WDAY · Q2 2026 Earnings
BullishWorkday, Inc.
Reported August 21, 2025
30-second summary
Workday delivered $2.35B in Q2 revenue (+12.6% YoY) with non-GAAP operating margin holding at 29.0%, and management raised FY26 subscription revenue guide to $8.815B (+14.2% YoY) alongside the FY26 operating cash flow outlook to $2.85B. The signal that matters: AI products were attached to >75% of net new deals and net-new AI ACV more than doubled YoY, while management announced two acquisitions (Paradox, FlowWise) — a meaningful break from Workday's organic-first playbook. The Workday Government subsidiary launch and a strong UVA full-suite win reinforce that the bull case (AI monetization + full-suite adoption + federal TAM) is converting into print.
Headline numbers
EPS
Q2 FY2026
$2.21
Revenue
Q2 FY2026
$2.35B
+12.6% YoY
Free cash flow
Q2 FY2026
$0.59B
Operating margin
Q2 FY2026
10.6%
Key financials
Q2 FY2026| Metric | Q2 FY2026 | YoY |
|---|---|---|
| Revenue | $2.35B | +12.6% |
| EPS | $2.21 | — |
| Operating margin | 10.6% | — |
| Free cash flow | $0.59B | — |
Guidance
Prior quarter data unavailable — comparison not possible.
Segment performance
Q2 FY2026| Segment | Q2 FY2026 | YoY |
|---|---|---|
| Subscription Services | $2.169B | +14.0% |
Platform metrics
Q2 FY2026| Segment | Q2 FY2026 |
|---|---|
| 12-Month Subscription Revenue Backlog | $7.91 billion |
| Total Subscription Revenue Backlog | $25.37 billion |
| 12-Month Backlog YoY Growth | 16.4% |
| Total Backlog YoY Growth | 17.6% |
| Subscription Revenue Mix | 92.4% of total revenue |
| Customer Base | 75+ million users under contract; 65%+ of Fortune 500 |
Profitability
Q2 FY2026| Segment | Q2 FY2026 |
|---|---|
| Non-GAAP Operating Margin | 29.0% |
Management tone
Three quarters ago AI was framed as a product roadmap thread; this quarter it is the headline KPI. The anchor disclosure — "More than 75% of our net new deals included one or more of our AI products… net new ACVs from our AI products once again more than doubled year over year" — is the most specific AI monetization disclosure Workday has put in a press release. Management is forcing investors to underwrite AI as a growth vector, not a defensive narrative.
The full-suite story has moved from cross-sell aspiration to converted bookings. The 30% full-suite mix (50%+ in SLED/healthcare) cited this quarter, combined with the UVA net-new win across HCM + Financials + Student + health system, signals Workday is now landing Financials as part of the initial deal rather than waiting years to upsell. This compresses payback on net new logos and makes Financials a near-term growth contributor rather than a multi-year TAM bet.
The M&A posture is the cleanest break from prior Workday tone. Paradox and FlowWise — both announced this quarter — directly contradict the organic-innovation messaging that has defined Workday's capital allocation for years. Management described Paradox as "larger than recent M&A history" and tied a $15M FY26 revenue contribution to it. The message: Workday will buy AI-native capability rather than wait to build it, and investors should expect more.
Government has been elevated from a vertical to a standalone business. The launch of Workday Government as a wholly owned subsidiary with a dedicated cloud environment, paired with the "once-in-a-generation opportunity to modernize" framing and references to DoD, intelligence, and DIA engagement, suggests management is signaling a multi-year federal pipeline that won't be visible in headline CRPO for several quarters but justifies the infrastructure investment now.
Tone in Q&A was unusually confident on competitive positioning. Carl explicitly dismissed Sam Altman's "OpenAI in SaaS" comments and the broader AI-disruption-of-incumbents thesis, leaning on gross retention in the high 90s and 70%+ Illuminate adoption. The lack of hedging on this question — historically a defensive topic — reflects management's view that the AI revenue data now does the rebuttal for them.
Recurring themes management leaned on this quarter:
Risks management surfaced:
Q&A highlights
Cash Rangan · Goldman Sachs
Addressing market concerns about AI disruption to SaaS and seat-based models, and whether AI startups with generative capabilities could disrupt Workday's position as the incumbent. Also asked about Sam Altman's statement on OpenAI entering SaaS.
Carl dismissed AI disruption concerns as overblown, citing Workday's entrenched market position with 11,000+ customers (65% of Fortune 500), high gross retention in high 90s, 70%+ customer adoption of Workday Illuminate, and 100% YoY growth in net new AI SKUs. Noted that most headcount moderation at customers is due to COVID-era overhiring, not AI disruption. Addressed Sam Altman's SaaS comments as vague, noting AI is software, not a replacement for it.
Brad Zelnick · Deutsche Bank
Asked about strategic rationale for Paradox acquisition, vision for the deal, and financial profile including revenue contribution.
Carl and Garrett explained Paradox rounds out industry-leading recruiting suite alongside HiredScore and internal recruiting agent. Paradox addresses high-volume hiring with mobile and AI-first conversational approach, delivering real ROI (75% reduction in time to hire per Chipotle case study). Enables selling into competitor install bases without Workday HCM. Zane indicated deal is larger than recent M&A history but didn't break out specific revenue details, noting $15M increase in full-year guide includes Paradox contribution.
Kirk Matern · Evercore ISI
Asked about macro headwinds offsetting positive momentum, specifically tariffs, geopolitical issues, and their impact on international and SLED (state and local education) business.
Carl confirmed Europe performed strongly with no blowback from macro headwinds in UK and Germany. On SLED, noted state/local facing funding uncertainty headwinds, but higher ed remains competitive despite federal funding pressures. Cited University of Virginia as example of strong competitive win despite sector pressures. Overall market selling environment described as consistent with last year's 'new norm'. Zane noted upside beat with guide increases on both top line and operating margin.
Mark Murphy · JP Morgan
Asked about Workday Government subsidiary launch, whether it was required by government for security compliance, and architectural differentiation driving DoD/intelligence agency expansions.
Carl explained subsidiary structure was created to demonstrate focused commitment to government sector and was well-received in DC. Building sector-specific cloud environment with higher security levels per government requirements. Government conversations span DoD, intelligence agencies, and civilian agencies. Government is leading AI adoption and looking to Workday to facilitate transition. DIA contract referenced as example.
Brent Pill · Jefferies
Asked for more color on AI doubling figure, impact on win rates, and notable large deal activity in the quarter.
Carl provided detailed color on AI adoption metrics: 70% of customers using Workday Illuminate, 30% of customer-base sales including AI SKU, 70%+ of net new sales including AI. Promised more details at Workday Rising (September). Zane highlighted notable wins: University of Virginia (HCM+Financials+Student), Nationwide (financials upsell/cross-sell), Salesforce (financials go-live), and expansions at Sanofi, Google, Michaels, Redcoats. UVA characterized as net-new across all modules including healthcare system.
What to watch into next quarter
Q3 CRPO growth lands inside the 15–16% guide — with a ~1 point tenant headwind embedded, the floor of the range is the real bar; sub-15% would signal new-business deceleration masked by the tenant attribution.
AI revenue quantification at Workday Rising (September) — management explicitly deferred a hard AI revenue number; whether they disclose AI ACV in dollars (vs. % attach) sets the bar for FY27 modeling.
Paradox standalone contribution and cross-sell into non-Workday HCM bases — the $15M FY26 contribution is the floor; track whether management discloses Paradox net-new logos outside the Workday installed base by Q4.
Workday Government bookings disclosure — watch for any named federal contract wins (DoD, DIA, civilian agencies) and whether management starts breaking out federal CRPO or backlog.
Operating margin sustainability at the FY guide of 29% — Q3 guide steps down to 28%, implying Q4 needs to be ≥29% to hold the FY. With Paradox and FlowWise integration costs incoming, watch whether the FY29% holds in the next guide update.
Full-suite mix above 30% — if Q3 full-suite mix sustains or accelerates above 30%, the Financials cross-sell narrative becomes a structural growth contributor rather than a quarterly highlight.
Sources
- Workday Q2 FY2026 press release, filed via SEC EDGAR — https://www.sec.gov/Archives/edgar/data/1327811/000132781125000181/wday-07312025x991.htm
- Workday Q2 FY2026 earnings call commentary (as cited in extraction inputs; full transcript not independently reviewed)
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