Workday posts 13% revenue growth in Q2 FY2026, expands margins and raises full-year guidance

ByInvestment Club

Overview

Workday, Inc., the AI-driven platform for managing people, money, and agents, delivered another strong quarter with double-digit revenue growth and substantial operating margin expansion. The company highlighted momentum in subscription revenues, record backlog, and continued adoption of its AI innovations, while strategically expanding its ecosystem through acquisitions and partnerships.

“Workday delivered another solid quarter, driven by our AI and platform innovation, international momentum, and an ecosystem that continues to grow alongside us. Customers are choosing Workday because we help them unlock value today and prepare for what’s next—whether that’s navigating AI transformation, streamlining operations, or creating more meaningful work for their people”, said Carl Eschenbach, CEO, Workday.

Q2 FY2026 vs. Q2 FY2025:

  • Total revenue was $2.35bn (+12.6% YoY), led by strong demand across subscription services.
    • Subscription revenue reached $2.17bn (+14.0% YoY), underscoring Workday’s durable growth model.
  • GAAP operating income increased to $248m (10.6% margin) from $111m (5.3% margin) a year ago, while non-GAAP operating income rose to $680m (+31% YoY), with 29.0% margin.
  • GAAP diluted EPS was $0.84 versus $0.49 last year, and non-GAAP diluted EPS grew to $2.21 (+26% YoY).
  • 12-month subscription revenue backlog increased to $7.91bn (+16.4% YoY), while total backlog rose to $25.37bn (+17.6% YoY).
  • Operating cash flow reached $616m (up from $571m last year), while free cash flow was $588m (compared to $516m).
  • Net income recorded a value of $228m (+73% YoY), reflecting revenue growth and margin gains.
  • Workday repurchased 1.2m shares for $299m, ending the quarter with $8.19bn in cash, cash equivalents, and marketable securities.
  • The company announced acquisition of Paradox (AI candidate experience platform) and Flowise (low-code AI agent builder), reinforcing leadership in AI-powered HR and finance solutions.
  • Also, it launched Workday Agent Partner Network and AI developer toolset to accelerate ecosystem innovation.
  • The company expanded customer base with wins at Banamex, Carrefour, Masan Group, Memorial Health, and Red Coats, and deepened relationships with Google, Qantas, Randstad, Nationwide, and University of Virginia.
  • It introduced Workday Government subsidiary to serve U.S. federal clients; community now covers more than 75m users and 65% of the Fortune 500.

For Q3 FY2026, Workday expects subscription revenue of approximately $2.24bn (+14.1% YoY) and a non-GAAP operating margin of ~28%. For the full year FY2026, the company raised guidance to $8.82bn in subscription revenue (+14.2% YoY) and a non-GAAP operating margin of ~29%. Management emphasized the ongoing benefits of AI innovation, international expansion, and ecosystem growth, supporting durable double-digit growth into FY2027.

Despite reporting results that exceeded Wall Street expectations, Workday’s stock closed the week down -2.77%, extending a bearish trend that has persisted for several months. The price continues to trade below both the 50-day SMA ($232.71) and the 200-day SMA ($248.74), levels that have recently acted as strong resistance, particularly the 50-day average. This technical setup underscores the ongoing downward pressure on the stock. The RSI is currently at 42.66, in a neutral range, which reflects subdued momentum and keeps investors cautious in both the short and long term. Unless the stock can reclaim key moving averages, the prevailing bearish sentiment is likely to remain intact.

Source: TradingView

Author: Ionuț-Adrian Lazar

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