Workday, Inc.

WDAY · NASDAQ · USD

Analysis

Last 4 earnings calls · through Q2 FY2027

Aneel Bhusri's return has turned Workday into an AI company: agents sell, adoption compounds and pricing shifts to usage. The risk is timing, because the AI money arrives months behind the core slowdown. How much of the AI ARR is customers actually paying for today?

  • AI went from a demo to a real revenue line.

    AI products now make up over a quarter of all the new business Workday signs, and customers running a Workday-built agent rose by a third in three months. Bhusri's phrase is 'lawful' agents: they act inside the rules a company runs on. Which agents are driving most of that AI revenue today?

  • The core is slowing faster than AI can fill the gap.

    Workday guides this year's subscription growth to about 13%, and next year's early target steps down to roughly 11%. Total backlog grew at its slowest rate yet, with renewals making up more of the business than new customers did.

  • Workday is moving from charging per seat to charging per use.

    Bhusri calls the move to Flex Credits 'a material change': every AI action is priced as it is used, including agents built elsewhere. That bills as the work happens, so the money trails the deals by months while the cost lands now. How much AI usage is billed through Flex Credits rather than subscriptions?

Bullish
  • Agentic AI on installed base
    The bull case is that agentic AI sold into an existing base of large enterprises creates a new revenue stream on top of a stable core business.
  • Mission-critical core retention
    Workday runs payroll and the books for large organizations, so customers renew at high rates and expansion within the base supplies most of the growth.
  • Margin expansion while investing
    Management has raised its margin outlook twice while still funding AI investment, suggesting efficiency gains are absorbing the added spending.
Bearish
  • Subscription growth decelerating
    The bear case is that the core subscription business is slowing, and management's own targets point to lower growth next year before AI revenue becomes material.
  • AI monetization lags adoption
    Agent usage is spreading much faster than the consumption pricing that turns it into revenue, so the financial benefit arrives well after the adoption numbers.
  • Large deals closing later
    Large enterprise, federal and healthcare deals are taking longer to close, which holds back new business even where customer interest remains intact.
See the full bull & bear case
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Donald Trump
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Purchase≥$500KJul 20Sep 22
Donald Trump
Republican · Executive
Sale≥$1KJul 17Sep 22
Donald Trump
Republican · Executive
Sale≥$1KJul 8Sep 22
Donald Trump
Republican · Executive
Sale≥$50KJun 24Aug 22
Donald Trump
Republican · Executive
Sale≥$1KJun 23Aug 22

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Product segmentsGeography
FY2026 · USD

How Workday turned $9.6B of revenue into $721.0M of operating income.

Revenue
Subscription Services$8.8B▲ 14.45% YoY
Professional Services$719.0M▼ 1.24% YoY
Total revenue$9.6B
Gross profit$7.2B75.7%
Operating income$721.0M7.5%
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