Workday (WDAY) Q2 FY2027: Revenue Rises 12.8%, Non-GAAP Margin Hits 31.1% as AI Agents Expand

Workday (NASDAQ: WDAY) posted fiscal second-quarter revenue of $2.649 billion, up 12.8% year-over-year, as non-GAAP operating margin expanded 2.1 percentage points to 31.1%. Adjusted EPS of $2.75 beat the $2.56 consensus estimate, and the company raised its full-year subscription revenue guidance.

Q2 FY2027 Results

• Total revenue: $2.649 billion, up 12.8% year-over-year from $2.348 billion in Q2 FY2026
• Subscription revenue: $2.471 billion, up 13.9% year-over-year
• Adjusted EPS: $2.75, versus $2.21 in the prior-year period and a consensus estimate of $2.56
• GAAP EPS: $2.57, versus $0.84 in the prior-year period; includes a $1.52-per-share tax benefit from an intra-entity intellectual property transfer
• Non-GAAP operating income: $824 million, up 21.2% year-over-year; non-GAAP operating margin of 31.1%, up from 29.0%
• 12-month subscription revenue backlog: $9.034 billion, up 14.2% year-over-year; total subscription backlog of $27.403 billion, up 8.0%

What Drove the Results

Adjusted EPS of $2.75 beat the $2.56 consensus by approximately 7.4%, driven by scale benefits across all major expense lines as revenue growth outpaced cost growth. GAAP operating income rose 26.2% to $313 million, with GAAP operating margin expanding 1.2 percentage points to 11.8%. The GAAP net income of $632 million substantially exceeded the prior year's $228 million, though the comparison is materially affected by a $305 million income tax benefit, partly stemming from a $1.52-per-share benefit related to an internal legal entity restructuring.

On the demand side, Workday reported that AI contributed more than 25% of new annual contract value in the quarter, with more than 5,500 customers now using at least one organic AI agent, a figure the company said is up more than 35% from the prior quarter. New customers in the period included BWX Technologies, Guess, KPMG LLP, and S-E-B, while Caterpillar, Merck & Co., Novartis, and others expanded existing relationships.

Free cash flow came in at $460 million for the quarter, down from $588 million in Q2 FY2026, as capital expenditures more than doubled to $60 million from $28 million in the prior-year period. Operating cash flow was $520 million, compared to $616 million a year earlier. The company also repurchased approximately 9.8 million shares of Class A common stock for $1.3 billion during the quarter, and its board authorized an additional $4.0 billion in share repurchases.

Why It Matters

Workday raised its full-year FY2027 subscription revenue guidance to $9.940 billion-$9.950 billion, representing approximately 13% growth, and increased its full-year non-GAAP operating margin guidance to 31.0%. For Q3 FY2027, the company guided for subscription revenue of $2.515 billion, representing approximately 12% growth, with a non-GAAP operating margin of 30.0%. The raised full-year margin target is notable given that the company simultaneously cited continued investment in its agentic AI roadmap.

Product announcements during the quarter included the general availability of Workday Learning powered by Sana, a new Developer Agent capability, an Agent Passport verification system for third-party AI agents, and Adaptive Decision Intelligence for finance teams. Workday also disclosed a new data integration partnership with Amazon Web Services and an expanded strategic partnership with Google Cloud, through which Workday agents will work within Google's Gemini Enterprise environment.

Wall Street View

Analyst sentiment heading into the print leaned constructive, with the most recent consensus showing 29 Buy or Strong Buy ratings against 18 Hold and 2 Sell recommendations as of August 1, 2026. Shares gained 1.48% on Thursday, August 27, 2026, while the S&P 500 rose 0.66%.

Investor Takeaway

The quarter's clearest forward signal may be the 14.2% growth in the 12-month subscription backlog to $9.034 billion, which provides near-term revenue visibility beyond the headline beat. With full-year non-GAAP margin guidance now set at 31.0% and AI-driven contract activity cited as exceeding 25% of new ACV, investors will be watching whether the Q3 subscription revenue guide of $2.515 billion, implying a deceleration to approximately 12% growth, signals a temporary step-down or a structural shift in the growth rate.