Workday Inc. reported fiscal second-quarter results that exceeded analyst expectations, with revenue rising 14% year-over-year to $2.65 billion and non-GAAP earnings per share of $2.75, ahead of the $2.61 estimate. The company’s stock advanced 5.1% in after-hours trading following the release.
AI-driven products contributed approximately $600 million in annual recurring revenue, more than doubling from the prior year. New AI-related annual contract value surpassed $100 million in the quarter, accounting for over a quarter of all new deals closed. Customer adoption of AI agents reached 5,500 clients, a 35% sequential increase, while AI-infused deals averaged 50% larger in value than non-AI agreements. The base subscription business grew 14% YoY, supported by a 31.1% non-GAAP operating margin that topped the 30% consensus.
Workday maintained a flat headcount of 20,896 employees and generated $460 million in free cash flow, though the figure was described as temporarily reduced by payroll timing. The board completed a $5 billion share buyback program six months ahead of schedule and authorized an additional $4 billion open-ended repurchase plan. Forward guidance for fiscal 2028 calls for a non-GAAP operating margin of 33%, above the Street’s 32% estimate, while subscription revenue growth is projected at roughly 11%, below the 11.7% consensus.
The company’s Q3 current remaining performance obligations guidance of 11-12% fell short of the 14% expectation, contributing to a modest valuation adjustment. As of August 28, Workday’s shares traded at $203.45, valuing the company at approximately $47.8 billion. Forward price-to-earnings is estimated at 17.5x, while the enterprise value to trailing EBITDA stands at 31.6x. Analysts’ fair value estimate averages $279.12, implying 37.1% upside from current levels.
Management declined to comment on a Reuters report suggesting acquisition interest from Silver Lake, which had previously fueled a 48% rally in Workday’s shares over three months. Upcoming catalysts include the December 1, 2026 Q3 earnings release, potential resolution of acquisition speculation, and further AI monetization under the Flex Credits pricing model.
