Workday 2026 Q2 Earnings Beats Expectations as Net Income Surges 72.7%

Workday (WDAY) reported its fiscal 2026 Q2 earnings on Aug 22, 2025. The company beat earnings expectations and raised its full-year subscription revenue forecast, though it highlighted potential challenges in certain sectors. Shares slipped in extended trading despite strong results.

Revenue
Workday’s total revenue for Q2 fiscal 2026 rose 12.6% year-over-year to $2.35 billion, with subscription services accounting for the vast majority at $2.17 billion. Professional services added $179 million to the top line, reflecting steady demand for implementation and support services. The subscription segment’s strong performance underscored the company’s continued shift toward recurring revenue.

Earnings/Net Income
Adjusted earnings per share (EPS) came in at $0.86, a 72.0% increase from $0.50 in the prior-year period. Net income surged 72.7% year-over-year to $228 million, or $0.84 per share, from $132 million, or $0.49 per share, reflecting improved operating efficiency and scale. These results highlight the company’s strong earnings momentum.

Price Action
Workday’s stock price rose 3.46% in the latest trading day but fell 2.13% for the week and 8.20% month-to-date, reflecting mixed investor sentiment ahead of and after the earnings report.

Post-Earnings Price Action Review
A strategy of buying Workday shares following a revenue increase and holding for 30 days has historically yielded strong returns. Over the past three years, this approach delivered a 64.21% return, outperforming the benchmark by 11.41%, with a maximum drawdown of 0.00% and a Sharpe ratio of 0.49, indicating solid risk-adjusted performance.

CEO Commentary
CEO Carl M. Eschenbach highlighted robust performance in Q2, with 14% subscription revenue growth and a non-GAAP operating margin of 29%. AI adoption is central to Workday’s strategy, with over 30% of deals and 75% of new deals including AI products. The company also plans to expand AI capabilities and open new Customer Experience Centers. Eschenbach noted ongoing challenges in the public sector, particularly in government and higher education, as funding remains uncertain.

Guidance
Workday raised its full-year 2026 subscription revenue guidance to $8.815 billion, or 14% growth, and set Q3 revenue expectations at $2.235 billion in subscription services. The company also forecasts a 29% non-GAAP operating margin for the year, with Q3 at 28%, and expects $2.85 billion in operating cash flow and $2.65 billion in free cash flow.

Additional News
Workday announced the acquisition of Paradox, a conversational AI firm focused on talent acquisition, to enhance its AI-driven recruitment capabilities. The company also launched AI agents for automating accounting processes and tracking absenteeism during the quarter. CEO Carl Eschenbach noted ongoing challenges in the public sector, particularly in government and higher education, as funding uncertainty persists. Workday shares have declined approximately 12% year-to-date, underperforming the Nasdaq’s roughly 9% gain.