Workday (NASDAQ:WDAY) executives used the company’s fiscal 2026 fourth-quarter earnings call to outline what CEO Aneel Bhusri described as “chapter four” for the company: a renewed emphasis on innovation centered on agentic AI, while maintaining what management characterized as a stable and “rock solid” core business in HR and finance.
Bhusri, who said he is “excited to be back,” framed the opportunity as combining deterministic enterprise systems of record with probabilistic AI. He argued HR and ERP systems are difficult to replace given the need for accuracy, security, and regulatory compliance, but said AI can materially reshape user experiences, business process automation, and insight generation when embedded into governed workflows.
AI product momentum and agent rollout
Kazmaier provided several metrics on AI usage and commercialization:
- Workday delivered 1.7 billion “AI actions” in full-year FY26, which he said reflects organically developed AI results produced across the platform.
- In Q4, Workday generated over $100 million in new ACV from emerging AI products, which he said was up more than 100% year-over-year.
- Overall ARR from these emerging AI solutions reached over $400 million.
He also said Workday has 12 new organically developed, role-based agents moving toward general availability, with more than 400 customers already using them. As an example of early ROI, he said customers using Workday’s self-service agent reduced HR case volume by 25% and increased employee productivity by 20%.
Kazmaier highlighted the general availability of Sana Core and Sana Enterprise. Sana Core brings conversational AI into Workday, while Sana Enterprise extends the experience to other tools (he cited Outlook and Google Drive). He said the company executed the integration and GA launch in about three months, and also described internal productivity gains from AI-assisted software development, including accelerated API development and broad usage of coding assistants among engineers.
Customer expansion, Flex Credits, and go-to-market changes
Chief Commercial Officer Rob Enslin said Workday’s customer base exceeded 11,500 global customers and that expansions remain the company’s largest growth engine. He pointed to Q4 expansions with Anthropic, Ally Financial, and Otis Elevator, and said AI was involved in roughly half of the company’s customer base transactions during the quarter. Enslin added that expansion deals that included AI were nearly 50% larger on average.
Enslin also discussed Workday’s Flex Credits pricing model, which he said better aligns spend with value and supports a shift toward consumption-based monetization. He noted Accenture, Nike, and Merck among early adopters, with “nearly 50 customers” signed up. Management repeatedly characterized Flex Credits and agent monetization as a second-half fiscal 2027 motion, with revenue recognized ratably thereafter.
On sales execution, Enslin said some net new large enterprise deals took longer to close in Q4—particularly in Fed, SLED, and Healthcare and in parts of the commercial market—affecting the number of deals closed, though he said most remained active in the pipeline and some closed in Q1. He also said medium enterprise customers drove roughly 60% of net new ACV in FY26. In response to a question about leadership changes, Enslin said regional sales leaders would report directly to him, describing a flatter structure designed to move faster, and referenced forward-deployed engineers to help customers activate agents more quickly.
Q4 financial results and cash flow
CFO Zane Rowe reported Q4 subscription revenue of $2.360 billion, up 16%, and full-year subscription revenue of $8.833 billion, up 14%. He said Q4 subscription growth benefited from successful delivery of a DIA contract, which added “nearly a point” to Q4 subscription revenue growth.
Total revenue was $2.532 billion in Q4, up 15%, and $9.552 billion for the full year, up 13%. Rowe also reported:
- 12-month subscription backlog (CRPO) of $8.83 billion, up 15.8% at quarter end
- Total subscription backlog of $28.1 billion, up 12%
- Gross revenue retention of 97%
Non-GAAP operating income was $774 million in Q4, representing a 30.6% non-GAAP operating margin. Full-year non-GAAP operating income was $2.82 billion, for a 29.6% margin. Operating cash flow was $1.28 billion in Q4 and $2.94 billion for the year, with free cash flow of $1.22 billion for Q4 and $2.78 billion for FY26.
Workday repurchased $1.5 billion of shares in Q4 and $2.9 billion in FY26, and ended the year with $5.4 billion in cash and marketable securities. Headcount was 21,070 as of January 31.
FY27 outlook: investment-first posture for agentic AI
For fiscal 2027, Rowe guided to subscription revenue of approximately $9.925 billion to $9.950 billion, representing 12% to 13% growth, with Q1 subscription revenue expected to be approximately $2.335 billion (about 13% growth). He noted the DIA contract’s benefit in Q4 is not expected to repeat in Q1 and also cited typical Q1 seasonality from fewer days. The company expects CRPO growth of 14.5% to 15.5% in Q1 and subscription revenue to increase roughly 5% sequentially in Q2.
Workday guided to FY27 non-GAAP operating margin of approximately 30% (Q1: 30.5%), saying the outlook includes an “accelerated pace of AI investment across both product and go-to-market.” Rowe said the company remains focused on GAAP and non-GAAP margin expansion, but at a slower pace in the near term than previously communicated, as it prioritizes incremental investment to pursue a “generational opportunity” in AI.
On longer-term targets, Rowe said the company is holding to its previously discussed 12% to 15% medium-term subscription revenue growth range, but expects AI initiatives to move results higher within that range than they otherwise would have been. He added the company plans to provide an update at its next analyst event, including implications for operating margin.
Organic focus, selective M&A, and monetizing third-party agents
In Q&A, Bhusri said Workday is leaning “pretty heavily on organic development,” while remaining opportunistic on acquisitions similar to recent deals such as Sana, Paradox, and HiredScore. Rowe added that inorganic contributions are not expected to be a material component of the FY27 outlook.
Management also discussed monetizing third-party usage via consumption. Bhusri said Workday intends to charge for consumption when third-party tools run “off of Workday,” and Kazmaier described a tiered model based on API calls, Data Cloud usage for richer context, and premium “agent APIs” that complete meaningful work—each tied to Flex Credits.
Executives repeatedly returned to the view that the company’s systems of record, security model, and business process framework position Workday to embed AI directly into governed HR and finance workflows, and that broader adoption of organically developed agents—alongside consumption-based pricing—could shape the company’s growth profile as fiscal 2027 progresses.
About Workday (NASDAQ:WDAY)
Workday, Inc (NASDAQ: WDAY) is a provider of cloud-based enterprise applications focused on human capital management (HCM) and financial management. Founded in 2005 by Dave Duffield and Aneel Bhusri following their tenure at PeopleSoft, the company develops software-as-a-service solutions that help organizations manage workforce and financial processes in a unified, cloud-native environment. Workday’s platform emphasizes continuous updates, data security, and a configurable architecture aimed at large and mid-sized enterprises.
The company’s product portfolio centers on Workday Human Capital Management and Workday Financial Management, with additional offerings for payroll, talent management, workforce planning and analytics.
