Workday(WDAY) - 2026 Q2 - Quarterly Results

Fiscal 2026 Second Quarter Financial Results Announcement Financial Performance Workday reported strong Q2 FY2026 results with total revenues of $2.348 billion and subscription revenues of $2.169 billion, demonstrating significant year-over-year increases in operating income and EPS Q2 FY2026 Financial Performance Summary | Financial Metric | Q2 FY2026 | Q2 FY2025 | % Change YoY | | :--- | :--- | :--- | :--- | | Total Revenues | $2.348 B | $2.085 B | +12.6% | | Subscription Revenues | $2.169 B | $1.903 B | +14.0% | | Operating Income (GAAP) | $248 M | $111 M | +123.4% | | Operating Margin (GAAP) | 10.6% | 5.3% | +5.3 pts | | Non-GAAP Operating Income | $680 M | $518 M | +31.3% | | Non-GAAP Operating Margin | 29.0% | 24.9% | +4.1 pts | | Diluted EPS (GAAP) | $0.84 | $0.49 | +71.4% | | Non-GAAP Diluted EPS | $2.21 | $1.75 | +26.3% | | Operating Cash Flows | $616 M | $571 M | +7.9% | | 12-Month Subscription Backlog | $7.91 B | - | +16.4% | | Total Subscription Backlog | $25.37 B | - | +17.6% | - CEO Carl Eschenbach attributed the strong quarter to AI and platform innovation, international momentum, and a growing partner ecosystem[4] - CFO Zane Rowe announced an increase in fiscal 2026 guidance for both subscription revenue and non-GAAP operating margin, citing first-half momentum and the acquisition of Paradox[4] Recent Business Highlights Workday expanded its customer base and key relationships, strategically acquiring Paradox and Flowise to enhance AI capabilities, and launched new AI tools and a U.S. Government subsidiary - Workday announced key strategic acquisitions to enhance its AI capabilities: - Paradox: A definitive agreement to acquire the candidate experience agent that uses conversational AI - Flowise: Acquired a low-code platform for building AI agents[7] - The company is expanding its AI ecosystem by unveiling a new AI developer toolset and launching the Workday Agent Partner Network for building AI agents connected to its platform[7] - New customer wins include Banamex, Carrefour, Masan Group, Memorial Health, and Red Coats, with expanded relationships including Google, Nationwide Insurance, and Qantas Airways[7] - Workday launched Workday Government, a new subsidiary dedicated to serving the U.S. Government, and expanded its presence in India with a new president and commitment to a local data center[7][12] Financial Outlook Workday raised its full-year fiscal 2026 guidance, projecting subscription revenues of $8.815 billion (14.2% growth) and a non-GAAP operating margin of approximately 29.0% Q3 Fiscal 2026 Outlook | Guidance Metric | Q3 Fiscal 2026 Outlook | | :--- | :--- | | Subscription Revenues | $2.235 billion (+14.1% growth) | | Non-GAAP Operating Margin | 28.0% | Full Year Fiscal 2026 Outlook (Updated) | Guidance Metric | Full Year Fiscal 2026 Outlook (Updated) | | :--- | :--- | | Subscription Revenues | $8.815 billion (+14.2% growth) | | Non-GAAP Operating Margin | ~29.0% | Financial Statements Condensed Consolidated Balance Sheets As of July 31, 2025, Workday's balance sheet shows stable total assets of $17.96 billion, with total liabilities at $8.79 billion and stockholders' equity at $9.17 billion Condensed Consolidated Balance Sheet Data (in millions) | Balance Sheet Item (in millions) | July 31, 2025 | January 31, 2025 | | :--- | :--- | :--- | | Cash, cash equivalents, and marketable securities | $8,186 | $8,017 | | Total Assets | $17,961 | $17,977 | | Unearned Revenue (Current) | $3,852 | $4,467 | | Total Liabilities | $8,789 | $8,943 | | Total Stockholders' Equity | $9,172 | $9,034 | Condensed Consolidated Statements of Operations For Q2 FY2026, Workday reported total revenues of $2.348 billion and net income of $228 million, a significant increase from the prior year, driven by strong subscription services revenue growth Condensed Consolidated Statements of Operations (in millions) | Income Statement (in millions) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :--- | :--- | :--- | | Subscription Services Revenue | $2,169 | $1,903 | | Total Revenues | $2,348 | $2,085 | | Total Costs and Expenses | $2,100 | $1,974 | | Operating Income | $248 | $111 | | Net Income | $228 | $132 | | Diluted Net Income per Share | $0.84 | $0.49 | Condensed Consolidated Statements of Cash Flows In Q2 FY2026, net cash provided by operating activities was $616 million, leading to free cash flow of $588 million after capital expenditures, with $348 million used in financing activities Condensed Consolidated Statements of Cash Flows (in millions) | Cash Flow (in millions) | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $616 | $571 | | Capital expenditures | $(28) | $(55) | | Net cash used in financing activities | $(348) | $(347) | | Repurchases of common stock | $(298) | $(312) | Non-GAAP Financial Measures Reconciliation of GAAP to Non-GAAP Data For Q2 FY2026, non-GAAP operating income was $680 million (29.0% margin) and non-GAAP diluted EPS was $2.21, significantly higher than GAAP figures, primarily adjusted for share-based compensation Reconciliation of GAAP to Non-GAAP Operating Income (in millions) | Reconciliation (in millions) | Three Months Ended July 31, 2025 | | :--- | :--- | | GAAP Operating Income | $248 | | Share-based compensation expense | $391 | | Amortization of acquisition-related intangible assets | $21 | | Other adjustments | $20 | | Non-GAAP Operating Income | $680 | Reconciliation of GAAP to Non-GAAP Diluted Net Income per Share | Reconciliation | Three Months Ended July 31, 2025 | | :--- | :--- | | GAAP Diluted Net Income per Share | $0.84 | | Share-based compensation expense | $1.45 | | Income tax effects | $(0.24) | | Other adjustments | $0.16 | | Non-GAAP Diluted Net Income per Share | $2.21 | Free Cash Flow (in millions) | Free Cash Flow (in millions) | Three Months Ended July 31, 2025 | | :--- | :--- | | Net cash provided by operating activities | $616 | | Less: Capital expenditures | $(28) | | Free cash flows | $588 | Explanation of Non-GAAP Measures Management uses non-GAAP measures to evaluate financial performance by excluding items not reflective of ongoing operations, such as share-based compensation, to provide a clearer view of core business - Management uses non-GAAP financial measures for internal budgeting, forecasting, and evaluating the company's financial performance, believing it allows for more meaningful trend analysis[29] - Key items excluded from GAAP results to calculate non-GAAP measures include: - Share-based compensation expense - Employer payroll tax on employee stock transactions - Amortization of acquisition-related intangible assets - Acquisition-related costs - Restructuring costs - Gains and losses on strategic investments[28][30][34] Other Information About Workday Workday is an AI platform for managing people, money, and agents, serving over 11,000 organizations globally, including over 65% of the Fortune 500, with more than 75 million users under contract - Workday is an AI platform for managing people, money, and agents, built with AI at the core[10] - The company serves over 11,000 organizations worldwide, including more than 65% of the Fortune 500, and has over 75 million users under contract[10][12] Forward-Looking Statements This section cautions investors that the press release contains forward-looking statements, including financial guidance and acquisition plans, which are subject to various risks and uncertainties - The press release contains forward-looking statements regarding financial guidance (subscription revenues, non-GAAP operating margin) and the planned acquisition of Paradox[13] - These statements are subject to risks and uncertainties, including security breaches, economic volatility, competition, regulatory risks related to AI, and the ability to realize benefits from acquisitions[13]