Workday Stock Jumps as Q2 Earnings Beat Expectations with 12.6% Revenue Growth

Workday, Inc. (NASDAQ: WDAY), known for its AI platform for managing people, money, and agents, has reported its financial results for the fiscal 2026 second quarter, ending July 31, 2025. The company announced substantial growth in both total and subscription revenues. Total revenues for the quarter reached $2.348 billion, reflecting a 12.6% increase from the previous year. Subscription revenues, a significant component of Workday's business model, saw a rise of 14.0% year-over-year, totaling $2.169 billion.

Operating income improved significantly to $248 million, or 10.6% of revenues, compared to $111 million, or 5.3% of revenues, from the same period last year. On a non-GAAP basis, operating income was reported at $680 million, representing 29.0% of revenues, up from $518 million, or 24.9% of revenues, in the previous year. Additionally, diluted net income per share increased to $0.84 from $0.49, while the non-GAAP diluted net income per share rose to $2.21 from $1.75 year-over-year.

The company's 12-month subscription revenue backlog, an indicator of future revenue flows, grew by 16.4% to $7.91 billion. Total subscription revenue backlog increased by 17.6% year-over-year, reaching $25.37 billion, suggesting sustained growth in recurring revenue streams. Operating cash flows also experienced an increase, reaching $616 million compared to $571 million in the previous year, with free cash flows at $588 million, up from $516 million.

In shareholder-related activities, Workday repurchased approximately 1.2 million shares of Class A common stock for $299 million under its share buyback programs. The company's cash, cash equivalents, and marketable securities stood at $8.19 billion as of the end of the fiscal quarter.

Strategically, Workday expanded its customer base with new clients including Banamex, Carrefour, Masan Group, Memorial Health, and Red Coats. The company also bolstered existing partnerships with large enterprises such as Google, Nationwide Insurance, Qantas Airways, Randstad, Tokyo Electron, and the University of Virginia.

Furthermore, Workday has entered into a definitive agreement to acquire Paradox, a company specializing in conversational AI to streamline the hiring process, and acquired Flowise, a low-code platform aimed at simplifying the development of AI agents. These strategic acquisitions are expected to enhance Workday's capabilities in AI-driven solutions.

Looking into the future, Workday has provided guidance for the fiscal 2026 third quarter ending October 31, 2025, projecting subscription revenues of $2.235 billion, a 14.1% increase, and maintaining a non-GAAP operating margin of 28.0%. For the full fiscal year ending January 31, 2026, Workday has updated its guidance, anticipating subscription revenues of $8.815 billion, a growth of 14.2%, alongside a non-GAAP operating margin of 29.0%.

Management has expressed confidence in Workday's continued growth trajectory. CEO Carl Eschenbach attributed the strong quarterly performance to the company's AI and platform innovations, international expansion, and ecosystem growth. CFO Zane Rowe echoed these sentiments, emphasizing the robust platform performance and strategic progress which informed the decision to raise the fiscal 2026 subscription revenue and non-GAAP operating margin guidance.

Workday remains focused on advancing its strategic initiatives, with the introduction of the Workday Government subsidiary aimed at serving the U.S. Government, and the unveiling of a new AI developer toolset along with the Workday Agent Partner Network, which fosters a global ecosystem of partners in AI development.

As Workday continues its expansion, the results and outlook underscore the company's commitment to leveraging AI and cloud technology to drive business growth and operational improvements. This period marks an era of innovation and strategic acquisitions that are poised to enhance Workday's ability to serve its vast customer base and retain industry leadership. As the market evolves, Workday's strategic focus on AI, customer expansion, and operational excellence positions it well for sustained future growth.