Workday Set to Report Q2 Results: Revenue Growth and AI Initiatives to Boost Earnings?

Workday is set to release Q2 results on Aug. 21, with revenue growth expected to boost earnings. The company's earnings surprise in the trailing four quarters is 9.75%, with a surprise of 12.06% in the last quarter. Workday's AI integration and new unified AI developer toolset are expected to enhance productivity and decision-making. Subscription services revenues are estimated at $2.16 billion, with a 13.5% YoY growth.

Title: Workday Set to Release Q2 Results; Revenue Growth Expected to Boost Earnings

Workday, Inc. (WDAY) is poised to release its second-quarter fiscal 2026 results on Aug. 21, following the closing bell. The company has delivered impressive earnings surprises in the past four quarters, with a trailing four-quarter surprise of 9.75% and a surprise of 12.06% in the last reported quarter. These results suggest that the company is well-positioned to maintain its momentum.

Revenue Growth and Earnings Expectations

Analysts expect Workday to report higher revenues, driven by robust demand for its human capital management (HCM) and financial management solutions across various end markets. The company's strong focus on integrating artificial intelligence (AI) across its portfolio is a significant positive factor. During the quarter, Workday launched a new wave of Illuminate Agents, designed to enhance productivity in HR and finance functions. Additionally, the company rolled out a new unified AI developer toolset, empowering developers to customize, configure, and connect AI apps and agents on the Workday platform. These initiatives are expected to bolster Workday's commercial prospects.

Subscription Services and Professional Services

Estimates for subscription services revenues are pegged at $2.16 billion, indicating a 13.5% year-over-year (YoY) growth. Professional services revenues are estimated at $180 million. For the July quarter, the Zacks Consensus Estimate for revenues is $2.34 billion, suggesting an increase from the year-ago quarter’s reported figure of $2.09 billion. The consensus estimate for adjusted earnings per share is $2.09, indicating an increase from $1.75 reported in the prior year.

Earnings Whispers and Stock Performance

Our proven model does not conclusively predict an earnings beat for Workday for the fiscal second quarter. The company's Earnings ESP (Earnings Surprise Percentage), which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%, with both pegged at $1.99. Workday carries a Zacks Rank #3, indicating a "Hold" rating.

Morgan Stanley Analysis

Morgan Stanley analyst Keith Weiss maintains a Hold rating on Workday with a price target of $255. Weiss cited concerns about growth deceleration and AI disruption risks, despite the stock trading at a low multiple of 18 times free cash flow. Weiss noted that the upcoming quarter may not bring upward revisions to estimates, and the expectations for subscription revenue growth in the second half of the fiscal year appear ambitious.

Conclusion

Workday's AI integration and new unified AI developer toolset are expected to enhance productivity and decision-making. Subscription services revenues are estimated at $2.16 billion, with a 13.5% YoY growth. While the company faces challenges in maintaining its historical growth rates and potential risks from AI disruption, its growth prospects remain promising. Investors should closely monitor the upcoming quarterly results to gauge the company's performance and future prospects.

References

[1] https://www.nasdaq.com/articles/workday-set-report-q2-results-will-revenue-growth-boost-earnings
[2] https://www.ainvest.com/news/workday-faces-uncertainty-morgan-stanley-analyst-warns-growth-concerns-ai-disruption-risks-2508/