Workday Earnings Rise, Forecast Clouds Outlook

Workday Inc. (WDAY) reported strong fiscal 2026 revenue growth on Feb. 24, 2026, but cautious fiscal 2027 revenue guidance, citing economic uncertainty and a focus on agentic AI investments, tempered the near-term outlook.

Quarter and Full-Year Results

For the quarter ended Jan. 31, 2026, Workday said total revenue reached $2.5 billion, up 14.5% year over year, with subscription revenue rising 15.7% to $2.4 billion. GAAP operating income was $174 million, a 6.9% margin, while non-GAAP operating income was $774 million, or 30.6%. Diluted net income per share was $0.55 on a GAAP basis and $2.47 non-GAAP.

Fiscal 2026 total revenue rose 13.1% to $9.6 billion, with subscription revenue up 14.5% to $8.8 billion. The 12-month subscription revenue backlog (contractual remaining performance obligations, or cRPO) increased 15.8% to $8.8 billion. Total subscription revenue backlog was $28.1 billion, up 12.2%, reflecting the Paradox and Sana acquisitions completed during the year. Gross revenue retention stood at 97%.

For the full year, GAAP operating income was $721 million, a 7.5% margin that included a $303 million restructuring charge. Non-GAAP operating income was $2.8 billion, or 29.6%. Diluted net income per share was $2.59 GAAP and $9.23 non-GAAP.

Guidance and Capital Allocation

Workday forecast fiscal 2027 subscription revenue of about $9.9 billion to $10.0 billion, representing 12% to 13% growth, and total revenue of roughly $10.6 billion to $10.7 billion, or 11% to 12% growth. First-quarter subscription revenue is expected near $2.3 billion (13% growth) and total revenue about $2.5 billion (12% growth). The company anticipates a non-GAAP operating margin of approximately 30% for the year.

In fiscal 2026, operating cash flow rose 19.4% to $2.9 billion, and free cash flow increased 26.7% to $2.8 billion. As of Jan. 31, 2026, Workday held $5.4 billion in cash, cash equivalents, and marketable securities. It repurchased 12.8 million Class A shares for $2.9 billion during the year.

For fiscal 2027, the company expects operating cash flow near $3.5 billion (about 17% growth), plans $270 million in capital expenditures, and forecasts free cash flow around $3.2 billion (about 15% growth). It assumes a non-GAAP tax rate of 19%.

Management said it will prioritize investment in agentic AI, a form of artificial intelligence capable of autonomous decision-making, to capture a larger market opportunity. The company also noted that first-quarter sequencing is affected by delivery of a DIA contract in the fourth quarter. CFO Zane Rowe said, "We are prioritizing investment in our agentic AI roadmap to capture a larger market opportunity."