase costs, slow adoption, and lead to reputational harm or litigation.
In February 2026, Aneel Bhusri assumed the role of CEO and Carl Eschenbach ceased to serve as CEO, and Risk Factors say leadership changes may disrupt the business and hurt talent attraction and retention. Workday also awarded additional equity grants to critical talent in its May 2026 refresh cycle amid competition for AI, cybersecurity, and senior sales talent.
Risk Factors disclose that Workday is a target of malicious cyber-attack attempts and has experienced security events, including a July 2025 issue impacting reporting from high-volume data sources in certain customer tenants that may have yielded incomplete queries without displaying an error message. Supply chain and AI-enabled attack risks are also increasing.
Risk Factors state markets and monetization strategies for agentic AI solutions and Workday Data Cloud remain relatively new and uncertain, and success depends on optimal pricing under a subscription-based flexible pricing model, customer adoption and usage, and costs to deliver these solutions. MD&A notes Workday is addressing shifts in customer buying behavior through new pricing models.
Risk Factors say Workday depends on third-party data centers and has experienced disruptions at certain U.S. co-location data centers due to high temperatures and power outages that resulted in a brief temporary outage for a subset of customers. Any interruption could cause refunds, contract terminations, or renewal harm.
Workday has made significant investments to sell to U.S. federal, state, and local government entities and holds FedRAMP authorization; losing that authorization could inhibit or preclude contracting with certain government customers. Government contracts are subject to funding authorizations and termination, and related sales cycles are extended in government, higher education, and healthcare.
Risk Factors say Workday relies on its network of partners to drive additional revenue growth and provide professional services, and partner failure, competing incentives, or partner acquisitions by competitors could harm sales and operating results. MD&A notes continued expansion and leverage of service providers.
Risk Factors cite continuing global economic and geopolitical volatility, tariffs, inflation, interest rates, and foreign currency fluctuations, which have led to delays in purchasing decisions, increased demand for price concessions, and delayed payment terms. MD&A says these conditions may continue to impact customer behavior and Workday's revenue growth.
SaaS KPIs
All quarters →Non-GAAP Operating Margin
Total Customers
Free Cash Flow
Gross Revenue Retention Rate
Total Subscription Revenue Backlog (RPO)
12-Month Subscription Revenue Backlog (cRPO)
Summary, forecast, risks and KPIs are extracted from Workday, Inc.'s SEC filings for Q2 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.