Analyst(s): Keith Kirkpatrick
Publication Date: May 27, 2025
Workday’s Q1 FY 2026 earnings report highlighted how expanding adoption of AI agents and deeper partner engagement reinforce Workday’s strategic positioning across HR and finance workflows. The company’s balanced execution, resilient platform demand, and increased margin performance support its full-year confidence despite macroeconomic caution.
What is Covered in this Article:
- Workday’s Q1 FY 2026 financial results
- Growth in AI product adoption and customer expansion
- Increased partner contribution to net new ACV and ecosystem reach
- Momentum in the medium enterprise segment driven by WorkdayGo
- Updated guidance and margin outlook amid macroeconomic uncertainty
The News: Workday Inc. (NASDAQ: WDAY) reported its Q1 FY 2026 financial results, with total revenue of $2.24 billion, up 12.6% year on year (YoY) and in line with consensus estimates. Subscription revenue reached $2.06 billion, increasing 13.4% YoY, while professional services revenue came in at $181 million, rising 3.4% YoY. Non-GAAP operating income was $677 million (+31.5% YoY; +8.3% above consensus), with a non-GAAP operating margin of 30.2%, compared to 25.9% a year earlier. Non-GAAP diluted earnings per share (EPS) stood at $2.23, up from $1.74 last year and ahead of consensus expectations by 11.2%. The company’s 12-month subscription revenue backlog rose 15.6% YoY to $7.63 billion, while the total subscription backlog reached $24.62 billion, up 19% YoY.
“Workday delivered another solid quarter, a testament to the durability of our business and the relevance of our platform as CEOs increasingly turn to us to drive efficiency, agility, and growth,” said Carl Eschenbach, CEO of Workday. “We are delivering real ROI for our customers by helping them effectively manage their most critical assets—people and money—on one unified platform with AI at the core.”
Workday Q1 FY 2026 Delivers Strong Profitability Despite Macro Pressures
Analyst Take: Workday’s Q1 FY 2026 results highlight consistent execution across key growth areas, including AI product adoption, global customer expansion, and margin performance. The company delivered strong subscription revenue growth and exceeded profitability expectations while maintaining its full-year guidance. With more than half of new wins in focused industries adopting full-suite deployments and increasing partner contribution, Workday continues to reinforce the relevance of its platform. These trends, alongside disciplined cost control, supported the company’s ability to deliver a solid start to FY 2026.
AI Products Show Accelerating Adoption and Measurable ROI
Workday reported that new annual contract value (ACV) from AI products more than doubled YoY, with approximately 25% of customer expansions in Q1 FY 2026, including at least one AI product. Examples included Recruiting Agent, Talent Mobility Agent, Evisort, and Extend Pro. Notably, Evisort was cited for delivering operational efficiency, with Western Union reducing contract processing time by 65% and cutting external legal expenses by nearly 70%. Management introduced a new set of agents in Q1 designed to improve decision-making, reduce cost, and mitigate risk, all built natively into Workday’s platform. Over 60% of Workday customers are already using Illuminate AI. All new agents are required to meet specific total cost of ownership (TCO) thresholds with early adopters before launch. The adoption of AI products in Q1 FY 2026 demonstrates that Workday’s embedded AI strategy is delivering measurable value to its customer base.
Partner Contributions Drive Pipeline and Platform Reach
In Q1 FY 2026, more than 20% of Workday’s net new ACV originated from the partner-sourced pipeline, reinforcing the strategic importance of its ecosystem. The company reported strong engagement through its Global Payroll Connect program, which now supports payroll in 187 countries via 29 partners. Through its partnership with Strada, Workday enables customers to manage up to 60 global payrolls under a single contract. The Workday Marketplace added 25 new partner-built applications in Q1 FY 2026, and the developer community nearly doubled YoY. Workday also signed its first volume-managed services partnership with The Mutual Group to support mutual insurance companies. These developments extend the platform’s value and improve market access while underlining that the partner ecosystem is now a critical growth lever, driving both new ACV contribution and expanded platform reach across markets.
WorkdayGo Supports Momentum in Medium Enterprise Segment
Workday launched WorkdayGo in Q1 FY 2026 to target the emerging and medium enterprise market. The program enables deployments in 30 to 60 days through pre-configured solutions and fixed pricing, with implementation support from both Workday and partners. Currently, 75% of Workday’s customers have fewer than 3,500 employees, indicating a significant addressable opportunity. The company is investing in go-to-market alignment, pricing, and deployment simplicity to better serve this segment. WorkdayGo has helped increase adoption in smaller enterprises by improving speed and affordability. The initiative is now a core part of Workday’s growth engine for non-large enterprise accounts, and management confirmed it contributed to a strong quarter for the emerging and medium enterprise teams.
Guidance and Final Thoughts
Workday reaffirmed its FY 2026 subscription revenue guidance of $8.8 billion and raised its non-GAAP operating margin outlook to 28.5% (previously: 28%). Q2 FY 2026 subscription revenue is expected to be $2.16 billion. Management expects a faster pace of subscription revenue growth in the second half of the year, supported by product deliverables linked to previously closed deals and increasing AI monetization.
Workday also authorized a new $1 billion share repurchase program. The company’s strong start to the year, combined with clear investment priorities and operational discipline, supports its reiterated outlook. Despite cautious commentary around international and SLED segments, management cited no material impact in Q1. Overall, the guidance reflects Workday’s stable demand profile and margin-focused execution in a choppy macro backdrop.
Like other SaaS players, Workday is leaning into the use of AI and AI agents to drive greater value for its customers. The company’s ability to deliver enterprise-grade AI agents that are being used in commercial deployment is a key strength, particularly as organizations focus on ROI as a key success metric and driver of continued vendor engagement.
See the complete press release on Workday’s Q1 FY 2026 financial results on the Workday investor relations website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
Other insights from Futurum:
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Author Information
Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.
