Workday (WDAY) Q2 FY2027 Earnings Call: AI ARR Nears $600 Million
Source Tradingkey
Key Takeaways
- Workday reported fiscal Q2 2027 revenue of $2.649 billion, up 13%, including subscription revenue of $2.471 billion, up 14%.
- AI products generated more than $100 million in new ACV and represented over 25% of total new ACV. AI SKU ARR approached $600 million, rising more than 200% year over year and over 20% sequentially.
- More than 5,500 customers were using at least one organic Workday agent, up more than 35% from the prior quarter. Over half of net-new customer wins included one or more AI solutions.
- Current remaining performance obligations, or cRPO, reached $9.03 billion, up 14.2%. Total subscription revenue backlog increased 8% to $27.4 billion.
- Non-GAAP operating margin was 31.1%. Workday raised its fiscal 2027 non-GAAP operating margin guidance to 31% while maintaining its operating cash flow outlook of $3.45 billion.
- Management expects fiscal 2027 subscription revenue of $9.94 billion to $9.95 billion, representing 13% growth. It also expects non-GAAP operating margin to expand by at least 2 percentage points in fiscal 2028.
Core Financial Results
| Metric | Fiscal Q2 2027 result | Change or context |
|---|---|---|
| Subscription revenue | $2.471 billion | Up 14% year over year |
| Professional services revenue | $178 million | — |
| Total revenue | $2.649 billion | Up 13% year over year |
| U.S. revenue | $1.97 billion | Up 12% year over year |
| International revenue | $682 million | Up 17% year over year |
| cRPO | $9.03 billion | Up 14.2% year over year |
| Total subscription revenue backlog | $27.4 billion | Up 8% year over year |
| Gross revenue retention | 97% | Existing customers contributed about 60% of subscription revenue growth |
| Non-GAAP operating income | $824 million | 31.1% non-GAAP operating margin |
| Operating cash flow | $520 million | Year-over-year decline reflected an additional payroll run in the quarter |
| Free cash flow | $460 million | Affected by payroll calendar timing |
| Cash and marketable securities | $3.4 billion | At quarter-end |
Disclaimer: For information purposes only. Past performance is not indicative of future results.
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