Workday (NASDAQ:WDAY) reported first-quarter fiscal 2027 results that executives said reflected renewed momentum in new annual contract value growth, continued customer expansion and early traction for the company’s artificial intelligence products.
Chief Executive Officer Aneel Bhusri, who recently returned to the CEO role, said the company delivered “the best first quarter of new ACV growth in five years,” supported by its core human capital management and finance businesses as well as increasing adoption of AI offerings. Bhusri said Workday is reorganizing around three priorities: building and delivering the AI future, growing with customers and living its values.
“Following slower ACV growth in fiscal year 2026, we’re seeing momentum once again building in the business,” Bhusri said. He added that customers are looking to Workday first for AI solutions in HR and finance, rather than attempting to replace the platform internally or with startup-built alternatives.
Revenue Rises 13% as Subscription Growth Continues
Chief Financial Officer Zane Rowe said first-quarter subscription revenue was $2.354 billion, up 14% from the prior-year period. Professional services revenue was $188 million, bringing total revenue to $2.542 billion, an increase of 13%.
U.S. revenue totaled $1.89 billion, up 13%, while international revenue was $649 million, up 16%. Workday ended the quarter with 12-month subscription revenue backlog, or current remaining performance obligations, of $8.81 billion, up 15.5%. Total subscription revenue backlog was $27.29 billion, up 11%.
Rowe said gross revenue retention remained strong at 97%. Net customer expansion rates were consistent with the prior quarter and contributed about 60% of subscription revenue growth in the quarter.
Non-GAAP operating income was $809 million, representing a non-GAAP operating margin of 31.8%. Operating cash flow rose 52% to $696 million, while free cash flow increased 46% to $616 million. Workday repurchased $1.6 billion of its shares during the quarter and had $1.3 billion remaining under its authorization as of April 30. The company ended the period with $4.4 billion in cash and marketable securities and 20,834 employees.
AI Products Drive Bookings Momentum
President of Product and Technology Gerrit Kazmaier said Workday is building what it calls the “world model of work,” supported by more than 80 million users under contract and approximately 1.4 trillion annual transactions on its platform. He said that data and context help Workday deliver AI agents that operate within established approvals, security, policies and business processes.
Kazmaier said Workday now has 20 organically developed AI agents in general availability or early access, and the number of customers using those agents more than doubled quarter over quarter. More than 4,000 customers are using at least one organically developed agent, he said.
In the quarter, Workday’s Recruiting Agent supported 14 million hiring processes, up 44% year over year, while Contract Intelligence analyzed more than 1.1 million contracts, up 53% from the previous quarter. Kazmaier said new ACV from agentic AI products grew more than 200% year over year, and Workday is approaching $500 million in annual recurring revenue from agentic AI solutions.
Workday also highlighted several AI initiatives, including:
- Deployment Agent: Designed to reduce implementation hours and costs, with Workday targeting an estimated 30% reduction in current projects and as much as 50% in future AI-driven projects.
- Self-Service Agent: Expected to go live with the company’s first Fortune 500 customers this quarter.
- Sana for Workday: Set to be provided, along with Self-Service Agent, to HCM and finance customers on Workday’s AI terms of service as part of existing contracts.
- Sana Travel Agent: A new agent intended to combine travel planning, booking and expenses in a conversational experience.
- Sana for ITSM: A new offering aimed at automating employee onboarding, offboarding, access changes and IT service requests.
Customer Expansion Remains Key Growth Driver
President and Chief Commercial Officer Rob Enslin said Workday serves more than 11,500 customers globally. He said customer expansions again drove roughly 60% of subscription revenue growth in the quarter, citing expanded relationships with Queensland University of Technology, Rakuten Group and Bank OZK.
Net new business accounted for about 40% of subscription revenue growth. Enslin said Workday added new relationships with Harley-Davidson, Del Monte, Australian Gas Infrastructure Group, Smiths Group, Heartland Dental and AC Hotels by Marriott. In the public sector, Workday signed statewide deals with the State of Delaware and the Commonwealth of Massachusetts and began the next phase of its contract with the Defense Intelligence Agency.
Enslin said AI is influencing expansion activity. More than a quarter of new ACV from customer base expansions came from AI, and expansion deals that included AI were more than 50% larger on average, he said.
Workday also pointed to international and partner momentum. Enslin said the company expanded operations into Vietnam, launched EU-based data residency in Frankfurt and is expanding Workday GO globally. In EMEA, the company’s medium enterprise segment posted new ACV growth of more than 50% in the quarter. Partners sourced roughly 30% of net new ACV in Q1, he said.
Guidance Reiterated for Subscription Revenue, Margin Outlook Raised
Workday reiterated its fiscal 2027 subscription revenue outlook of $9.925 billion to $9.950 billion, representing growth of 12% to 13%. For the second quarter, the company expects subscription revenue of approximately $2.455 billion, up 13%, and professional services revenue of $180 million.
The company expects second-quarter CRPO growth of 13.5% to 14.5%. Workday raised its fiscal 2027 non-GAAP operating margin guidance to 30.5%, while guiding for a second-quarter non-GAAP operating margin of approximately 30%.
Rowe said the company is maintaining its fiscal 2027 operating cash flow outlook of $3.45 billion and expects capital expenditures of approximately $270 million, resulting in free cash flow of $3.180 billion, up 15%.
During the question-and-answer session, Bhusri said Workday is placing AI at the center of its strategy rather than treating it as one part of the broader product story. He said the company’s core business remains strong, but future growth will be increasingly tied to agentic applications, AI APIs and AI-driven product adoption.
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.
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