Workday: Strong Q2 Results, Guidance Raise, and Bullish Analyst Trends

Workday's Q2 results show a 13% YoY net revenue increase, driven by a 14% rise in core subscription services and growth across client sizes. The company forecasts a greater than 14% revenue increase for Q3 and the year, and its balance sheet reflects strong cash flow and profitability. Analysts are bullish, with a consensus target near $290 as of late August. The company's expanding use of AI and ecosystem partners make it a vital player in the enterprise automation industry.

Workday, Inc. (WDAY) reported robust second-quarter fiscal 2026 results, highlighting a 13% year-over-year (YoY) net revenue increase. The company's core subscription services revenue rose by 14%, driven by strong customer wins across various industries including education, healthcare, financial services, retail, and hospitality [1].

The company's revenue for the quarter was $2.34 billion, up from $2.08 billion in the prior-year quarter. This performance exceeded the Zacks Consensus Estimate by $8 million. Subscription services revenue contributed $2.2 billion, up from $1.9 billion in the year-ago quarter. The 12-month subscription revenue backlog increased by 16.4% to $7.91 billion, indicating strong demand and contract renewals [1].

Workday's net income on a GAAP basis was $228 million or 84 cents per share, compared to $132 million or 49 cents in the year-ago quarter. The non-GAAP net income per share was $2.21, up from $1.75 in the prior-year quarter. This bottom-line performance beat the Zacks Consensus Estimate by 12 cents [1].

Operating income during the quarter was $248 million compared to $111 million in the year-ago quarter. Non-GAAP operating income was $680 million, up from $518 million a year ago, with respective margins of 29% and 24.9%. The year-over-year improvement was backed by revenue outperformance, cost discipline, and improved efficiencies across the company [1].

For the third quarter of fiscal 2026, Workday expects subscription services revenues to be $2.41 billion, representing growth of 12%. Revenues from professional services are estimated to be $180 million. Management expects the non-GAAP operating margin to be 28% [1].

For fiscal 2026, the company expects subscription revenues to be $9.51 billion, indicating growth of 13% year over year. Professional services revenues are expected to be about $700 million. The non-GAAP operating margin is anticipated to be 29%. Capital expenditure is approximated to be around $200 million, down slightly from fiscal 2025. Non-GAAP tax rate is expected to be 19%. Operating cash flow is forecasted to be $2.85 billion [1].

Analysts are bullish on Workday's prospects. The consensus target is near $290 as of late August, reflecting confidence in the company's growth trajectory and strategic initiatives [2].

Workday's expanding use of AI and ecosystem partners positions it as a vital player in the enterprise automation industry. The company's strategic AI investments, such as Workday Illuminate and its $589 billion cloud AI market positioning, underscore its long-term growth potential [2].

References:
[1] https://www.nasdaq.com/articles/workday-q2-earnings-beat-estimates-solid-revenue-growth
[2] https://www.ainvest.com/news/workday-q2-2026-earnings-strategic-dip-high-growth-ai-driven-enterprise-2508/