The Investor
28 Aug 2026, 10:54
Workday Falls 1.3% as Slower Growth and Cash Flow Weigh on Strong Q2
Workday (NASDAQ: WDAY) shares fell 1.3% despite reporting solid fiscal second-quarter results and raising its profitability outlook.
Revenue increased 12.8% to $2.65 billion, while subscription revenue rose 13.9% to $2.47 billion. Non-GAAP EPS climbed to $2.75 from $2.21, and non-GAAP operating margin improved to 31.1% from 29.0%.
AI adoption was a major bright spot. AI products generated more than 25% of new annual contract value, while more than 5,500 customers now use at least one Workday organic AI agent, up more than 35% from the previous quarter.
However, investors may be focusing on signs of moderating growth and weaker cash generation. Total subscription backlog grew only 8%, while free cash flow declined to $460 million from $588 million. Workday also expects Q3 subscription revenue growth of 12%, below Q2’s 13.9%.
For fiscal 2027, Workday expects subscription revenue of $9.94–$9.95 billion, representing 13% growth, while raising its non-GAAP operating margin outlook to 31%. The modest stock decline suggests strong AI momentum and improving margins were largely offset by concerns about slowing subscription growth and cash flow.
Workday (NASDAQ: WDAY) shares fell 1.3% despite reporting solid fiscal second-quarter results and raising its profitability outlook.
Revenue increased 12.8% to $2.65 billion, while subscription revenue rose 13.9% to $2.47 billion. Non-GAAP EPS climbed to $2.75 from $2.21, and non-GAAP operating margin improved to 31.1% from 29.0%.
AI adoption was a major bright spot. AI products generated more than 25% of new annual contract value, while more than 5,500 customers now use at least one Workday organic AI agent, up more than 35% from the previous quarter.
However, investors may be focusing on signs of moderating growth and weaker cash generation. Total subscription backlog grew only 8%, while free cash flow declined to $460 million from $588 million. Workday also expects Q3 subscription revenue growth of 12%, below Q2’s 13.9%.
For fiscal 2027, Workday expects subscription revenue of $9.94–$9.95 billion, representing 13% growth, while raising its non-GAAP operating margin outlook to 31%. The modest stock decline suggests strong AI momentum and improving margins were largely offset by concerns about slowing subscription growth and cash flow.
