Skip to content
CXProWealth

Workday

WDAY · Nasdaq

A one-time tax benefit supplied 48% of net income

A $305M tax benefit from moving intellectual property inside the group lifted net income to $632M, while pre-tax income rose only 7.6%.

Q2 FY2027, the quarter to Jul 31, 2026 (Workday's fiscal 2027 ends in January 2027) · 10-Q filed Aug 27, 2026

Q2 FY2027 · revenue
$2.6B+12.8% on the year
Operating margin
11.8%
Net income
$632.0M
Free cash flow, quarter
$460.0M

Largest source of revenue: Subscription services, 93.3% of the total.

Follow the money

Where Workday's money goes

Tap the picture to explore the flow: levels, scale, every line and its figures.
Key insights · Q2 FY2027
  1. 01

    A one-time tax benefit supplied 48% of net income

    A $305M tax benefit from moving intellectual property inside the group lifted net income to $632M, while pre-tax income rose only 7.6%.

    Why it matters

    Pre-tax income was $327M, against $304M a year earlier. The tax line then added $305M instead of taking money away, against a $76M tax charge a year earlier. The filing attributes the benefit to an intra-entity transfer of certain intellectual property rights as part of an internal legal entity restructuring. Net income of $632M was larger than pre-tax income of $327M, and the benefit alone equals 48.3% of net income.1

    That one item explains most of the headline jump. Net income rose 177.2% and the net margin reached 23.9%, above the operating margin of 11.8%. Diluted earnings per share were $2.57 against $0.84 a year earlier.1

    The filing also says there is a reasonable possibility of releasing a significant part of the valuation allowance on deferred tax assets in one foreign jurisdiction, which would lower tax expense in the period it is recorded. Tax may therefore keep moving net income apart from the business.1

    AnalysisAnalysis: the quarter reads more clearly through operating income and pre-tax income than through net income. The benefit comes from how the group arranged ownership of its intellectual property, not from selling more software, and a net margin above the operating margin is a sign of that.

  2. 02

    Buybacks traded interest income for a smaller share count

    Other income fell to $14M from $56M after securities were sold for buybacks, and diluted shares fell to 246.3 million from 270.2 million.

    Why it matters

    Other income, net was $14M against $56M a year earlier. The filing attributes the drop to lower interest income after the liquidation of marketable debt securities to fund acquisition activities and share repurchases. Other income was 18.4% of pre-tax income a year ago and 4.3% this quarter.1

    Weighted-average diluted shares were 246.3 million against 270.2 million a year earlier, 91.2% of the year-earlier count. Basic shares were 245.2 million against 266.8 million. The filing reports that the repurchase programs in effect were fully used by the end of July and that the board authorized a new program in August.1

    Operating income rose 26.2% but pre-tax income only 7.6%, because the lost interest absorbed much of the operating gain before tax. The diluted share count fell at the same time, which lifts every per-share figure.1

    AnalysisAnalysis: this is the trade a buyback makes. Interest the cash would have earned is given up, and each remaining share claims a larger slice of operating profit. Per-share results now reflect capital decisions as well as the business, so operating income is the cleaner read on the software itself.

  3. 03

    Free cash flow runs far ahead of operating profit

    Last fiscal year free cash flow was $2.78B against operating income of $721M, so operating profit alone undercounts the cash the business produced.

    Why it matters

    In the fiscal year to January 2026, operating cash flow was $2.94B, capital spending $162M and free cash flow $2.78B, against operating income of $721M. Capital spending took 5.5% of operating cash flow. The filing says subscription contracts typically run three years or longer and are generally invoiced annually in advance.1

    Cash arrives unevenly. Free cash flow in the fourth quarter of that year was $1.22B, 43.9% of the full year's $2.78B; the filing says the company signs a significantly higher share of new and renewal agreements in the fourth quarter.1

    A single quarter shows a smaller gap. Free cash flow was $460M against operating income of $313M, or 147%, and a 17.4% margin on revenue. It was below the $588M of a year earlier, as operating cash flow fell to $519M from $616M and capital spending rose to $59M from $28M.1

    AnalysisAnalysis: two things sit between the lines. Customers prepay, so cash comes in before revenue is recognized. Share-based compensation, a large non-cash cost the filing records in every expense line, reduces operating income without using cash. That second part is paid in shares instead, which is part of why buybacks matter for per-share results.

  4. 04

    Margin gains came from selling and admin, not product

    Operating income rose 26.2% on 12.8% revenue growth as sales, marketing and administration shrank as a share of revenue, while product development held at 28.2%.

    Why it matters

    Sales and marketing was $706M, 26.7% of revenue, against $641M and 27.3% a year earlier. General and administrative was $231M, 8.7% of revenue, against $216M and 9.2%. Product development was $747M, 28.2% of revenue, against $660M and 28.1%. Operating margin rose to 11.8% from 10.6%.1

    The filing credits "revenue growth outpacing headcount growth and moderation of operating expenses." Headcount rose to 20,896 from 19,517 while revenue grew 12.8%. Restructuring cost nothing this quarter against $1M a year earlier, so the gain is not a charge rolling off.1

    One cost line went the other way. Costs of subscription services, mainly hosting and support, rose to $436M from $370M, while subscription revenue grew 13.9%. They took 17.6% of subscription revenue this quarter.1

    AnalysisAnalysis: the company kept spending on the product at the same rate while getting more from each sales and administrative dollar. That grounds the gain in scale rather than in cutting development, but it leaves further margin dependent on delivery costs, which the filing expects to keep rising in absolute dollars.

Sources

  1. 1.Workday 10-Q for the period to 2026-07-31 (the filing), Aug 27, 2026, read Nov 2, 2026

Have a question about Workday? Ask CXProWealth on ChatGPT.Free membership required.

Business performance

Growth, profit and margin

Revenue went from $68.1M in FY2011 to $9.6B in FY2026, the operating margin from -82.4% to 7.5%, over 15 years.

  • Revenue$9.6B
  • Operating income$721.0M
  • Operating margin7.5%
Period
Q2 FY2027
Revenue
$2.6B
Operating income
$313.0M
Operating margin
11.8%
Net income
$632.0M
Free cash flow
$460.0M
Business performance

Does the profit turn into cash?

Q2 FY2027: free cash flow of $460.0M against net income of $632.0M in the quarter.

  • Operating cash flow$2.9B
  • Capital expenditure$162.0M
  • Free cash flow$2.8B
  • Net income$693.0M

Capital expenditure is drawn below the axis as cash out. Cash conversion is operating cash flow over net income, shown in the tooltip for years with a profit.

Financial data and sources

How the revenue mix has shifted

Each breakdown the filing reports, as shares of revenue, for every period it restates.

Revenue streams

Condensed Consolidated Statements of Operations. The filing restates this breakdown for 1 period.

Click a member to isolate it across the years shown.

The figures

Margins, cash and growth for the period, each with what it was computed from.

Gross margin
Not reported
the company reports expenses by nature: no cost of revenue or gross profit line exists
Operating margin
11.8%
Source10-Q, Derived from Operating income and Total revenues in the 10-Q filed 2026-08-27
Net margin
23.9%
Source10-Q, Derived from Net income and Total revenues in the 10-Q filed 2026-08-27
Free cash flow, quarter
$460.0M
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-27
Free cash flow margin, quarter
17.4%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-27
Cash conversion, quarter
0.82x
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-27
Capital spending, quarter
2.2%
Source10-Q, Derived from the prior period in the history in the 10-Q filed 2026-08-27
Revenue growth
+12.8%
From the record's own history, against the prior year.

Not reported, or not derivable

  • gross margin: the company reports expenses by nature: no cost of revenue or gross profit line exists

Where revenue comes from

Every breakdown the filing reports for the period, with each item's share.

Revenue streams

Subscription services$2.5B93.3%
Professional services$178.0M6.7%

Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-08-27

What it costs

The cost lines beneath operating income, each as a share of revenue, then the operating result.

Costs are reported by nature: what they are (food, labor, occupancy, personnel, marketing), not what they were for, so there is no cost-of-revenue line and no gross profit.

Cost lineQ2 FY2027Of revenueSource
Total costs and expenses$2.3B88.2%Source10-Q, us-gaap:OperatingExpenses, as reported in the 10-Q filed 2026-08-27
Operating income$313.0M11.8%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-08-27

Operating figures the company states

From the text of the filing rather than its statements, each with the sentence that states it.

12-month subscription revenue backlog
$9.0B
As of Jul 31, 2026
View source
As of July 31, 2026, our total subscription revenue backlog was $27.4 billion, and 12-month subscription revenue backlog was $9.0 billion.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Aug 27, 2026
Customers
11,500 customers
As of Jul 31, 2026
View source
As a result of our innovation and commitment to customer success, today we are a Fortune 500 company with more than 11,500 customers around the world.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Aug 27, 2026
Gross revenue retention rate
97.0%
As of Jul 31, 2026
View source
Our growth in subscription services revenues attributable to existing customers is further reflected by our gross revenue retention rate of approximately 97% as of July 31, 2026.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Aug 27, 2026
Headcount
20,896 employees
As of Jul 31, 2026
View source
Headcount 20,896 19,517 7 %
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Aug 27, 2026
Share of subscription revenue growth from existing customers
60.0%
As of Jul 31, 2026
View source
Approximately 60% of the increase in subscription services revenues was attributable to expansion within our customers that existed as of the beginning of the comparable prior year period, and the remaining 40% was attributable to customers added after the beginning of the comparable prior year period.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Aug 27, 2026
Share of subscription revenue growth from new customers
40.0%
As of Jul 31, 2026
View source
Approximately 60% of the increase in subscription services revenues was attributable to expansion within our customers that existed as of the beginning of the comparable prior year period, and the remaining 40% was attributable to customers added after the beginning of the comparable prior year period.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Aug 27, 2026
Total subscription revenue backlog
$27.4B
As of Jul 31, 2026
View source
As of July 31, 2026, our total subscription revenue backlog was $27.4 billion, and 12-month subscription revenue backlog was $9.0 billion.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, 10-Q filed Aug 27, 2026

The statements, as filed

The income statement, cash flow statement and balance sheet in the company's own order and words. Every line links to the filing.

Income statement19 lines, as presented in the 10-Q
LineQ2 FY2027A year earlierChangeOf revenueSource
Revenues:
Total revenues$2.65B$2.35B+13%100%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax, as reported in the 10-Q filed 2026-08-27
Subscription services$2.47B$2.17B+14%93.3%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax [wday:SubscriptionServicesMember], as reported in the 10-Q filed 2026-08-27
Professional services$178.0M$179.0M-0.6%6.7%Source10-Q, us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax [wday:ProfessionalServicesMember], as reported in the 10-Q filed 2026-08-27
Costs and expenses:
Subscription services$436.0M$370.0M+18%16.5%Source10-Q, us-gaap:CostOfGoodsAndServicesSold [wday:SubscriptionServicesMember], as reported in the 10-Q filed 2026-08-27
Professional services$216.0M$212.0M+1.9%8.2%Source10-Q, us-gaap:CostOfGoodsAndServicesSold [wday:ProfessionalServicesMember], as reported in the 10-Q filed 2026-08-27
Product development$747.0M$660.0M+13%28.2%Source10-Q, us-gaap:ResearchAndDevelopmentExpense, as reported in the 10-Q filed 2026-08-27
Sales and marketing$706.0M$641.0M+10%26.7%Source10-Q, us-gaap:SellingAndMarketingExpense, as reported in the 10-Q filed 2026-08-27
General and administrative$231.0M$216.0M+6.9%8.7%Source10-Q, us-gaap:GeneralAndAdministrativeExpense, as reported in the 10-Q filed 2026-08-27
Restructuring$0$1.0M0.0%Source10-Q, us-gaap:RestructuringCharges, as reported in the 10-Q filed 2026-08-27
Total costs and expenses$2.34B$2.10B+11%88.2%Source10-Q, us-gaap:OperatingExpenses, as reported in the 10-Q filed 2026-08-27
Income Statement
Operating income$313.0M$248.0M+26%11.8%Source10-Q, us-gaap:OperatingIncomeLoss, as reported in the 10-Q filed 2026-08-27
Other income, net$14.0M$56.0M-75%0.5%Source10-Q, us-gaap:NonoperatingIncomeExpense, as reported in the 10-Q filed 2026-08-27
Income before provision for (benefit from) income taxes$327.0M$304.0M+7.6%12.3%Source10-Q, us-gaap:IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest, as reported in the 10-Q filed 2026-08-27
Provision for (benefit from) income taxes-$305.0M$76.0M11.5%Source10-Q, us-gaap:IncomeTaxExpenseBenefit, as reported in the 10-Q filed 2026-08-27
Net income$632.0M$228.0M+177%23.9%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-08-27
Net income per share, basic (in dollars per share)$3$1+200%0.0%Source10-Q, us-gaap:EarningsPerShareBasic, as reported in the 10-Q filed 2026-08-27
Net income per share, diluted (in dollars per share)$3$1+206%0.0%Source10-Q, us-gaap:EarningsPerShareDiluted, as reported in the 10-Q filed 2026-08-27
Weighted-average shares used to compute net income per share, basic (in shares)245,181,000266,777,000-8.1%Source10-Q, us-gaap:WeightedAverageNumberOfSharesOutstandingBasic, as reported in the 10-Q filed 2026-08-27
Weighted-average shares used to compute net income per share, diluted (in shares)246,307,000270,180,000-8.8%Source10-Q, us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding, as reported in the 10-Q filed 2026-08-27
Cash flow statement6 lines, as presented in the 10-Q

Year to date, as a quarterly filing reports it.

LineQ2 FY2027A year earlierChangeSource
Cash flows from operating activities:
Net income$632.0M$228.0M+177%Source10-Q, us-gaap:NetIncomeLoss, as reported in the 10-Q filed 2026-08-27
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred costs$83.0M$72.0M+15%Source10-Q, us-gaap:CapitalizedContractCostAmortization, as reported in the 10-Q filed 2026-08-27
Statement of Cash Flows
Cash, cash equivalents, and restricted cash at the end of period$668.0M$1.27B-47%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-08-27
Reconciliation of cash, cash equivalents, and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows:
Cash and cash equivalents$661.0M$1.26B-48%Source10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-08-27
Restricted cash included in Prepaid expenses and other current assets$7.0M$5.0M+40%Source10-Q, us-gaap:RestrictedCash, as reported in the 10-Q filed 2026-08-27
Total cash, cash equivalents, and restricted cash$668.0M$1.27B-47%Source10-Q, us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents, as reported in the 10-Q filed 2026-08-27
Balance sheet33 lines, as presented in the 10-Q
LineQ2 FY2027A year earlierChangeSource
Current assets:
Cash and cash equivalents$661.0M$1.26B-48%Source10-Q, us-gaap:CashAndCashEquivalentsAtCarryingValue, as reported in the 10-Q filed 2026-08-27
Marketable securities$2.74BSource10-Q, us-gaap:MarketableSecuritiesCurrent, as reported in the 10-Q filed 2026-08-27
Trade and other receivables, net$1.90BSource10-Q, us-gaap:AccountsReceivableNetCurrent, as reported in the 10-Q filed 2026-08-27
Deferred costs$320.0MSource10-Q, us-gaap:DeferredCostsCurrent, as reported in the 10-Q filed 2026-08-27
Prepaid expenses and other current assets$351.0MSource10-Q, us-gaap:PrepaidExpenseAndOtherAssetsCurrent, as reported in the 10-Q filed 2026-08-27
Total current assets$5.97BSource10-Q, us-gaap:AssetsCurrent, as reported in the 10-Q filed 2026-08-27
Assets
Property and equipment, net$1.13BSource10-Q, us-gaap:PropertyPlantAndEquipmentNet, as reported in the 10-Q filed 2026-08-27
Operating lease right-of-use assets$680.0MSource10-Q, us-gaap:OperatingLeaseRightOfUseAsset, as reported in the 10-Q filed 2026-08-27
Deferred costs, noncurrent$654.0MSource10-Q, us-gaap:DeferredCosts, as reported in the 10-Q filed 2026-08-27
Acquisition-related intangible assets, net$611.0MSource10-Q, wday:FiniteLivedIntangibleAssetsNetAcquisitionRelatedIntangibles, as reported in the 10-Q filed 2026-08-27
Deferred tax assets$1.13BSource10-Q, us-gaap:DeferredIncomeTaxAssetsNet, as reported in the 10-Q filed 2026-08-27
Goodwill$5.23BSource10-Q, us-gaap:Goodwill, as reported in the 10-Q filed 2026-08-27
Other assets$461.0MSource10-Q, us-gaap:OtherAssetsNoncurrent, as reported in the 10-Q filed 2026-08-27
Total assets$15.86BSource10-Q, us-gaap:Assets, as reported in the 10-Q filed 2026-08-27
Current liabilities:
Accounts payable$102.0MSource10-Q, us-gaap:AccountsPayableCurrent, as reported in the 10-Q filed 2026-08-27
Accrued expenses and other current liabilities$462.0MSource10-Q, us-gaap:AccruedLiabilitiesCurrent, as reported in the 10-Q filed 2026-08-27
Accrued compensation$493.0MSource10-Q, us-gaap:EmployeeRelatedLiabilitiesCurrent, as reported in the 10-Q filed 2026-08-27
Unearned revenue$4.39BSource10-Q, us-gaap:ContractWithCustomerLiabilityCurrent, as reported in the 10-Q filed 2026-08-27
Operating lease liabilities$130.0MSource10-Q, us-gaap:OperatingLeaseLiabilityCurrent, as reported in the 10-Q filed 2026-08-27
Debt, current$999.0MSource10-Q, us-gaap:LongTermDebtCurrent, as reported in the 10-Q filed 2026-08-27
Total current liabilities$6.57BSource10-Q, us-gaap:LiabilitiesCurrent, as reported in the 10-Q filed 2026-08-27
Liabilities and stockholders’ equity
Debt, noncurrent$1.99BSource10-Q, us-gaap:LongTermDebtNoncurrent, as reported in the 10-Q filed 2026-08-27
Unearned revenue, noncurrent$72.0MSource10-Q, us-gaap:ContractWithCustomerLiabilityNoncurrent, as reported in the 10-Q filed 2026-08-27
Operating lease liabilities, noncurrent$653.0MSource10-Q, us-gaap:OperatingLeaseLiabilityNoncurrent, as reported in the 10-Q filed 2026-08-27
Other liabilities$109.0MSource10-Q, us-gaap:OtherLiabilitiesNoncurrent, as reported in the 10-Q filed 2026-08-27
Total liabilities$9.40BSource10-Q, us-gaap:Liabilities, as reported in the 10-Q filed 2026-08-27
Stockholders’ equity:
Common stock$0Source10-Q, us-gaap:CommonStockValueOutstanding, as reported in the 10-Q filed 2026-08-27
Additional paid-in capital$13.37BSource10-Q, us-gaap:AdditionalPaidInCapital, as reported in the 10-Q filed 2026-08-27
Treasury stock (shown as a deduction)($7.15B)Source10-Q, us-gaap:TreasuryStockCommonValue, as reported in the 10-Q filed 2026-08-27
Accumulated other comprehensive loss-$96.0MSource10-Q, us-gaap:AccumulatedOtherComprehensiveIncomeLossNetOfTax, as reported in the 10-Q filed 2026-08-27
Retained earnings (accumulated deficit)$342.0MSource10-Q, us-gaap:RetainedEarningsAccumulatedDeficit, as reported in the 10-Q filed 2026-08-27
Total stockholders’ equity$6.46B$9.17B-30%Source10-Q, us-gaap:StockholdersEquity, as reported in the 10-Q filed 2026-08-27
Liabilities and stockholders’ equity
Total liabilities and stockholders’ equity$15.86BSource10-Q, us-gaap:LiabilitiesAndStockholdersEquity, as reported in the 10-Q filed 2026-08-27

About this data

Source
Workday 10-Q, accession 0001327811-26-000044, filed Aug 27, 2026, read on Nov 2, 2026.
History
From the SEC's XBRL company facts, the value from the latest filing that stated each period.
Reading
Paragraphs marked Analysis are CXProWealth's reading; everything else is the filing's own numbers and words, or a cited source.
Version
methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02
Edge and risks

What holds Workday's model up, and what could bend it

Competitive edge

  • Next year's subscription revenue is largely signed already

    The $9.0B of backlog due within twelve months equals 94.2% of last fiscal year's $9.55B total revenue, and it grew faster than total backlog.

    The detail

    Subscription revenue backlog was $27.4B at the end of July, against $25.4B a year earlier. The portion due within twelve months was $9.0B against $7.9B. Contracts typically run three years or longer and are generally noncancelable.1

    AnalysisAnalysis: with most of the coming year contracted before it begins, a weak selling quarter reaches revenue slowly, and the filing names that delay as a feature of its model. The comparison sets subscription backlog against total revenue, which includes professional services, so it slightly understates coverage of subscription revenue alone.

  • Existing customers supply most growth and rarely leave

    About 60% of subscription revenue growth came from customers already on board a year earlier, with gross revenue retention near 97%.

    The detail

    The filing attributes about 60% of the rise in subscription revenue to expansion within customers that existed at the start of the prior-year period and 40% to customers added since. Gross revenue retention was about 97% at the end of July; it counts revenue kept and excludes upsell. The company counts more than 11,500 customers.1

    AnalysisAnalysis: systems that run payroll, people records and the general ledger are hard to replace. The filing notes that financial management contracts have long lifecycles, so a customer lost to a rival is out of reach for years. The same stickiness works in Workday's favour once it is installed, and lets it sell more applications into accounts that already rely on its data.

  • Partners do most deployments, keeping services small

    Professional services were 6.7% of revenue and cost 121% of what they brought in, as third-party firms handle most implementation work.

    The detail

    Professional services revenue was $178M against costs of professional services of $216M. Services slipped 0.6% while subscriptions grew 13.9%, moving 0.9 points of the mix toward subscriptions, now 93.3% of revenue. The filing says third parties provide a majority of deployment services and expects partners to increasingly contract directly with customers for services.1

    AnalysisAnalysis: the loss on Workday's own services buys a channel of consulting firms that recommend, install and support the software without being on its payroll. The filing names the other side of that dependence: if partners fall short or favour competitors, selling and deploying the software may suffer.

What to watch

  • Pricing per worker ties revenue to customer headcount

    Subscription revenue depends on the number of workers at each customer, and the filing already reports slower growth in headcount commitments at renewal.

    The detail

    The filing lists the drivers of subscription revenue as the number of customers, the number of workers at each customer, the applications subscribed to, and price. It reports reduced growth in headcount-level commitments upon renewals, deal scrutiny, longer sales cycles for net new business and more flexible payment terms for some customers, with the longest cycles in government, higher education and healthcare.1

    AnalysisAnalysis: if customers run leaner, or AI agents take on work employees did, the seat base under each contract stops growing even while retention stays high. The flexible pricing the company now offers for AI and platform features would have to make up what seats no longer add.

  • Delivery costs are rising faster than subscription revenue

    Costs of subscription services rose to $436M from $370M while subscription revenue grew 13.9%, led by third-party hosted infrastructure.

    The detail

    Costs of subscription services took 17.6% of subscription revenue this quarter. The filing names third-party hosted infrastructure as the largest part of their increase and expects these costs to keep rising in absolute dollars as it expands technical operations. It also says success under its flexible AI pricing depends on its costs to deliver.1

    AnalysisAnalysis: running AI features on rented compute is a cost that grows with usage. If usage grows inside fixed-price subscriptions, delivery costs could take back part of the margin gained from selling and administration, so the test is whether AI pricing covers the compute it consumes.

  • General-purpose AI joins Oracle and SAP as competition

    The filing now names generic language models, general-purpose agents and software built from prompts as rivals, alongside primary competitors Oracle and SAP.

    The detail

    The filing names Oracle and SAP as primary competitors, plus vendors including ADP, Dayforce, UKG, ServiceNow and Microsoft. It adds non-specialist solutions built on generic large language models, general-purpose agents and software created from natural-language prompts. It says the markets and monetization for its agentic AI and Workday Data Cloud remain new and uncertain, and it is defending a lawsuit alleging some AI products enable discrimination.1

    AnalysisAnalysis: this pressure does not yet show in the numbers, with retention near 97% and existing customers behind 60% of subscription growth. It would show first in new-customer wins and renewal terms, the places where the filing already describes slower decisions.

Sources

  1. 1.Workday 10-Q for the period to 2026-07-31 (the filing), Aug 27, 2026, read Nov 2, 2026
Go deeper

Workday, further in

Member research, then your own questions on ChatGPT.

What could change the outlook

What Workday's numbers depend on from here, read from the filing: the conditions behind this period's margins and growth, and where a change would show first.

  • What the subscription engine depends on from here

    How seats, AI pricing and delivery costs pull on each other, and which disclosed figures would show first whether the margin gains can hold as AI usage grows.

  • Buybacks, tax and what earnings per share now measure

    How a tax benefit, lost interest income and a shrinking share count separate per-share results from the business, and where to read the operating story instead.

Loading…

CXProWealth on ChatGPT

Have a question about Workday?

Explore its profit drivers, competitive edge, risks, or your own investment and business questions with CXProWealth on ChatGPT.

Ask CXProWealth on ChatGPTFree CXProWealth membership required. Learn more
Questions to start with
  • How much of Workday's $632M quarterly net income came from the $305M tax benefit, and what drove that benefit?
  • If Workday's customers cut headcount, how would its per-worker pricing affect subscription revenue growth?
  • Why did Workday's free cash flow of $2.78B last fiscal year run so far ahead of its $721M operating income?

Business Lens describes Workday from its own filings with the SEC. It is not a view on its shares, a target, or advice to buy, sell or hold anything; figures are as filed and may be restated by the company later. The filing, the dates and the version are under the financial data above.