WDAY

Image source: The Motley Fool. Thursday, Aug. 27, 2026 at 4:30 p.m. ET Vice President of Investor Relations - Justin Allen Furby CEO - Aneel Bhusri President, Product and Technology - Gerrit Kazmaier Chief Technology Officer - Gabriel Monroy president and chief commercial officer - Robert Enslin CFO - Zane C. Rowe Operator: Ladies and gentlemen, welcome to Workday's Second Quarter Fiscal Year 27 Earnings Call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the call. During the Q&A session, please limit your questions to 1. I will now hand it over to Justin Allen Furby, Vice President of Investor Relations. Please go ahead. Justin Allen Furby: Thank you, operator. Welcome to Workday's second quarter fiscal 27 earnings conference call. On the call, we have Aneel Bhusri, our CEO Gerrit Kazmaier, our President, Product and Technology Gabriel Monroy, our Chief Technology Officer Robert Enslin, our president and chief commercial officer and Zane C. Rowe, our CFO. Following prepared remarks, we will take questions. Our press release was issued after close of market and is posted on our website where this call is being simultaneously webcast. Before we get started, we want to emphasize that some of our statements on this call particularly our guidance, are based on the information we have as of today include forward looking statements regarding our financial results, applications and solutions, customer demand, operations, and other matters. These statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission including our fiscal 26 annual report on Form 10-K, additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements. In addition, during today's call, we will discuss non GAAP financial measures, which we believe are useful as supplemental measures of Workday's performance. These non GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non GAAP measures including reconciliations with comparable GAAP results, in our earnings press release our investor presentation and on the Investor Relations page of our website. The webcast replay of this call will be available for 90 days on our company website under the Investor Relations link. Additionally, the prepared remarks of this call and our quarterly investor presentation will be posted on our Investor Relations. Our third quarter fiscal 27 quiet period begins on 10/15/2026. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 26. With that, I will pass the call to Aneel. Aneel Bhusri: Thanks, Justin, and thanks everyone for joining us today. it is hard to believe I have been back in the CEO seat for 6 months. Time flies when we are having fun. And I am having a lot of fun. This is a fun time to be back in the tech industry. Q2 was another strong quarter in AI played an increasingly bigger role. AI products alone drove more than 100 million of new ACV, which accounted for more than 25% of all new ACV closed in the quarter. it is starting to lift our core business too, including our win rates. We had commercial success with AI in the quarter, including strong early returns with flex credits. And we expect this to accelerate going forward. What I am watching more closely is adoption. Today, more than 5.5 thousand customers are using 1 or more of our organic agents. that is up more than 35% from last quarter. As we continue to build organic agents on Workday, we are also deeply integrating acquired agents like those from Paradox, HiredScore, and Eversort into our platform. And we have signed some of the world's largest brands for our Lighthouse program, which gives strategic customers Sana Enterprise free for a year. We have rolled it out to our own workmates last month, and they are hooked. I expect these customers will be too. We know that if we deliver the value, monetization will follow. After 2 strong back-to-back quarters, I really like the momentum we have going into the second half of the year. Garrett and our product and technology teams have our innovation engine humming again. While Rob and his team have done a phenomenal job building pipeline that will drive more new business. They will cover the numbers shortly, including the impact of AI adoption on our Outlook, for the second half and fiscal year 2028. I spent much of the past 6 months with customers. Last quarter, I told you I had not met a single customer who is looking to replace Workday with something they are building internally or buying from a start up. A quarter later, that has not changed. The reason is the deterministic rails I have talked about before. Our agents are lawful. They work inside the permissions, policies, and business process a company already runs on. that is why our customers can trust them with the work that matters. it is why we are seeing our organic agents really take off this year. 1 of those customers is BMO, a top 10 bank in North America. They piloted self-service agent with 500 employees in May, and successfully rolled it out to all 55 thousand employees in June. SSA gives BMO employees and managers a personal intuitive way to get HR questions answered and work done faster and easier. And because it is native to Workday, the agent understands employee permissions and which HR policies apply to them. That built in context is exactly what makes this a responsible and scalable AI deployment for BMO. BMO is 1 of many. More customers are moving from pilots to production with our agents. But we know that no 1 company will build every agent. The future will be open, and CIOs need a trusted platform to connect it all. We are building for that world with data cloud and developer agent. Data Cloud lets customers use their Workday data alongside the other systems they run on, without copying or moving it. Customers see the value and demand is building. Developer agent, which we announced at DevCon in June, makes it dramatically faster and easier for developers to build on work day using natural language. it is 1 of the innovations I am most excited about. I will add just 1 thing. Because I do not think it is fully understood. Workday is not just an enterprise apps company. We are an enterprise context platform we were built that way from the start. Agency contacts to do anything useful. Who reports to whom, what the policies are, how money moves, So whether a customer runs our agents or bills their own on top of Workday, we win either way. Gabe will go deeper on this shortly. Finally, Rising is coming to Las Vegas, October 12-15. I have to tell you, Garrett and his team have walked me through our Rising announcements. I was blown away by how much innovation we have to show. Not slides. Live demos and customers talking about the work our agents are already doing inside their businesses. that is the proof I care about most. We will also be hosting our financial analyst day at Rising, and I hope to see you all there. To close, as many of you know, I am an unabashed optimist. But I am not leaning on optimism here. We are shipping AI products. Our customers are adopting them rapidly. it is happening across the board from the agents we built ourselves to the ones we have acquired. This is Workday's moment, I have never felt better about where we are headed. With that, I will hand it to my Vulcan mind-melded friend, Gerrit. Gerrit Kazmaier: Thanks, Aneel, and hello, everyone. In Q2, once again, we have accelerated our road map and added new AI capabilities across our platform. All of it builds on our unique role model of work and we keep moving more agents into production at scale. So let me put this into numbers for you. Nearly $600 million in ARR from our AI SKUs and that is up more than 200% year-over-year and up over 20% from last quarter. Here is what this looks like in practice. In recruiting, more than 30 million candidates interacted with our talent acquisition agent and AI automatically scheduled more than 8 million interviews last quarter alone. In functions like procurement and legal, Workday contract intelligence agent drove nearly 70% year-over-year growth in agreements processed. And in HR case resolution, more than 100 customers moved Sana self-service agent into product last month. Since February, have nearly doubled AI tools and skills in the agent that run in production. So now let's talk about 3 key innovation highlights from last quarter. Sana, adaptive decision intelligence, and our deployment and adoption agents. Let's talk about Sana Enterprise first. Sana Enterprise is our AI workbench for HR, finance, and IT to build, orchestrate, and run AI across the entire enterprise. In Q2, we have shipped 23 new capabilities in Sana that open up what customers can do with it. For example, our brand new sauna agent builder lets any user create an agent in natural language. And then run it on a schedule or trigger it on a business event. Every 1 of those agent runs in a secure sandbox. We now have 1 shared agent task inbox in Sana. Where work is managed in 1 place, human or AI. And we have added custom MCP connectors so Sana can connect to any third party application out there. This innovation it is already changing AI adoption inside and outside of Workday. Here is what we have done. We rolled out Sana Enterprise internally on August 4. And already have 12 thousand active users on it. These workmates have built 22 thousand custom agents in 3 weeks alone. Now this is what AI looks like when it is embedded into real work. We have also brought Workday Learning and Sana Learn together into 1 product. It is in GA now with a learning admin agent, AI based course generation, and AI tutor for self paced learning, and MCP support as part of our open platform. And the results are clear. In Sana, monthly active users grew almost 190% year-over-year, and 78% of all published courses were created with AI. And we are taking the next major step of Sana for Workday. As we have shared in the past, Sana is our vision for an AI driven work experience across Workday and beyond. With our unique meta driven platform, we can now unlock all Workday processes for generative UI in Sana. So by Workday Rising in October, Sana's conversational AI experience will be the default home screen for Workday. The second big AI innovation is decision intelligence. As you know, frontier models are good at analyzing data. But they sit on the sidelines of the operational system. They are detached from business semantics. They are working off downloaded spreadsheets. And they are unable to close the loop back to work actually happens. Adaptive decision intelligence is different. It is our AI agents for analytics and planning that runs analysis, generates plans, and takes government action directly in inside Workday. All based under our security model, audit trails, and governance rules. On July 31, adaptive decision intelligence entered into GA. And this was 1 of the fastest products we have ever delivered. From concept to general availability in 4 months. it is built organically within Workday. Here is what we have shipped all AI agent based. Live analysis of plan data, scenario modeling, sensitivity analysis, regression models, version comparison, and AI recommendations that you can submit as governed plan up updates with approval audit trails, and staleness detection. And as of today, 170 customers have already purchased it. And 1 EA customer told us it gives finance teams answers they can actually defend. And we are not stopping here. We just kicked off the early adopter program connecting adaptive decision intelligence directly into Workday finance. To give it access to journal lines, plan data, and to our accounting center. Our customers can now tie AI to financial out outcomes with transaction level evidence. And next, we are going to move this to workforce analytics. Connecting live people data with financial decisions in 1 AI agent experience. And our third AI highlight for this quarter is deployment and adoption agent. Deployment agent momentum has been dynamite. As of today, we have more than 4.6 thousand customers almost 24 thousand users And query volume surging nearly 500% in Q2. Mohegan Gaming is now live. And Mohegan says the downstream impact is priceless. Deployment agent deploys updates so rapidly that employees remain focused on their core business. And our long term target is to reduce deployment task time with this agent by 80% to 90%. And once customers are live, Adoption Agent helps keep them ahead of what is new. It surfaces the releases that matter and recommends the next step for their environment. Adoption agent entered 200 customers signed on in the first 3 days alone. With 20 thousand release notes evaluated and achieved a 94% customer satisfaction rate. 1 customer, Solution Health, used adoption agent on their latest release. They ran it across every functional area, and they have cut that release time down by 70%. And here is why this matters so much. Faster deployments, faster adoption, and a lower cost to serve are fueling Workday Go's momentum in the medium enterprise. Workday goes win rates and deal volume are both increasing in Q2. Here is 1 more note for you. Travel Agent and Sana for ITSM have both moved into early adopter with the first customers already onboarded. And the bottom line of this is this, The broad model of work is not a thesis. Is in production. It is compounding. And you can see it in the numbers. A key part of this equation is our open platform strategy, unlocking the power of Workday for our customers and for the entire ecosystem around us. I am going to pass it to our very own Gabriel Monroy, Workday's CTO and the leader of our technology platform to share our progress here. Gabe? Take it away. Gabriel Monroy: Thanks, Garrett. it is good to be here. Building on what Anil said, it is almost as though Workday was built for AI 20 years ago. Having 1 data model, 1 security model, 1 version for every customer from the start is an incredible advantage. it is a big reason why I came to Workday. Over the last several years, we modernized that foundation to handle the complexity of running AI at scale. We built tools that can query work that using industry standard analytics solutions and MCP layer so AI models can talk to our APIs in natural language. But access is only half of it. The stakes are different in the world of people and money. that is why we have updated our security model and built the agent system of record. So our agents act with the same permissions, rules, and controls our customers already trust. An agent is not just a model. it is identity, permissions, guardrails, logs, and governance all working together. that is what separates a lawless agent from a lawful 1. Lawless agent will attempt to take action on its own. A lawful agent takes action because the system allows it. Inside Workday's deterministic rails, every step is checked against the security model. The business process framework. And the compliance logic before it runs. Now in Q2, we advanced our platform strategy in 3 ways. Making it more open, extensible, and lawful. Starting with being open. CIOs are not going to settle for a single rigid AI stack. So we built Workday with 3 paths in. Developers building custom agents on their own AI stacks need safe, governed access to Workday. Both for querying data and for taking action. Data cloud gives external agents and partners like Snowflake, AWS, and Google zero copy access to HR and finance. Data. In Q2, we closed 6 deals with all customers choosing our premium Data Cloud Pro edition. Data Cloud remains on track for GA in Q3. And at DevCon, we launched agent ready tools over MCP. These agent APIs allow third party agents on any stack to safely get work done inside Workday. like updating an employee record or approving an invoice without breaking corporate rules. Brent ready tools are now available to early adopters through Workday Extend Pro, With GA in Q3. Today, more than 1.6 thousand customers use Workday across third party services like Teams and Slack, As well as Copilot and Gemini, which we added in Q1. Over 100 of those customers are already leveraging self-service agent directly in the tools they use every day. Whether a manager approves spend or logs an expense right in chat, the underlying policy checks and compliance, stay securely anchored inside Workday. And some work simply outgrows a chat bubble. Travel and IT service management, which Garrett mentioned earlier, those need a Canvas. That work lands in Asana. Where we own both the reasoning engine and the experience. Whether a customer uses their own agent uses our agents with their own front door, or Sana, we meet them wherever they work. And because all of it runs through flex credits, we monetize every action happening on our rails regardless of the path. In Q2, custom apps built on Workday Extend grew over 90% year-over-year, even when building required specialized engineers. Our new developer agent removes that bottleneck. Now builders can generate policy compliant workflows using plain language directly inside tools like cursor, codex, and cloud code. This takes development time from weeks to minutes and opens up the platform to all builders. Customer uptake was instant, Developers have built more than 3 thousand custom apps and agents since DevCon. As we expand these plain language tools across our user base, we fundamentally shift our business model. You do not have to be an engineer to build on Workday. Finally, none of this matters if the transactions are not lawful. In Q2, we launched Brent Passport. It gives security teams a verified, auditable record that an agent was tested against critical risks before it is deployed and is monitored after. Cisco joined as a launch partner, bringing Cisco AI Defense to test agents against leading standards and protect them in production. We will add more security partners and attestation stamps in coming months, giving CSOs the confidence required to route higher value work through Workday. In short, our customers can work where they want, build in plain language, and trust every execution. With that, I will hand it to Robert. Robert Enslin: Thanks, Gabe, and hello, everyone. Our customers trust Workday with the most important parts of their business. And we see it in the field every day. Companies on legacy HCM and ERP systems are realizing they cannot get value from AI without modernizing their core. They want 1 platform they can trust with security and reliability. Which is a big driver behind the demand for Sana Enterprise AI is amplifying the value of the software stack. customers already trust. You can see those tailwinds in our Q2 results. With more than 65% of the Fortune 500 running on Workday, we continue to bring on some of the world's leading brands. In Q2, we formed new relationships with companies such as KPMG US, Danske Bank, BWX Technologies, and Guidehouse. Medium enterprise, as you heard from Garrett, Workday Go is taking off. Customer volume increased more than 5x Over Q1. Across large and medium enterprises, AI is a key reason companies are modernizing their core on Workday. In fact, over half of our net new wins in Q2 signed up for 1 or more AI solutions. And we are seeing even faster AI adoption across our base. As customers leverage our unmatched HR and finance context to truly unlock the value of AI in the enterprise. Genesys, using our new financial audit agent, the chief accounting officer described it as the first step toward the dream of getting a touchless audit. Seminole Hard Rock Services is using payroll agent to automate complex tax and compliance calculations for 28 thousand employees. In Calpine Investment, 1 of our first 20 customers back in 2007, added Sana Enterprise to power an AI layer over the employee experience. This pulls on the other AI agents they recently added, including recruiting, contract intelligence, and planning. Sana Enterprise had an exceptional launch in Q2. New customers included AstraZeneca, Novartis, Caterpillar, and Delivery Hero Group. Since we combined Sana Learn with our core learning management system, we have seen a sizable jump in our overall learning business, which more than tripled quarter over quarter. Adaptive decision intelligence, helped drive strong performance across the entire planning business. And our ecosystem is moving fast with it. Partners have helped build more than 100 industry specific use cases in a little over a month. In late May, we made sign up for Workday and sign a self-service available to all our customers on our AI terms of service. That drove a surge in the number of customers that have signed a universal main service agreement which gives them access to our agents and our AI capabilities. That strategy clearly worked. More than half of our customer base has already migrated to the UMSA and that momentum is accelerating. Our focus now shifts to driving adoption through flex credits. We have already signed 200 customers this quarter, and we expect to significantly grow that number in the second half as we add more GA agents and expands our platform and data cloud capabilities. We continue to see strong execution across the globe. North America, our largest market, had an exceptional quarter. Anchored by US large enterprise, and another strong quarter in Canada. EMEA drove solid growth, with strong performance in France, Germany, and The Nordics. AI now accounts for nearly 1/3 of new ACV in EMEA. Japan also had a standout quarter. Further proof that our continued investment there is paying off. I am proud of the results our teams delivered across the business in Q2. Let me close where I started with trust. For more than 20 years, organizations have trusted Workday with their most critical work and now with their AI. that is a durable advantage. And it sets us up for an even stronger second half. Now over to Zane. Zane C. Rowe: Thanks, Robert. Good afternoon, everyone, and thank you for joining us. Building on Robert's remarks, our second quarter results reflect the continued strength of our platform as organizations rely on Workday to power their most critical HR and finance operations. Subscription revenue in Q2 was $2.407 billion, up 14%. Professional services revenue was a $178 million, resulting in total revenue of $2.649 billion, growth of 13%. Looking at our results by geography, US revenue totaled $1.97 billion an increase of 12% while international revenue was $682 million, up 17%, benefiting from stronger performance over the last few quarters. Turning to backlog, 12 month subscription revenue backlog, or CRPO, ended the quarter at $9.03 billion an increase of 14.2%. Growth was again fueled by expansion within our existing customer base. With AI increasingly a driver alongside a steady contribution from new logos. Total subscription revenue backlog was $27.4 billion in Q2 at $27.4 billion up 8% from a year ago. The year over year growth rate was impacted by a continued mix shift towards customer-based bookings versus net new, and the mix of industries that drove our net new bookings. Gross revenue retention remained strong at 97% for the quarter, and net expansion from existing customers once again led to about 60% of our subscription revenue growth. Non GAAP operating income was $824 million for the quarter. Representing a non GAAP operating margin of 31.1% driven by a combination of revenue outperformance, and ongoing cost discipline. Our GAAP results in the quarter included a $374 million nonrecurring tax benefit related to an internal IP transfer. Operating cash flow totaled $520 million in the quarter, and free cash flow was $460 million. The year over year decline was impacted by the timing of the payroll calendar, which had an additional payroll run in Q2. We repurchased $1.3 billion of shares during the quarter. Completing the $5 billion repurchase plan that we discussed at our Financial Analyst Day last September, 6 months ahead of our target. Buybacks will continue to be an important part of our capital allocation philosophy, and our board has recently approved a $4 billion open ended share repurchase program. We ended the quarter with cash and marketable securities of $3.4 billion. Our headcount as of quarter end stood at 20.9 thousand workmates around the globe. Turning to our outlook. We are pleased with our first half results, and we now expect FY 2027 subscription revenue of $9.94 billion to $9.95 billion, growth of 13%. For the third quarter, we expect subscription revenue of approximately $2.515 billion, growth of 12%. We expect Q3 CRPO growth of 11% to 12%. We lapped the Paradox acquisition in the third quarter which added over a point to last year's Q3 CRPO growth. For Q3, we expect professional services revenue of $175 million, And for the full year, we expect $710 million. We continue to prioritize investment in AI, along strategic investments in the core, while driving efficiencies across the business. With that, we are increasing our FY 2027 non GAAP operating margin guidance to 31%. For the third quarter, we expect a non GAAP operating margin of approximately 30%. We expect to continue expanding margins while positioning ourselves for future growth. We expect Q3 GAAP operating margin to be approximately 18 percentage points lower than our non GAAP operating margin, and the full year FY 2027 GAAP operating margin to be approximately 18 to 19 points lower. Our FY 2027 non GAAP tax rate estimate remains 19%. We are maintaining our FY 2027 operating cash flow outlook of $3.45 billion and we continue to expect FY 2027 capital expenditures of approximately $270 million, resulting in free cash flow of $3.18 billion, growth of 15%. As our Q2 progress demonstrates, embedding AI across Workday's platform provides a significant opportunity to drive customer value. While we are still in the early innings, demand for our agentic portfolio is building. We are focused on driving discovery and adoption through initiatives like our lighthouse program, which we believe will benefit subscription revenue growth over time. And we continue to execute against a framework that delivers both top line growth and margin expansion. With that in mind and ahead of our upcoming financial analyst day, I would like to provide some early context for how we are thinking about next year. Our current target for FY 2028 subscription revenue growth is consistent with our expected second half FY 2027 growth rate of approximately 11%. We also see potential upside across new products, including Sana Enterprise, Workday Extend with Data Cloud, and our AI agents. All of which are seeing great early demand. In addition, we expect our non GAAP operating margin to expand by at least 2 percentage points next year. We are encouraged by the significant opportunity ahead to continue to deliver long term earnings and free cash flow growth. We look forward to diving deeper into our platform innovation at our Financial Analyst Day on October 13 in Las Vegas. And we hope to see many of you there. With that, I will turn it back over to the operator to begin Q&A. Operator: Thank you. And we will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speaker phone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we ask that you please limit yourself to 1 Again, it is star 1 to join the queue. And our first question comes from the line of Gabriela Borges with Goldman Sachs. Line is open. Gabriela Borges: Hey. Good afternoon. Thanks so much for taking the question. Zane, I really appreciate the early look into growth rates exiting 2H 2027 and then the longer term upside potential The question I want to ask about this is twofold. 1 is tell us a little bit about how you are thinking about monetization for headless. The second is how do you, as an executive team, think about the risks that some of the upside opportunities end up coming as a trade off between some of the core. What I mean by that is do customers end up essentially negotiating harder on the core products or exerting pricing pressure on the core products such that you end up at a similar place even when adding new functionality. So maybe just those pieces together would appreciate your thought. Thank you. Aneel Bhusri: Yeah. So I will take the first part. On the headless transactions, we are pretty much indifferent whether you know, somebody uses, from a from a profitability perspective, I think it will show in a revenue perspective whether a company buys our agent uses our APIs, which we get to monetize or goes to data cloud, we get to monetize. So or the, you know, the other option is to build their own agents using Workday, ExtendAI. So we feel like we are pretty covered in all ways that AI gets used, and it does not take away any opportunities. If anything, it grows our market opportunity than where it has been before. Robert Enslin: Second part, I will probably ask Robert to weigh in. I what I actually see, Gabriel, is that customers are making 5-year, 7-year decisions on new platforms, and AI is a huge decision point for them. And if anything, it is impacting our win rates on the platform because we are viewed as the much stronger player in terms of an AI vision and AI agent than our than our legacy competitors are that we all know so well. Yeah. And, Gabriel, from my side, I do not see compression on the core. What I see is customers starting with the AI and wanting us to be the AI platform for Gen AI on HCM and on finance. I think that is driving a broader conversation. And a much broader conversation to the value we offer. You can see it actually in the amount of uptake on the agents that we started to announce and bring to the fore. Where customers. This is where they actually want to see where is going and where finance is going in the future. Yeah. Aneel Bhusri: And just to add to what Robert said. You know, our competitors do not have 1 data model across their multiple versions of their applications. You know, these legacy companies might have 6 or 7 different versions. And as a result, they cannot aggregate the data model to drive the AI models. And so we are just way ahead of where they can be not just where they are now, but where they can ever be, from that AI perspective in terms of driving outcomes using AI. Zane C. Rowe: Hey, Gabriel. I will just add, you know, the early look into FY 2028 is just to give you a target and how we are thinking about it. As you can tell, we have a number of initiatives in place, and we are very enthused by what we are seeing as early indicators in our AI products. Not all of that has been factored into our FY 2028 outlook. So we are, as you can tell, very enthused on the upside there, but I just wanted to, ahead of financial analyst day, give you at least a baseline to see how to let you see how we are thinking about it. Operator: And our next question comes from the line of Michael Turrin with Wells Fargo Securities. Your line is open. Michael Turrin: Hey, great. Thanks. Appreciate you taking the question. A lot's changed over software over the past couple of months. We have seen the topic shift to the rise of open source, open weight models, some signs of cooperation between the Frontier Labs and existing vendors. Aneel, I am curious where Workday fits within those discussions, if any of that if any of those shifts your view on where to focus and wanna also give you a chance to respond to just some of the recent headlines around private equity interest given we have all been fielding a number of questions there as well. Much appreciated. Thank you. Aneel Bhusri: I obviously cannot comment on the on the latter. On the former, we are gonna do what is in the best interest of our customers. And so I will I am going to ask Gerrit to talk about how we think about the different models. And, you know, we work with all of them but we are trying to do what is best for our customers both from a performance, but also from a cost perspective. Gerrit Kazmaier: Yeah. As Aneel has said, right, we are really focused on driving the right ROI and economics for our customers. So as of today already, we deploy a large set of models for multiple vendors. We have small models open weight models, and large frontier models, all in this set of models that we use to build our AI systems and agents with. And quite frankly speaking, we are pretty excited about open weight models. So, you know, they open up new opportunities for us for, you know, having own reinforcement learning, building on adapters over them, they give us a much stronger optionality when you think about international and sovereignty So it is a core tenant, you know, for us, as Aneel has said, to be model agnostic. And because of the different characteristic already, we get great benefit from them. And now as the benchmarks are getting closer, we have signed the open rates initiative as well as other companies. We truly see, you know, a real big upside, you know, for us and our customers to drive better ROI out of our AI investment. And last comment, we also started our own research foundation inside of Workday, so we have an own research lab, which specifically actually focuses on getting high accuracy HR and finance AI systems in place. And 1 of the things that this team is doing right now is actively actually exploring opportunities for us to not only use open weight models, but truly to specialize them to our purposes and see what lift we get out of that. Operator: And our next question comes from the line of Kirk Materne with Evercore ISI. Your line is open. Kirk Materne: Yeah. Thanks very much for taking the question. I think this is probably for Aneel or Robert. Obviously, we can hear the enthusiasm around the early progress on AI. Kind of curious if you can give us an idea. Is AI crowding out some of your other products at this point in time? Meaning, when you go in and talk to a customer, obviously want to talk about AI. You obviously wanna get AI into their hands. Does that mean sometimes your salespeople have to put something they might have been thinking about a year ago on the shelf for now? And the reason I ask that is because your tone and your enthusiasm is obviously very apparent. But, you know, when I look at CRPO just for a proxy, yeah, that is more or less in line. And, you know, and Zane gave a guide for early guide nonetheless for next year that seems, you know, more or less in line with where people were kind of forecasting. So it seems more substitutive than incremental. So I was just wondering if there is something from just a go to market perspective where, you know, there is a purposeful push with AI, whereas we are not gonna try to load everything into every customer right now. Let's get them successful with AI. Even though that might mean you were not seeing as much incremental benefit. I hope that makes sense. Aneel Bhusri: Yeah. I will I will start. Thank you for the question, Kirk. So first of all, you are right in that it is early days. The difference on these agents versus traditional applications they iterate and become better so much faster. So I am very optimistic that we are going to see you know, ramping up usage of these agents faster than we ever saw of our apps. And we are also new to the flex credit consumption model. And, you know, that is a delayed gratitude, delayed gratification model that is frankly, newer to Workday, Again, very optimistic. We are seeing great early signs, but I but I think that is 1 of the reasons for cautious optimism going into next year because we are aggressively moving towards a hybrid model between subscription and this consumption model. I do not actually see it as crowding out. I actually see it as you know, customers new customers choosing Workday because of our agentic strategy, existing customers they have an AI budget, and now we have products that actually fit in that AI budget which is a big win for us. But, again, a lot of these new AI products are consumption based, so we will not see the impact from the revenue until, you know, months or a year down the road. So Rob, what do you want to add to that? Robert Enslin: Yeah. I would add there is a lot of excitement around AI, but our focus has really been about getting adoption. You look at bringing an agent, you gotta harden them, so you gotta get them adopted. The more customers that go through early access, the more customers that are adopting these products just get better. Really fast. And so that is how that is how our merger has been around, do we get adoption for us? The more customers we have access to our agents, the more they are using those agents, and that is how we are measuring them and moving the company in that direction. And I think you can actually see it in the amount of UMSAs we have signed. Like, our UMSAs have really started to take off. Customers really want that. They need to have the UMSA to actually get into the AI world. And then you link that to the data play and the and the Extend Pro and what you are doing with the developer agent. As Anil says, this is a lag in it. But our conversations are really good. And it is in almost every conversation irrespective of the level of customer I am speaking to, whether it is a c level executive, or the HCM team or the finance team, people really start to understand that Workday is really entered the agentic world in a big way. Zane C. Rowe: Hey, Kirk. And just to add to that, you know, as we mentioned, we have got 5.5 thousand customers using our organic agents. And, you know, just over 200, I think, that have actually signed up, you know, for flex credits. So that is the delay that Aneel's alluding to, and that is been factored into our CRPO guide as well as our revenue guide for the remainder of this year. Also our cautious optimism heading into FY 2028 and beyond. Operator: And our next question comes from the line of John DiFucci with Guggenheim Securities. Your line is open. John DiFucci: Thank you. Thanks for taking my question. My question, I think, is for Aneel, Gerrit, and maybe Gabe. Listen. Workday's approach to AI seems, at least to me, seems sincere and frankly more thoughtful than some of your peers. But it is also more pragmatic. In other words, it makes sense. In my understanding, it is simply so is AI is going to be part of everything you do. Which, again, sounds simple, but also an immense task and, frankly, the right move. It sounds like you are certainly on the way from your prepared remarks. But how much effort do you think it will take to accomplish that? And, of course, it is a continuous effort. But when do you think you will get to the point where you can say, we have arrived as an AI platform? Is that going to take years? Or I am just curious. What you think about that. Aneel Bhusri: I will I will start, then I think I think both Gerrit and Gabe should weigh in. We are trying to be very thoughtful in the way that we are building our agentic solutions. They are they are not meant to solve simple problems. Anybody can solve the simple problems. When I look at what we are doing with the self-service agent is really hard What we are doing with the financial audit agent is really hard. But by building these agents and coming out the other end, they add tremendous value to our to our customers. And frankly, from a competitive perspective, they are really, really hard for anybody to compete with because they are they are so deeply embedded in the bowels of Workday. I do not know when we arrive. I think we are arriving now, and I it just gets better over the next couple years. But it is all about adoption and customer success. We have to have agents that have real ROI that is been the lens we have been looking at it since I came back. We had a lot more agents when I came back. We killed a lot or we rolled them into rolled them into bigger agents. And the ones that we have right now, I am very optimistic. They are all very meaningful to our customers. But let's have Gerrit and Gabe add to that. Gerrit Kazmaier: Yeah. I had a couple of points on, you know, the top of stack, if you will, and then Gabe on the platform side. But, you know, to give you a few concrete points on what are the key milestones that we are looking at that we truly believe are landmark moments for Workday as well as for the industry of moving into the AI era and enterprise SaaS. 1 of the biggest 1 for us is how work is gonna change in the work experience with Sana. You heard in the prepared remarks that Sana is going to be the default home for Workday coming rising this year. Robert spoke about the Lighthouse program at Sana Enterprise, and I have shared, you know, how this changed the world, you know, of work inside Workday already. We have 24 thousand agents being billed in just 3 weeks. You know, we really see this, you know, coming this rising as a key moment because the phase of SaaS and how work happens is going to fundamentally change. And, frankly, we believe it is a stark difference to what that work experience is than what you get from generic Jet Copilots because they are deeply tethered into the system of action and the system of work. Secondly, you heard, you know, that our agents are making a lot of progress. And when we say agents, we really mean AI systems. That automate large parts of the value chains in HR and finance. We just put decision intelligence into GA, which is truly a reimagination of how you collaborate with AI on enterprise data. We are about, you know, to bring new functionality to recruiting agent. You referred earlier how much momentum that has already. We are making great progress in 1 of the areas that Aneel is most excited on, financial audit and financial compliance agents. All of these agents are coming out, you know, either they are out already or coming out at rising at the end of the year. And I think when we come together in the next, you know, callbacks, and you look at the agent momentum you have built until then, I think there will be no question mark anymore about Workday being an AI company or not because the world of SaaS will have changed. Gabe, over to you for platform. Gabriel Monroy: Yeah. And, you know, thanks for that, and thanks for the question. Question. In terms of just the timeline view on this on the platform side, it is pretty obvious that the AI technology evolution has been at a frantic pace. Right? We are seeing rapid and continuous evolution, and I do not really see an end to that. it is going to be continuous. Constant evolution. And so the way we are looking at this is these new integration patterns change, as protocols change, as identity approaches change, we are on a process of taking the new capabilities, pulling them into the platform, driving adoption, as Robert was mentioning, and then delivering outcomes and ROIs. And the key is going to be doing that continuously in a loop. That is the art of building AI systems. And that is gonna be a long journey. that is just not something that is going to end anytime soon. Operator: And our next question comes from the line of Alex Zukin with Wolfe Research. Your line is open. Alex Zukin: Yeah. Hey, guys. Thanks for taking the question. Probably another AI question here. But just it is great to hear about the agents and the data cloud opportunities that you are getting of customers, but maybe just help crystallize for us how you are monetizing and maybe any specifics around, like, how many flex credits does an onboarding or procurement agent actually go through? And what that could mean in terms of a net expansion, in terms of spend, at a customer that is deploying them. Or like a Salesforce yesterday talked about how in order for customers to unlock AI functionality, they had to upgrade to a premium version. that is, you know, 60% to 80% more in some cases. How do you see that? With some of the MSA agreements you were talking about, Robert? And when should we think about that as a tailwind to numbers? Is that a is that a 2020, fiscal 27 dynamics or the following year? Gerrit Kazmaier: You know, you said it is a question about AI, but you are hitting all of the cards here, you know, from sales to finance to core technology. So maybe let me start, and then I will hand it over to Robert and probably Zane on the outlook question. Know, what we are seeing is that, you know, the workload that these agents are driving quite substantial. When you heard about earlier the numbers our volumes, we are driving recruiting already. And the key of the ambient agents the agents that are running in the background, you know, we see a substantial opportunity. But we are not comparing it to software spend. Actually, you know, what we are modeling it against is the labor spend that companies have in those given roles already and think about what is the share of the agent that actually will get you know, basically transferred from a labor spend into an AI agent spend for that specific task group. You know, right now, though, and Robert has said it, so I wanna repeat that. Our focus is really on adoption, adoption, adoption. Right? This is the way, you know, how you actually build great AI systems. So what we are doing right now, and Robert spoke about it. Right? We are incentivizing this with programs like the Sana Lighthouse program, we basically allow customers to use it for free in the first year. Self-service agent, 1 of the most consequential agents we do we put out a promotion that we are not, you know, putting on a flex for it either. Until the end of August or September. So, you know, the question that you are asking, you know, how does this translate now sales and dollars right now is difficult to answer because this has not been our focus point. But then you ask me for the, you know, potential that we have because on how much workload that actually processes. It is incredibly substantial. And this is why Zane has said, right, we are so bullish as this being an upside because we can see on the 1 side, the usage increasing, and then we see it on the inside that this represents a significant monetization opportunity for us. Robert Enslin: I mean, you kind of said it that look. I am super excited. You know, we focus on the adoption side of things. Now we are starting to focus really on the consumption side things. So as we move into this, the sales motion changes. And what you see with you know, broad adoption of Sana self-service agent, it is gonna rise all the other agents as well because it gives it a completely different look and feel on how you utilize Workday in the future and what kind of users can work with Workday pretty much anyone. I watched the CFO and the COO look at the you know, decision intelligence agent, and I was just, you know, they were completely blown away. So I think the opportunity for us is really good. The back half of the year looks really positive for us. And I cannot see that changing. And we are in lockstep in making certain that these agents as you adopt them and consume them, the quality of the agent continues to improve. All the time. And I think that is what Gabe meant by it is a circle, it is a loop. And I think we have got a really good process on how to define that loop. So the field is excited by it. Every single 1 of my customer conversations is really, really interesting. And even customers that I have known for years that are not really in HR, IT, or finance space really wanna understand what we are doing. 1 will take the lead in the space of HCM finance. And then lastly, I would just say, you know, do not forget about we have also got agents like talent acquisition agent and a document where we actually measure by different statistics. And, you know, if I look at Talent Acquisition agent, we had more than 30 million candidate interviews in Q2 with 8 million interviews scheduled. So numbers are starting to show up. It will continue to improve over the next months and quarters. Zane C. Rowe: Yeah. Alex, I would just add, you know, this quarter, we talked about, you know, roughly $600 million in AI ARR which is up from around just over 150 just a year ago. So we expect that trend to continue. As Aneel mentioned earlier on the call, this is all about customer success and customer value, and that is gonna be the ultimate driver of our revenue. So, you know, we have got some of that built into the back half of the year as you would expect, but really growing from FY 2028 and beyond where the AI component becomes a significant part of our incremental ARR. So we are excited about the future as you can tell. Operator: We just want to be thoughtful as we as we monetize it. Our next question comes from the line of Karl Keirstead with UBS. Your line is open. Karl Keirstead: Okay, great. Thanks. Maybe I will direct this 1 to Zane. Zane, you gave us a preliminary look at 200 bps of margin expansion next year, a little bit more than I was modeling. And, actually, a greater pace of expansion than you are guiding to this year. I am assuming there is no big change in the prioritization on investing. So perhaps, you will probably address this at the Investor Day, but a couple of things that might be driving that. Thanks so much. Zane C. Rowe: Yeah. Karl, thanks for the question. You know, as Anil mentioned earlier this year, this was the year where we intentionally invested heavily in AI and brought on some great talent and feel like we are doing a lot in that area. I think we have done a credible job prioritizing and then leveraging size and scale and really being thoughtful, on how we drive, you know, just thoughtful expenses in the future. So it is a continuation of that. Doing, I think, a pretty good job utilizing AI ourselves. Internally and expect that trend to continue. So it is really been about the team focusing on what matters and rethinking what we are doing and, as importantly, what we are not doing. And where we are not going to be spending money in the future. And it is that kind of focus that I think is also driving the increase. And we believe that you know, the 2 points for next year is a good starting point. As you know, we have increased to 31% this year, and we believe we can continue, to see that improvement as well as leaning in as much as we have in investments in critical areas around AI and our platform. Aneel Bhusri: Yeah. I would just add we are leveraging AI internally. And we are doing more with, you know, flat head count. that is that is the goal, and I think that is a really important direction for us to head. Operator: And our final question comes from the line of Samik Chatterjee with JPMorgan. Your line is open. Analyst: Hi. Thanks for taking my question. You talked a lot today about the organic agents and the adoption curve you see there. Maybe if you can sort of dive into the acquired AI acquisitions that you have done and particularly the acquired agents and you think about the road map there in terms of integration, finally, sort of making it to a product and then the monetization on that front, and particularly how should we think of that to impact your fiscal 28 sort of financial outlook as well? Any thoughts on that front would be helpful. Thank you. Aneel Bhusri: Well, I will I will just say that they are all doing well, but most importantly, they are all deeply integrated already. We do not we do not ever buy technology and just leave it on the outside. We deeply integrate it right away so we can deliver that unified experience Maybe, Gerrit, you wanna talk about where the products are headed. Gerrit Kazmaier: Yeah. Awesome. So it is a great question because, actually, you know, we kind of you know, spoke about it earlier. You know, the big, you know, products that you can think of is HiredScore on the recruiting side in Paradox. They are both are part of our talent acquisition agent now. So they are basically agentic skills as we evolve our AI systems. And both of them have tremendous momentum. I am gonna hand it over to Robert in a second to talk about that. But we are not really thinking about this as hey. This is separate from the core. As Aneel has said, you know, we have a really good m and a regime that we look for strong technical fit. So as we move forward with Workday recruiting, HiredScore and Paradox, they are an integral part of that, and they are all coming together under the role based agent for talent acquisition. Again, right, this whole idea, this is in the embodiment of an actual recruiter with all of these skills. And on the Sana side, which had an absolutely blowout quarter as well, gangbuster growth, we put it into GA in a combined product. So, Workday Learning and Sana learning is actually 1 product now. it is in GA already. it is driving substantial growth for our customers. But as we take it to them, we do not portray this as Workday and others. You know, this is the learning agent from Workday. This is the agent from Workday. And those acquisition, they are just widening the breadth of skills these agents have. Robert? Robert Enslin: Yeah. I would simply say, I mean, we grow we drove more than 100 million of new ACV with our AI products, which is 25% of all new ACV. So if you just look at those numbers, And then we our AI ARR numbers are up at close to $600 million now. More than half of the new wins in Q2 signed up for AI solutions. Our solution AI solutions are really paying off. And as Gerrit said, I think it is really important to point out, they are integrated into the Workday Foundation. it is 1 call. it is 1 view for our customers. That allows us to deliver the agents even on top of that. Operator: And ladies and gentlemen, thank you for your participation on today's conference. You may now disconnect. Before you buy stock in Workday, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Workday wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $440,710!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 31, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Workday. The Motley Fool has a disclosure policy. Workday (WDAY) Q2 2027 Earnings Call Transcript was originally published by The Motley Fool

Workday stock has delivered a weak result over the past 5 years, with the share price declining 26.3%, even as an intrinsic value estimate based on a Discounted Cash Flow (DCF) approach points to the shares trading at a discount to that model. Set against that, market based checks on earnings and revenue multiples suggest pricing that looks broadly in line with peers rather than clearly cheap. The 26.3% share price decline over 5 years leaves Workday trailing many large software peers, which can make the current level more interesting for investors who focus on entry price. Growing use of Workday’s AI driven products and reported customer adoption can support expectations for future cash flows, while any setback around the reported take private discussions or a reset in growth expectations may weigh on what investors are willing to pay. With a value score of 3 out of 6, the broader checks on Workday line up as a mixed picture rather than a clear bargain or clear overvaluation. The issue now is whether the current Workday share price already reflects that intrinsic value estimate or if there is still a margin between the market price and the cash flow based valuation. Spot under pressure like Workday, then weigh it against a curated set of 44 high quality undervalued stocks, which also combine discounted valuations with stronger recent share price momentum. The Discounted Cash Flow (DCF) method here uses projected free cash flows to estimate what Workday might be worth today. Workday currently generates last twelve month free cash flow of about $2.8b, and the model assumes those cash flows continue growing over time rather than shrinking. On that basis, the DCF points to an estimated intrinsic value of about $357 per share. With the implied 42.7% discount to the current share price, the stock screens as undervalued on this cash flow view. The strong Q2 fiscal 2027 results and raised guidance tied to AI adoption help explain why some investors see room for the share price to move closer to the cash flow based estimate. Overall, the Discounted Cash Flow work suggests Workday stock currently looks undervalued compared with the cash it is expected to generate. Our Discounted Cash Flow (DCF) analysis suggests Workday is undervalued by 42.7%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Workday. P/E is a useful cross check for Workday because earnings are now a meaningful part of the story alongside cash flow. Workday currently trades on a P/E of about 39.4x, which is above the broader software industry average of 31.8x but below the peer group average near 49.3x. The fair P/E ratio based on Workday’s size, margins and risk profile is estimated at about 36.9x. That is only slightly below the current multiple, so this framework points to the stock being roughly in line with what you might expect rather than clearly cheap or expensive. Overall, Workday looks roughly fairly valued on its P/E multiple compared with both its tailored fair ratio and peer benchmarks. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives pick up where this valuation puzzle for Workday leaves off and spell out what kind of growth, margins and earnings path would need to hold for the stock to be worth materially more or less than today’s price, on Workday’s Community page. Each narrative treats fair value as a thesis about the business that you can track over time, rather than a one off snapshot. Community views on Workday are far apart, with some investors focused on backlog and cash flow while others focus on competition, AI risks and execution. Bull case: 63% undervalued Read the full Bull Case to see why Workday could be undervalued Bear case: 20% overvalued Read the full Bear Case to see why Workday could be overvalued Do you think there's more to the story for Workday? Head over to our Community to see what others are saying! The Discounted Cash Flow (DCF) work suggests Workday screens as undervalued, while the earnings multiple view points to pricing that is about right compared with peers. That split reflects different emphasis. The intrinsic value model leans on future cash flows, while the P/E view is tied to what the market currently pays for similar growth stories. With broader checks lining up as mixed, the key question is whether Workday can deliver on the cash flow and AI adoption assumptions that underpin the intrinsic value estimate, or whether the market is correctly pricing competitive and execution risks. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include WDAY. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Workday, Inc. WDAY reported second-quarter fiscal 2027 non-GAAP earnings of $2.75 per share, which increased 24.4% from $2.21 a year ago. The bottom line beat the Zacks Consensus Estimate of $2.62 by 4.96%. Revenues rose 12.8% to $2.65 billion, beating the consensus estimate of $2.63 billion by 0.57%.Subscription growth, stronger margins and rising AI adoption supported the quarter. AI products drove more than $100 million of new annual contract value, representing more than 25% of total new Annual Contract Value (ACV). 12-month subscription revenue backlog increased 14.2% to $9.03 billion. Subscription services revenues rose 13.9% year over year to $2.47 billion, accounting for about 93% of total revenues. Roughly 60% of the increase came from expansion among existing customers, with the balance from customers added after the start of the comparable prior-year period. Professional services revenues slipped 1% to $178 million as Workday continued to leverage service partners. U.S. revenues increased 12% to $1.97 billion, while international revenues climbed 17% to $682 million. Total subscription revenue backlog grew 8% to $27.4 billion, and gross revenue retention remained about 97%. Workday, Inc. price-consensus-eps-surprise-chart | Workday, Inc. Quote Agentic AI annual recurring revenues approached $600 million, rising more than 200% year over year and 20% sequentially. More than 5,500 customers were using at least one organic Workday agent, up more than 35% from the prior quarter. More than half of net new wins included one or more AI solutions. AI activity was visible across products. More than 30 million candidates interacted with the Talent Acquisition Agent, which scheduled more than eight million interviews. 170 customers had purchased Adaptive Decision Intelligence, and more than 200 customers had signed up for Flex Credits. Total costs and expenses increased 11% to $2.34 billion. The rise included $126 million of higher employee-related expenses, $43 million of additional facilities and IT costs, and a $32 million increase in third-party hosted infrastructure spending. During the quarter, non-GAAP net income increased 13.2% to $677 million. GAAP operating income advanced 26% to $313 million, with margin improving to 11.8% from 10.6%. Non-GAAP operating income rose 21% to $824 million, while margin expanded to 31.1% from 29%. Workday attributed the improvement to revenue growth outpacing headcount growth and moderated operating expenses. GAAP results also included a $374 million nonrecurring tax benefit. Operating cash flow totaled $520 million, down from $616 million a year earlier, while free cash flow declined to $460 million from $588 million. During the first six months of 2026, the company generated $1.22 billion in cash compared with $1.07 billion in the year-ago period. Management attributed the year-over-year decline to the payroll calendar, which included an additional payroll run in the quarter. As of July 31, 2026, Workday had cash, cash equivalents and marketable securities of $3.4 billion with long-term debt of $1.99 billion. The company repurchased $1.3 billion of shares during the quarter, completing its $5 billion repurchase plan six months ahead of target. The board subsequently authorized a new open-ended $4 billion share repurchase program. For the third quarter of fiscal 2027, Workday expects total revenues of $2.69 billion, up 11%, and subscription revenues of $2.52 billion, up 12%. Management projects 12-month subscription revenue backlog growth of 11-12% and a non-GAAP operating margin of 30%. For fiscal 2027, total revenues are projected at $10.65-$10.66 billion, up 12%, while subscription revenues are forecast at $9.94-$9.95 billion, up 13%. Workday raised its non-GAAP operating margin outlook to 31%. It maintained operating cash flow guidance of $3.45 billion and expects $3.18 billion of free cash flow, up 15%. Management's current fiscal 2028 target calls for subscription revenue growth of about 11%, consistent with the expected second-half fiscal 2027 growth rate. Potential upside could come from Sana Enterprise, Workday Extend with Data Cloud and AI agents, all of which management said are seeing strong early demand. Workday also expects its non-GAAP operating margin to expand by at least two percentage points in fiscal 2028. The company is prioritizing adoption before full monetization of consumption-based AI products, with management expecting AI to become a more significant contributor to incremental annual recurring revenues from fiscal 2028 and beyond. Workday currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Silicon Motion Technology Corporation SIMO sports a Zacks Rank #1 at present. In the last reported quarter, it delivered an earnings surprise of 14.08%. It is benefiting from growing demand for NAND flash storage solutions driven by AI, data centers, PCs, smartphones and automotive applications. Its focus on advanced controller technologies, PCIe Gen5 solutions and expanding embedded storage offerings is expected to support long-term growth and strengthen its position in the storage semiconductor market.Texas Instruments Incorporated TXN carries a Zacks Rank #2 at present. It delivered an earnings surprise of 12.04% in the last reported quarter. The company is experiencing strong demand for analog and embedded processing solutions across industrial, automotive, communications and personal electronics markets. Its focus on product innovation, manufacturing capacity expansion and embedded processing technologies is likely to drive long-term growth.Amazon.com, Inc. AMZN carries a Zacks Rank #2 at present. It delivered an earnings surprise of 2.73% in the last reported quarter.Amazon continues to gain from strong demand for e-commerce, cloud computing, and digital advertising services, supported by the growing adoption of AI. Its expanding Amazon Web Services business, investments in generative AI and cloud infrastructure, and growing fulfillment network support sustained growth and strengthen its competitive position. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Workday, Inc. (WDAY) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Texas Instruments Incorporated (TXN) : Free Stock Analysis Report Silicon Motion Technology Corporation (SIMO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Salesforce (NYSE:CRM), a cloud CRM and AI-powered enterprise software provider, closed at $252.10, up 22.60% Thursday. The move followed a strong Q2 earnings beat, raised full-year guidance, and fresh AI partnership momentum. Investors are watching Salesforce's next earnings report and AI-related revenue traction. Trading volume reached 53.3M shares, coming in about 246% above its three-month average of 15.4M shares. Salesforce IPO'd in 2004 and has grown 5,763% since going public. The S&P 500 (SNPINDEX:^GSPC) closed at 7,730, up 0.71%, while the Nasdaq Composite (NASDAQINDEX:^IXIC) finished at 26,541, up 1.57%. Among enterprise software and customer relationship management (CRM) applications peers, ServiceNow (NYSE:NOW) closed at $138.44, up 10.05%, and Workday (NASDAQ:WDAY) closed at $193.57, up 1.48%, reflecting broad enthusiasm for large-cap software after Salesforce's results. Salesforce reported Q2 earnings and soared past Wall Street's expectations as sales and current remaining performance obligations grew 11% and 14%. The company also raised full-year guidance, stating that sales will grow between 11% and 12% this year. However, the news that stole all the headlines was Salesforce's announcement that it was partnering with Anthropic to develop Claudeforce. CEO Marc Benioff explained, "By fusing Claude's extraordinary reasoning with the trusted data, workflows, and governance every enterprise runs on, we're delivering a dynamic interface that thinks, reasons, and acts. This is how every business will run." This certainly quiets some of the fears surrounding a potential SaaS-pocalypse (at least in respect to Salesforce) and could make the CRM leader a true, AI-first behemoth. Even before this partnership, Salesforce grew its agentic workforce units by 97% in Q2 as AI agents continue to tackle a broader array of tasks for its customers. Trading at 16 times free cash flow, Salesforce isn't outrageously priced considering today's interesting developments and steady growth rates, but investors will want to watch this new partnership closely for progress in the upcoming quarters. Before you buy stock in Salesforce, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Salesforce wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $439,308!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,286,826!* Now, it’s worth noting Stock Advisor’s total average return is 964% — a market-crushing outperformance compared to 212% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of August 27, 2026. Josh Kohn-Lindquist has positions in ServiceNow. The Motley Fool has positions in and recommends Salesforce, ServiceNow, and Workday. The Motley Fool has a disclosure policy. Stock Market Today, Aug. 27: Salesforce Surges 23% on Anthropic Partnership and Q2 Earnings Beat was originally published by The Motley Fool

Workday (WDAY) came out with quarterly earnings of $2.75 per share, beating the Zacks Consensus Estimate of $2.62 per share. This compares to earnings of $2.21 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +4.96%. A quarter ago, it was expected that this maker of human resources software would post earnings of $2.49 per share when it actually produced earnings of $2.66, delivering a surprise of +6.83%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Workday, which belongs to the Zacks Internet - Software industry, posted revenues of $2.65 billion for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 0.57%. This compares to year-ago revenues of $2.35 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Workday shares have lost about 11.2% since the beginning of the year versus the S&P 500's gain of 12.1%. While Workday has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Workday was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $2.65 on $2.69 billion in revenues for the coming quarter and $10.81 on $10.66 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Internet - Software is currently in the top 35% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, UiPath (PATH), is yet to report results for the quarter ended July 2026. The results are expected to be released on September 3. This enterprise automation software developer is expected to post quarterly earnings of $0.15 per share in its upcoming report, which represents no change from the year-ago quarter. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. UiPath's revenues are expected to be $397.59 million, up 9.9% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Workday, Inc. (WDAY) : Free Stock Analysis Report UiPath, Inc. (PATH) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Interested in Workday, Inc.? Here are five stocks we like better. Workday reported solid fiscal Q2 growth: Revenue rose 13% year over year to $2.649 billion, while subscription revenue increased 14% to $2.471 billion. Current remaining performance obligations grew 14.2% to $9.03 billion, and the company achieved a 31.1% non-GAAP operating margin. AI adoption accelerated: AI products generated more than $100 million in new annual contract value and represented over 25% of new ACV. More than 5,500 customers were using Workday’s AI agents, while AI-related annual recurring revenue reached nearly $600 million. Workday raised its outlook and expanded shareholder returns: Fiscal 2027 subscription revenue guidance increased to $9.94 billion–$9.95 billion, with full-year non-GAAP operating margin guidance raised to 31%. After repurchasing $1.3 billion in shares, the company authorized a new open-ended $4 billion buyback program. Workday Validates AI Flywheel: Stock Price Recovery Begins Workday (NASDAQ:WDAY) reported second-quarter fiscal 2027 revenue growth of 13%, as the enterprise software company said artificial intelligence products accounted for more than $100 million in new annual contract value, or ACV, during the quarter. Chief Executive Officer Aneel Bhusri said AI products represented more than 25% of all new ACV closed in the period and were beginning to support the company’s core business, including win rates. More than 5,500 customers were using at least one of Workday’s internally developed AI agents, up more than 35% from the prior quarter, he said. → Quantum Computing Is Raising the Stakes for Cybersecurity: 5 Stocks to Watch Workday, Seriously, It’s Time to Buy This SaaS Leader “More customers are moving from pilots to production with our agents,” Bhusri said, citing BMO’s rollout of Workday’s Self-Service Agent to its 55,000 employees after a pilot involving 500 workers. Subscription revenue rose 14% to $2.471 billion in the second quarter, while professional services revenue totaled $178 million. Total revenue was $2.649 billion, up 13% year over year, according to Chief Financial Officer Zane Rowe. U.S. revenue increased 12% to $1.97 billion. International revenue rose 17% to $682 million. Current remaining performance obligations, or cRPO, increased 14.2% to $9.03 billion. Total subscription revenue backlog grew 8% to $27.4 billion. Gross revenue retention was 97%. Existing-customer expansion contributed about 60% of subscription revenue growth. → NVIDIA Reveals $21 Billion SpaceX Stake: Signal of Confidence or Circular Financing? The Late-Stage Bull Market Is a Buying Opportunity for Tech Workday posted non-GAAP operating income of $824 million, equal to a 31.1% non-GAAP operating margin. The company recorded a $374 million non-recurring GAAP tax benefit tied to an internal intellectual-property transfer. Operating cash flow was $520 million and free cash flow was $460 million. Rowe said the year-over-year decline reflected payroll-calendar timing, including an additional payroll run during the quarter. → Berkshire Boosts Its Bet: This AI Hyperscaler Is Now a Top-3 Holding The company repurchased $1.3 billion of shares, completing its prior $5 billion repurchase authorization six months ahead of its target. Workday’s board approved a new open-ended $4 billion share repurchase program. The company ended the quarter with $3.4 billion in cash and marketable securities. President of Product and Technology Gerrit Kazmaier said Workday’s AI stock-keeping units generated nearly $600 million in annual recurring revenue, up more than 200% from a year earlier and more than 20% sequentially. In recruiting, more than 30 million candidates interacted with Workday’s Talent Acquisition Agent during the quarter, while the AI scheduled more than 8 million interviews. Workday’s Contract Intelligence Agent drove nearly 70% year-over-year growth in agreements processed, Kazmaier said. Workday also highlighted progress for Sana Enterprise, its AI workbench for HR, finance and IT. The company introduced 23 new Sana capabilities during the quarter, including an Agent Builder that allows users to create agents in natural language. Workday deployed Sana Enterprise internally on Aug. 4 and said 12,000 employees became active users, building 22,000 custom agents in three weeks. Kazmaier said Sana’s conversational AI experience is expected to become Workday’s default home screen by the company’s Rising conference in October. Adaptive Decision Intelligence, Workday’s AI product for analytics and planning, entered general availability on July 31. The offering had been purchased by 170 customers as of the call. Workday also said its Deployment Agent had reached more than 4,600 customers and nearly 24,000 users, with query volume rising nearly 500% in the second quarter. Chief Technology Officer Gabe Monroy said Workday was expanding its open-platform approach through Data Cloud, agent-ready tools and Workday Extend. Data Cloud provides zero-copy access to HR and finance data for external agents and partners including Snowflake, AWS and Google. Workday closed six Data Cloud deals in the quarter, all for the premium Data Cloud Pro edition, and expects general availability in the third quarter. Monroy added that developers had built more than 3,000 custom applications and agents since Workday’s June DevCon event using the company’s Developer Agent tools. President and Chief Commercial Officer Rob Enslin said more than half of Workday’s net new wins in the second quarter included one or more AI solutions. New customer relationships included KPMG LLP, Danske Bank, BWX Technologies and Guidehouse. Enslin said Sana Enterprise added customers including AstraZeneca, Novartis, Caterpillar and Delivery Hero Group. More than half of Workday’s customer base has migrated to its Universal Main Subscription Agreement, which provides access to the company’s agents and AI capabilities. Workday had signed 200 customers for Flex Credits during the quarter, he said. For fiscal 2027, Workday raised its subscription revenue outlook to a range of $9.94 billion to $9.95 billion, representing 13% growth. It expects third-quarter subscription revenue of approximately $2.515 billion, or 12% growth, and third-quarter cRPO growth of 11% to 12%. The company increased its full-year non-GAAP operating margin outlook to 31% and maintained its operating cash flow forecast of $3.45 billion. It expects fiscal-year free cash flow of $3.18 billion, up 15%. Looking ahead, Rowe said Workday’s current target for fiscal 2028 subscription revenue growth is consistent with its expected second-half fiscal 2027 growth rate of approximately 11%. He also said the company expects non-GAAP operating margin to expand by at least two percentage points next year, while noting potential upside from newer offerings including Sana Enterprise, Data Cloud and AI agents. Workday, Inc (NASDAQ: WDAY) is a provider of cloud-based enterprise applications focused on human capital management (HCM) and financial management. Founded in 2005 by Dave Duffield and Aneel Bhusri following their tenure at PeopleSoft, the company develops software-as-a-service solutions that help organizations manage workforce and financial processes in a unified, cloud-native environment. Workday's platform emphasizes continuous updates, data security, and a configurable architecture aimed at large and mid-sized enterprises. The company's product portfolio centers on Workday Human Capital Management and Workday Financial Management, with additional offerings for payroll, talent management, workforce planning and analytics. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Workday Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.