Workday beats Q2 estimates, raises AI and buyback milestones

Workday, Inc. (NASDAQ: WDAY ) reported better-than-expected second quarter results after market close on Thursday.

Sales rose 12.8% year over year to $2.649 billion, exceeding the $2.636 billion consensus.

The company reported adjusted EPS of $2.75, beating the $2.61 estimate.

Diluted EPS rose significantly to $2.57 from $0.84 a year ago, including a $1.52-per-share tax benefit from an intra-entity transfer of certain intellectual property rights related to an internal legal-entity restructuring.

Operating cash flow was $520 million versus $616 million a year earlier, and free cash flow declined to $460 million from $588 million.

Workday repurchased $1.3 billion of shares during the quarter, completing its previously announced $5 billion buyback six months ahead of schedule.

The board authorized a new $4 billion open-ended repurchase program.

The company ended the quarter with $3.4 billion in cash and marketable securities.

Business Performance Subscription revenue stood at $2.471 billion, up 14% year over year, while professional services revenue reached $178 million.

U.S. revenue rose 12% to $1.97 billion, while international revenue increased 17% to $682 million.

The company’s 12-month subscription revenue backlog reached $9.03 billion, up 14.2%, and total subscription backlog rose 8% to $27.4 billion.

Gross revenue retention remained at 97%, with existing customers accounting for about 60% of subscription revenue growth.

Key Metrics Workday said AI products generated more than $100 million in the second quarter new ACV, over 25% of total new ACV.

More than 5,500 customers now use an organic Workday agent, up over 35% quarter over quarter, while AI SKU ARR neared $600 million, up more than 200% year over year and over 20% sequentially.

Workday added 23 Sana Enterprise capabilities in the second quarter.

Its Aug.

4 internal rollout saw 12,000 users build 22,000 custom agents in three weeks.

Sana monthly active users rose nearly 190% year over year, and AI created 78% of published courses.

Adaptive Decision Intelligence reached general availability on July 31 and has been purchased by 170 customers.

Deployment Agent now has over 4,600 customers and 24,000 users, with second-quarter query volumes soaring nearly 5,500%.

Data Cloud closed six second-quarter deals, all for the Pro Edition, and remains on track for third-quarter general availability.

More than 1,600 customers use Workday through Teams, Slack, Copilot and Gemini, including 100-plus using Self Service Agent directly.

Workday Extend apps grew over 90% year over year, with 3,000-plus custom apps and agents built since DevCon.

AI featured in more than half of the second quarter net new wins, while Workday Go customer volume increased more than fivefold from prior quarter.

Guidance The company lowered its fiscal 2027 sales guidance to $9.940 billion-$9.950 billion from $10.635 billion-$10.660 billion, below the $10.669 billion estimate.

It expects third quarter sales of $2.515 billion versus the $2.697 billion estimate.

Workday’s CFO said the current fiscal 2028 target for subscription revenue growth remains consistent with the approximately 11% growth rate expected in the second half of fiscal 2027.

The company expects subscription revenue of $9.94 billion-$9.95 billion, representing 13% growth in fiscal 2027 and approximately $2.515 billion in the third quarter.

Following the earnings, Piper Sandler analyst Billy Fitzsimmons raised the price forecast from $145 to $190.

Also, Needham analyst Scott Berg boosted the price forecast from $180 to $230.

WDAY Stock Price Activity: Workday shares were up 6.94% at $207.00 on Friday, according to Pro data.

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