Workday's fiscal 2027 second quarter, the period ended July 31, 2026, cleared consensus on revenue and margin. Total revenue was $2.649 billion, up 12.8% year over year. Subscription revenue was $2.471 billion, up 13.9%. Non-GAAP operating margin hit 31.1%, up from 29.0%. On the earnings call, Workday said AI products drove more than $100 million of new annual contract value, over 25% of all new ACV closed in the quarter, and that AI annual recurring revenue is approaching $600 million, up more than 200% year over year. More than 5,500 customers now use at least one organic agent, up over 35% from last quarter.
Those AI dollar figures surfaced on the earnings call rather than the press release. That distinction, along with the cash flow line, the capex trend, the timing of a co-founder's return to the CEO seat, and Workday's R&D spend against four AI rivals, rounds out the quarter.
The Cash Flow Number Is a Timing Effect
Workday's press release flagged operating cash flow down 15.6% and free cash flow down 21.8% for the quarter, year over year. Read in isolation, that looks like a real yellow flag: cash generation weakening as revenue grows.
CFO Zane Rowe attributed the decline to payroll-calendar timing, including an extra payroll run in the quarter. Workday's 10-Q also shows cash taxes paid rose to $131 million from $58 million over the first half, a separate data point worth watching but not the cause management cited.
The six-month view supports the timing read. Workday's first-half FY27 operating cash flow rose 13.2% year over year, to $1.215 billion from $1.073 billion, according to the 10-Q.
Treat the quarterly cash flow figure as a scheduling effect. Confirm it against the Q3 filing before drawing a harder conclusion.
Capex Is Rising From a Small Base
Capital expenditures for the first half of FY27 were $139 million, more than double the $64 million spent in the same period last year. That's a real acceleration, consistent with a company investing behind its AI roadmap.
Workday doesn't own datacenters at meaningful scale. It runs on Amazon Web Services and Google Cloud infrastructure, so this capex growth stays far below hyperscaler-level AI infrastructure spending. Most of Workday's AI investment shows up in the R&D line instead, the more relevant comparison for judging its competitive position.
A Founder's Return, Mid-Strategy
Co-founder Aneel Bhusri returned as CEO on February 9, 2026, replacing Carl Eschenbach, effective at the start of Workday's fiscal 2027. This was his second full quarter back in the role. The board framed the move as sharpening the company's AI focus for a defining industry moment.
Sana and the first wave of organic agents were largely in motion before he returned. More recent moves, including Developer Agent, arrived after he was back. One quarter isn't enough to separate his imprint from the plan he inherited.
"We had a strong Q2, with AI driving more than 25% of our new ACV and more than 5,500 customers now using at least one of our organic agents."— Aneel Bhusri, Co-Founder, CEO, and Chair, Workday
Where Workday's R&D Stands in the Field
None of these companies break out AI-only R&D. Total R&D is a capacity proxy, not proof of AI traction. Fiscal calendars don't line up, so each company below is labeled with its own reported quarter.
| Company | R&D Spend | Period | % of Revenue | YoY Change |
|---|---|---|---|---|
| Workday | $747M | Q2 FY27 (ended Jul 31, 2026) | 28.2% | +13.2% |
| ServiceNow | $915M | Q2 2026 (ended Jun 30, 2026) | 23.0% | +25% |
| SAP* | €1,701M (~$1.92B) | Q1 2026 (ended Mar 31, 2026) | 17.8% | +1.7% |
| Salesforce | $5.993B | Full FY26 (ended Jan 31, 2026) | ~15%† | +9.1% |
| Oracle | $2.61B | Q4 FY26 (ended May 31, 2026) | 13.6% | −1.5% |
*SAP reports in EUR (IFRS, actual currency, non-adjusted). The USD figure is a reference conversion at SAP's own disclosed 2026 planning rate of 1.13 USD/EUR, not a market spot rate. SAP's Q2 2026 statement was released July 23, 2026; its R&D line for that quarter was not independently confirmed for this table, so Q1 2026 is shown instead.
†Salesforce's 10-K describes FY26 R&D as approximately 15% of revenue; the exact figure from reported dollars is 14.4%.
Workday and ServiceNow, the two fastest-growing, most narrowly focused SaaS platforms in this set, both run R&D at roughly a quarter of revenue, well above Oracle's and SAP's ratios. Leaner, faster-growing companies plow more of each revenue dollar back into product.
Oracle's R&D ratio fell even as total revenue surged. Cloud and AI infrastructure revenue is growing faster than R&D spend, a different dynamic from the other four companies here.
The AI Disclosure Gap
Workday does report dollar figures for AI: $100 million-plus in new ACV this quarter, and AI ARR nearing $600 million, up more than 200% year over year. Against its closest rivals, the difference is less about whether a number exists and more about its size and where it appears.
ServiceNow reported AI annual contract value crossing $1 billion in Q2 2026, up more than 40% quarter over quarter, with agentic AI production deployments up ninefold over nine months. Salesforce reported Agentforce annual recurring revenue above $1.5 billion in its most recent quarter, up over 240% year over year. Both companies put those figures in the headline bullets of their press releases. Workday's AI ARR and new-ACV numbers came out on the earnings call, not in the release the wires ran with.
SAP has framed its strategy around "Business AI" and an "Autonomous Enterprise" positioning. It hasn't published a standalone AI revenue or ACV figure in the format ServiceNow and Salesforce use.
None of these self-reported AI metrics, ACV, ARR, or percentage of new bookings, carry the standardization or audit that GAAP subscription revenue does. Treat each as a data point to watch, not a settled result.
Scale and placement are what separate the three. ServiceNow's AI book is roughly double Workday's. Salesforce's is roughly two and a half times Workday's. Both put the figure in the release. Workday puts it in the call.
Workday's R&D ratio says it invests at a pace matching its fastest-growing peers. Its AI ARR, near $600 million, is real but roughly a third of ServiceNow's AI book and a quarter of Salesforce's. A CIO comparing platforms may want to ask why Workday reports that figure on the earnings call rather than in the release, the way ServiceNow and Salesforce do.
Sources:
Workday, Inc. "Workday Announces Fiscal 2027 Second Quarter Financial Results." 27 Aug. 2026.
Workday, Inc. Q2 FY27 Earnings Call Transcript. 27 Aug. 2026.
Workday, Inc. Form 10-Q. U.S. Securities and Exchange Commission, EDGAR, sec.gov, 2026.
Workday, Inc. "Workday Announces CEO Transition as Co-Founder Aneel Bhusri Returns to Lead the Company's Next Chapter." Newsroom, 9 Feb. 2026.
ServiceNow, Inc. "ServiceNow Reports Second Quarter 2026 Financial Results." investor.servicenow.com, 22 Jul. 2026.
ServiceNow, Inc. Form 10-Q. U.S. Securities and Exchange Commission, EDGAR, 2026.
SAP SE. "Quarterly Statement Q1 2026." sap.com, 23 Apr. 2026.
Salesforce, Inc. "Salesforce Delivers Record Second Quarter Fiscal 2027 Results." 26 Aug. 2026.
Salesforce, Inc. Form 10-K. U.S. Securities and Exchange Commission, EDGAR, 2026.
Oracle Corporation. "Q4 Fiscal 2026 Financial Results." Aug. 2026.
All revenue, margin, and R&D figures sourced from primary company filings and earnings releases. AI adoption metrics (ACV, ARR, customer counts, percentage-of-bookings figures) are self-reported and unaudited.
Principal Research Director, Info-Tech Research Group · Former Adjunct Professor, Georgetown University, Entrepreneur in Residence, Stony Brook University, NY
