Workday's FY26 Q4 call highlighted the company's 'chapter four' pivot towards innovation and AI, with early success in monetizing AI products ($400M ARR, $100M Q4 ACV). However, the FY27 guidance was conservative, highlighting a slower growth outlook in the face of elongated large enterprise deal cycles and a rationalization of the core HCM business. Management framed this as a deliberate investment period to capitalize on the agentic AI opportunity. FY27 subscription revenue growth guided to 12-13%, a deceleration, impacted by the lapsing of the DIA contract and a 'return to innovation' strategy prioritizing investment over margin expansion.
Workday's FY26 Q4 call highlighted the company's 'chapter four' pivot towards innovation and AI, with early success in monetizing AI products ($400M ARR, $100M Q4 ACV). However, the FY27 guidance was conservative, highlighting a slower growth outlook in the face of elongated large enterprise deal cycles and a rationalization of the core HCM business. Management framed this as a deliberate investment period to capitalize on the agentic AI opportunity. FY27 subscription revenue growth guided to 12-13%, a deceleration, impacted by the lapsing of the DIA contract and a 'return to innovation' strategy prioritizing investment over margin expansion.
Workday's FY26 Q4 call highlighted the company's 'chapter four' pivot towards innovation and AI, with early success in monetizing AI products ($400M ARR, $100M Q4 ACV). However, the FY27 guidance was conservative, highlighting a slower growth outlook in the face of elongated…
FY27 subscription revenue growth guided to 12-13%, a deceleration, impacted by the lapsing of the DIA contract and a 'return to innovation' strategy prioritizing investment over margin expansion.
AI is a major growth vector: $400M in emerging AI ARR, $100M in Q4 ACV, AI attached to ~50% of transactions, with AI deals ~50% larger on average.
The company pivoted to a 'FlexCredits' consumption-based pricing model to monetize agents and API access, signaling a strategic shift from subscription to consumption.
Management emphasized the rapid adoption and monetization of AI agents, with AI involved in roughly half of Q4 customer-based transactions and expansion deals including AI nearly 50% larger. They are transitioning to a consumption-based FlexCredit model and plan to prioritize organic agent development, expecting AI to accelerate growth in FY27.
Management guides conservatively for FY27 with growth driven by AI, particularly agents, expected to be back-half weighted. The tone is optimistic but cautious, acknowledging comp headwinds and elongated enterprise deal cycles.
No specific capex discussion beyond full-year FY27 capital expenditures guidance of approximately 270 million, which supports free cash flow growth of 15%.
The CEO expressed strong optimism about the AI opportunity and the ability to re-accelerate growth, while the CFO highlighted a conservative guide with room to beat.
“some net new large enterprise deals are taking longer to close, particularly in Fed, SLED, and healthcare, and across parts of the commercial market.”
“In Q4, we generated over $100 million in new ACV from emerging AI products. That's growing over 100% year over year. And our overall ARR from these solutions is now over $400 million.”
“AI played an increasingly meaningful role. It was involved in roughly half of our customer-based transactions. And expansion deals that included AI were nearly 50% larger on average.”
“Revenue in the quarter benefited from the successful delivery of the DIA contract, which added nearly a point to Q4 subscription revenue growth and is not expected to continue in Q1.”
| 지표 | 기간 | 범위 | 중간값 | 상태 |
|---|---|---|---|---|
| Free cash flow | FY2027 | $3.18B | $3.18B | GUIDED |
| Op margin | FY2027 | 30%below 컨센서스 대비 | 30% | GUIDED |
| Revenue | FY2027 | $9.925B–$9.95Binline 컨센서스 대비 | $9.9375B | GUIDED |
| Revenue | FY2027 Q1 | $2.335Binline 컨센서스 대비 | $2.335B | GUIDED |
| 제시 시점 | 지표 | 목표 기간 | 가이던스 | 실제 | 결과 |
|---|---|---|---|---|---|
| FY2026 Q3 | Revenue | FY2027 Q1 | $2.35B | $2.542B | Met / beat |
Accenture is expanding its Workday relationship by deploying AI-driven HR and recruiting solutions, and acting as a design partner for Workday's agent system of record.
“Accenture is a great example. They're reinventing HR and recruiting at scale, using our AI solutions to elevate the employee and candidate experience.”
… like Anthropic, Ally Financial, and Otis Elevator. In Q4, AI played an increasingly meaningful role. It was involved in roughly half of our customer-based transactions. And expansion deals that included AI were nearly 50% larger on average. While it's still early days, we've seen great initial traction with SANA since the acquisition closed in November. We're starting to see customers go all in on agents and agentic workflows. And Accenture is a great example. They're reinventing HR and recruiting at scale, using our AI solutions to elevate the employee and candidate experience. while driving improvements in productivity, speed, and agility. Accenture has also been a key design partner for us, helping to develop our agent system of record. And with our FlexCredits pricing model, customers can better align their spend with the value they're getting. Accenture, Nike, and Merck are among the first of nearly 50 customers signing on to use our new model. We expect FlexCredits adoption to continue to grow as we expand our AI roadmap, and mature the model. We're also investing in our customer-based motion, including forward-deployed engineers to activate agents faster and with less …
Anthropic expanded its existing Workday footprint in Q4, signaling continued demand from leading AI companies.
“In the quarter, we expanded with customers like Anthropic, Ally Financial, and Otis Elevator.”
Thanks, Garrett. And hello, everyone. It's great to be on the call today. As we look back at Q4, one thing is very clear. Our customers trust Workday with the parts of their business that have to run flawlessly, from payroll to closing the books. And that trust continues to show up in a high retention rate. and in customers expanding the use of the platform year after year. With over 11,500 global customers, expansions remain our largest growth engine. In the quarter, we expanded with customers like Anthropic, Ally Financial, and Otis Elevator. In Q4, AI played an increasingly meaningful role. It was involved in roughly half of our customer-based transactions. And expansion deals that included AI were nearly 50% larger on average. While it's still early days, we've seen great initial traction with SANA since the acquisition closed in November. We're starting to see customers go all in on agents and agentic workflows. And Accenture is a great example. They're reinventing HR and recruiting at scale, using our AI solutions to elevate the employee and candidate experience. while driving improvements in productivity, speed, and agility. Accenture has also been a key design partner for …
Nike is an early adopter of Workday's new FlexCredits pricing model, signalling a move to consumption-based AI services.
“Accenture, Nike, and Merck are among the first of nearly 50 customers signing on to use our new model.”
… agents and agentic workflows. And Accenture is a great example. They're reinventing HR and recruiting at scale, using our AI solutions to elevate the employee and candidate experience. while driving improvements in productivity, speed, and agility. Accenture has also been a key design partner for us, helping to develop our agent system of record. And with our FlexCredits pricing model, customers can better align their spend with the value they're getting. Accenture, Nike, and Merck are among the first of nearly 50 customers signing on to use our new model. We expect FlexCredits adoption to continue to grow as we expand our AI roadmap, and mature the model. We're also investing in our customer-based motion, including forward-deployed engineers to activate agents faster and with less friction for our customers. Turning to net new, we formed several strategic relationships in the quarter, including Boston's Children's Hospital, the State of New York Unified Court System, and Sargent and Lundy. We're seeing particularly strong momentum in net new medium enterprise deals, ME customers drove roughly 60% of net new ACV in FY26. To accelerate time to value in the segment, we're expanding …
OpenAI is a confirmed Workday customer, showcasing Workday's penetration into the AI sector.
Okay, great, thanks. Anil, welcome back to the arena. I had a question for you, maybe zooming out a little bit, so this is a broader question. Anil, you were the disruptor 20 years ago, and you and others forced incumbents at the time, Oracle and PeopleSoft, et cetera, to react. And in many cases, it took them years to actually pivot and some, frankly, didn't make it. So I just wanted to ask you whether you think a number of SaaS companies are going to have to do something similar and re-architect their cores, AI-enabled their cores, and how challenging do you think that process might be, and is the period 20 years ago that you lived through a good analogy? Thank you.
It's a great question. I do think it's different. In the transition from client-server to cloud, it was basically throwing away the old architecture and building a new architecture. In this move from cloud to AI, the difference is AI is built on cloud. Every cloud company out there is moving towards AI, but every AI company is actually built on the cloud. By the way, every one of these AI leaders actually runs Workday, just for what it's worth. Anthropic, Google, and OpenAI all run Workday. So it's orthogonal to that last transition because it's about the data, not about the process. I think that the keys for all the enterprise apps companies are, number one, to make sure that they have the right data model to use. know to inform the large language models and and make sure they're getting the best reasoning results and in order to do that it's a big investment in apis and you know we're pretty far along on that path but i think that's going to be the the case for um for all the sas companies the second piece is identifying where the savings are going to come for from customers because every every technology transition is about ROI and productivity gains. If there's no ROI or productivity gain, there is no technology transition that really amounts to anything. And so we're working really hard to figure out how do we improve business process execution for our customers at a lower cost? And I think that's where the agentic model fits in. What can agents do to replace human labor And then obviously longer term we've got to figure out what we're going to do with the humans that are displaced. I think that is an important thing to think about. But it's a different mindset. It's a role-based mindset as it relates to these agents, what roles are going to get replaced by agentic solutions, and how will that improve the way work gets done. But it is different than the last generation because cloud's not getting replaced, it's getting built on top of it.
Workday's agent APIs are open and work within Microsoft's ecosystem, positioning Workday as a partner in Microsoft's enterprise tools.
Yeah. Hey, guys. Thanks for taking my question, Neil. Welcome back as well from me. Maybe a quick tech one for you. You talked about monetizing first-party agents, both organic and inorganic. But I wanted to ask you specifically how you're thinking about monetizing third-party agents. You have Data Cloud. As you see more kind of investment construction going across these kind of multi-system agentic frameworks, how do you guys make sure that you monetize that for the value and the data context that you provide? And then, Zane, I just really simple one for you. Should we still think about the 35% operating margin targets for fiscal 28 as on the table or not?
Yeah, so, you know, The model that Anil has described really works that we have a tiered pricing structure for AI or programmatic access to the Workday platform. And the way how you should think about that is that we capture consumption in the form of API calls. They are monetized on flex credits. That's the most basic unit. So if a third-party agent chooses to access that layer, they can basically be capture or we capture the value on our side via simple API calls. If they want to get richer information like you have indicated, we also have Data Cloud. Data Cloud, again, is available on FlexCredits. It provides richer context. And if third parties want to aggregate agents, right, because we shouldn't think about APIs like in the old days where you have modern agents and legacy APIs. APIs and agents are eventually one and the same thing. Our agents, they're all exposed as APIs because we embrace the open ecosystem. You can use them in Microsoft. You can use them in Google Gemini. And those APIs, those agent APIs, they have a premium price tag to them because they complete meaningful work. They are not just a simple SOAP or REST API. And if you're now a customer or a partner or an ISV, you have all of these choices, right? You can subscribe to our applications and be captured on Workday pricing. You can build your own agents and then you can decide whether you want to consume raw APIs, data context, or highly differentiated agent APIs, which are basically aggregating large chunks of work across HR and finance for you already.