Quick Summary
- Workday delivered Q2 adjusted earnings of $2.75 per share, surpassing the analyst consensus of $2.61, with total revenue reaching $2.65 billion.
- Subscription revenues climbed to $2.47 billion, representing a 13.9% increase compared to the previous year and exceeding internal projections.
- Artificial intelligence features now represent over 25% of new annual contract value, with more than 5,500 clients actively utilizing at least one AI-powered agent.
- The company elevated its full fiscal year 2027 subscription revenue forecast to a range of $9.94B-$9.95B, reflecting 13% growth.
- During the quarter, Workday bought back 9.8 million shares worth $1.3 billion and secured board approval for an additional $4 billion repurchase program.
Workday (WDAY) delivered an impressive second-quarter performance, surpassing Wall Street projections across key financial metrics. Shares finished Thursday’s regular session up 1.5% at $193.57, with an additional 1% gain recorded during Friday’s premarket hours.
The enterprise software company reported adjusted earnings of $2.75 per share, comfortably exceeding the Street’s $2.61 expectation. Total revenue increased 12.8% year-over-year to $2.65 billion, marginally topping the consensus forecast of $2.64 billion.
Subscription revenues reached $2.47 billion, marking a 13.9% annual increase. This performance surpassed Workday’s internal guidance target of approximately $2.455 billion.
The company’s 12-month subscription backlog expanded 14.2% to $9.03 billion. Meanwhile, the cumulative subscription backlog hit $27.4 billion, representing an 8% year-over-year advance.
Adjusted operating income climbed to $824 million, representing 31.1% of total revenue, compared with $680 million, or 29% of revenue, during the comparable quarter of the previous year.
Adjusted net income grew to $677 million, up from $598 million recorded in the prior-year period.
Artificial Intelligence Momentum Accelerates
Artificial intelligence capabilities are increasingly central to Workday’s growth strategy. Management disclosed that AI-related features contributed more than 25% of new annual contract value during the quarter.
The customer base utilizing at least one of Workday’s native AI agents has expanded to over 5,500, representing a sequential increase of more than 35% from the previous quarter.
Co-founder and CEO Aneel Bhusri characterized the quarter as robust, emphasizing AI’s role as a critical catalyst for new business. CFO Zane Rowe echoed this sentiment, describing the performance as evidence of “continued momentum,” with AI emerging as a “strategic driver of customer expansion.”
Forward Outlook and Capital Allocation
Looking ahead to Q3, Workday projected subscription revenue of $2.515 billion, representing 12% growth, alongside an adjusted operating margin of 30%. The subscription revenue forecast slightly exceeded the analyst consensus of $2.51 billion.
For the complete fiscal year 2027, Workday increased the bottom end of its subscription revenue guidance range to $9.94 billion to $9.95 billion, indicating 13% annual growth. This represents a modest upward revision from the previous guidance range of $9.925 billion to $9.95 billion.
The company demonstrated its commitment to shareholder returns by repurchasing 9.8 million shares for $1.3 billion throughout the quarter. Subsequently, the board greenlit an additional $4 billion open-ended share buyback authorization.
Workday closed the quarter with $3.4 billion in cash, cash equivalents, and marketable securities on its balance sheet.
However, not all analysts share equal enthusiasm. Bank of America maintained its Neutral rating with a $205 price target, noting that while AI initiatives are “gaining traction,” meaningful “reacceleration is still elusive.” The firm reduced its long-term estimates, citing expectations for a more measured growth trajectory ahead.
Year-to-date, Workday shares have declined 9.9%, and are down 15.3% over the trailing twelve-month period. The stock experienced a notable spike in early August following speculation about a potential acquisition by private equity firm Silver Lake, though no formal transaction has materialized.
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