AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 31/10/2026
Moat69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Approximately 97% gross revenue retention, configurable integrations, training and deployment support jointly support strong switching costs. The long interval before another financial-management sales opportunity reinforces replacement friction. These disclosures establish customer stickiness, without proving exclusive technology, quantified migration costs or a separate network effect.
durability · 3/4 · Fiscal 2024 gross retention above 95% and net retention above 100%, followed by approximately 97% gross revenue retention as of July 31, 2026, demonstrate persistence across periods. Long financial-system sales intervals support durability, but customers can leave at renewal and incumbent competitors possess established relationships.
customer dependency · 3/4 · Retained recurring revenue directly demonstrates repeat demand. Configurable integrations and customer training indirectly support operational dependency and replacement friction. The evidence does not quantify migration burdens or establish equal dependency across applications; gross revenue retention measures revenue lost rather than the proportion of customers renewing.
erosion resilience · 2/4 · Strong retention coexists with realized sales-cycle pressure, reduced renewal headcount growth and acquisition-related cancellations. Some applications have low entry barriers. Internal-system unauthorized access and ongoing AI litigation add exposure, but the supplied passages do not demonstrate broad platform displacement or establish that these events impaired core retention.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · Subscription revenue growth does not separate price, volume and product mix. Increased demand for price concessions and actual payment flexibility show negotiation, but neither establishes realized subscription price changes. Gross retention explicitly excludes net expansions containing price adjustments. The supplied passages therefore cannot establish a numerical realized-pricing assessment.
retention · 3/4 · Approximately 97% gross revenue retention as of July 31, 2026, and fiscal 2024 gross and net retention above 95% and 100%, respectively, demonstrate strong repeat demand. These revenue measures do not establish successful price increases, and actual acquisition-related cancellations show that customer persistence is not absolute.
margin resilience · 3/4 · GAAP operating margin increased to 11.8% in the three months ended July 31, 2026, from 10.6% a year earlier despite disclosed sales pressure. Management attributes improvement primarily to revenue outpacing headcount and moderated expenses. This demonstrates operating resilience, without attributing the gain to pricing or inferring a moat from margins.
contractual freedom · 2/4 · Contracted noncancelable subscriptions protect revenue during their terms. Customers have no renewal obligation, service commitments can require credits, and actual payment flexibility demonstrates negotiation. These disclosures support a mixed assessment of contractual protection and customer bargaining constraints; unrestricted price-setting or unilateral repricing authority is not established.
Predictability100
5 consecutive published annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 2.79
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.78
- observedAnnualPeriods
- 5.00
Financial strength63
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 98.92
- netDebtEbitGrade
- 58.78
- interestCoverageGrade
- 48.41
- currentRatioGrade
- 45.73
- Debt / FCF (x)
- 1.08
- Net debt / operating income (x)
- 2.06
- Interest coverage (x)
- 6.32
- Current ratio (x)
- 1.32
Capital allocation51
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or EBIT calculated from reported pretax profit plus reported gross interest expense; the issuer-reported EBIT is distinct from GAAP operating income and gross interest; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. ROIC remains undefined for nonpositive invested capital; the explicit asset-return alternative does not change the ROIC chart. Missing financial inputs alone never trigger an alternative. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 4.62
- 3-year average dilution (%)
- 1.33
- 3-year average SBC / revenue (%)
- 18.17
- cashConversionGrade
- 100.00
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Six-month free cash flow of $1.076 billion and declining outstanding shares demonstrate cash generation and net share reduction. Repurchases of $2.907 billion, excluding excise tax and commissions, exceeded that cash flow; quarterly free cash flow declined and the equity reserve increased. Repurchase value creation and acquisition returns remain unproven.
incentive alignment · 2/4 · Implemented three-year PSUs and an adopted recoupment policy provide concrete alignment safeguards. Performance awards comprised 25% of regular annual executive equity, with 75% remaining time-based RSUs. Incentive profitability uses adjusted non-GAAP measures; disclosed non-GAAP exclusions include substantial expense categories. Award design does not demonstrate eventual vesting or superior shareholder outcomes.
execution · 3/4 · Revenue growth, strong retention, improved GAAP operating results, positive first-half free cash flow and the disclosed service-performance record demonstrate strong company-level execution. Quarterly cash-flow deterioration and slower sales temper the assessment. CEO-reported AI adoption adds commercial evidence, but uncertain monetization prevents assuming durable AI economics or attributing results solely to current leadership.
governance · 2/4 · A serving Lead Independent Director, entirely independent Audit Committee and adopted executive recoupment policy establish concrete oversight safeguards. Concentrated dual-class voting control limits outside shareholders' influence over corporate matters. These actual disclosures support mixed accountability, without relying on founder reputation, assumed ownership alignment or general statements of governance intent.
Evidence
Gross Revenue Retention Rate Our growth in subscription services revenues attributable to existing customers is further reflected by our gross revenue retention rate of approximately 97% as of July 31, 2026.
July 2026 Form 10-Q: Gross Revenue Retention Rate · Filed 27/08/2026
The metric takes into account recurring revenues lost to product or customer churn but does not account for additional revenue earned from add-ons or net expansions, which include volume and price adjustments.
July 2026 Form 10-Q: gross revenue retention metric definition · Filed 27/08/2026
Our Capabilities
Workday offers a suite of cloud-based enterprise solutions that address the evolving needs of the C-suite on a platform designed to be open, extensible, and configurable, allowing integration with other applications and the ability for customers and our partners to build custom applications.
Fiscal 2026 Form 10-K: Our Capabilities · Filed 06/03/2026
We also offer extensive customer training opportunities and a professional services ecosystem of experienced Workday consultants and system integrators to help customers achieve a timely adoption of Workday and enable them to enhance the value of our applications over the life of their subscription.
Fiscal 2026 Form 10-K: customer training and professional services ecosystem · Filed 06/03/2026
Therefore, if we lose a current customer to a competitor or fail to secure a prospective customer for financial management solutions, there is a long duration before we will be able to approach that customer again with our sales efforts for such solutions.
July 2026 Form 10-Q: financial-management customer sales opportunity risk · Filed 27/08/2026
The increase in subscription services revenues was primarily due to an increased number of new customers, expansion of our product offerings sold to existing customers, and strong customer renewals, with gross and net retention rates over 95% and over 100%, respectively.
Fiscal 2024 Form 10-K: subscription revenue growth and retention · Filed 08/03/2024
Our primary competitors are Oracle and SAP, well-established providers of financial management and HCM applications, which have long-standing relationships with customers and partners.
Fiscal 2026 Form 10-K: primary competitors and established relationships · Filed 06/03/2026
The markets for enterprise cloud applications, including AI-powered solutions, are highly competitive, with relatively low barriers to entry for some applications or services.
Fiscal 2026 Form 10-K: competition and application entry barriers · Filed 06/03/2026
As a result, we have experienced, and may continue to experience, a moderation of revenue growth rates due to deal scrutiny and the lengthening of certain sales cycles, particularly within net new opportunities, as well as reduced growth in headcount-level commitments upon renewals of existing customers.
July 2026 Form 10-Q: realized sales-cycle and renewal headcount pressure · Filed 27/08/2026
Acquisitions of our customers by other companies have led, and could continue to lead, to cancellation of our contracts with those customers, thereby reducing the number of our existing and potential customers.
July 2026 Form 10-Q: acquisition-related customer cancellations · Filed 27/08/2026
Further, we have provided, and may continue to provide, certain customers with more flexible payment terms.
July 2026 Form 10-Q: actual customer payment flexibility · Filed 27/08/2026
Our customers have no obligation to renew their subscriptions for our applications after the expiration of either the initial or renewed subscription period and it is difficult to predict attrition rates given our varied customer base and the number of multi-year subscription contracts.
July 2026 Form 10-Q: renewal obligations and multi-year contracts · Filed 27/08/2026
We believe our existing cash, cash equivalents, marketable securities, cash provided by operating activities, unbilled amounts related to the remaining term of contracted noncancelable subscription agreements, which are not reflected on the Condensed Consolidated Balance Sheets, and, if necessary, our borrowing capacity under our 2022 Credit Agreement that provides for $1.0 billion of unsecured financing, are sufficient to meet our working capital, capital expenditure, share repurchase, and debt repayment needs over the next 12 months and beyond.
July 2026 Form 10-Q: liquidity discussion identifying contracted noncancelable subscriptions · Filed 27/08/2026
In our standard agreements with customers, we commit to defined levels of service availability and performance and, under certain circumstances, permit customers to receive credits in the event that we fail to meet those levels.
Fiscal 2026 Form 10-K: standard service commitments and customer credits · Filed 06/03/2026
To date, we have not experienced any significant failures to meet defined levels of availability and performance and, as a result, we have not accrued any liabilities related to these agreements on the consolidated financial statements.
Fiscal 2026 Form 10-K: service availability and performance record · Filed 06/03/2026
GAAP operating income was $313 million, or 11.8% of revenues, for the three months ended July 31, 2026, compared to the prior year GAAP operating income of $248 million, or 10.6% of revenues.
July 2026 Form 10-Q: quarterly GAAP operating income and margin · Filed 27/08/2026
The increase is primarily due to our revenue growth outpacing headcount growth and moderation of operating expenses.
July 2026 Form 10-Q: explanation of quarterly operating improvement · Filed 27/08/2026
Three Months Ended July 31,
Six Months Ended July 31,
2026
2025
2026
2025
Net cash provided by operating activities
$
520
$
616
$
1,215
$
1,073
Less: Capital expenditures
(60)
(28)
(139)
(64)
Free cash flows
$
460
$
588
$
1,076
$
1,009
About Non-GAAP Financial Measures
To provide investors and others with additional information regarding Workday’s results, the following non-GAAP financial measures are disclosed: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP diluted net income per share, and free cash flows.
Fiscal 2027 second-quarter earnings release: quarterly and six-month free cash flow reconciliation · Filed 27/08/2026
Share repurchase programs authorized by our Board of Directors that were in effect during the three and six months ended July 31, 2026, and 2025, were as follows (in millions):
Authorization Date
Amount Authorized
Authorization Completion Date
August 2024
1,000
Q3 fiscal 2026
May 2025
1,000
Q4 fiscal 2026
September 2025
4,000
Q2 fiscal 2027
The table below sets forth information regarding repurchase of shares under our share repurchase programs (in millions, except number of shares which are reflected in thousands, and per share data):
Three Months Ended July 31,
Six Months Ended July 31,
2026
2025
2026
2025
Total number of shares repurchased
9,783
1,216
21,809
2,506
Average price paid per share (1)
$
133.59
$
245.57
$
133.29
$
236.11
Amount repurchased (1)
$
1,307
$
299
$
2,907
$
592
(1)Amounts exclude excise tax and commissions.
July 2026 Form 10-Q: share repurchase authorizations and purchases, including units and exclusions · Filed 27/08/2026
Note 13. Stockholders’ Equity
Common Stock
As of July 31, 2026, there were 196 million shares of Class A common stock and 45 million shares of Class B common stock outstanding.
July 2026 Form 10-Q: common shares outstanding as of July 31, 2026 · Filed 27/08/2026
80 Table of Contents Note 14. Stockholders’ Equity Common Stock As of January 31, 2026, there were 212 million shares of Class A common stock, and 47 million shares of Class B common stock outstanding.
Fiscal 2026 Form 10-K: common shares outstanding as of January 31, 2026 · Filed 06/03/2026
20
Table of Contents
Employee Equity Plans
In June 2026, our stockholders approved the amendment and restatement of the 2022 Equity Incentive Plan (the “A&R 2022 Plan”), which increased the total number of shares of common stock reserved for issuance by 20 million.
July 2026 Form 10-Q: June 2026 approval of increased equity incentive plan reserve · Filed 27/08/2026
70 | workday.com TABLE OF CONTENTS EXECUTIVE COMPENSATION Fiscal 2026 Pay Component Fiscal 2026 Enhancements Rationale and Value to Stockholders Fixed Pay Base Salary Adjustments for select executives as part of multi-year strategy to align cash compensation with market • Provides market-competitive cash compensation based on experience, skills, and responsibilities as well as alignment to internal pay equity At-risk or variable pay Performance-Based Cash Incentive Added adjusted non-GAAP operating margin as a financial metric • Encourages achievement of defined, near-term corporate performance objectives in alignment with Workday’s long term strategic growth objectives • Financial and non-financial metrics help drive efficient growth and stockholder value creation • Adjusted non-GAAP operating margin metric motivates more efficient performance and execution across the company, counterbalancing topline growth • Responds to stockholder feedback received in fiscal 2025 to include a profitability metric Restricted Stock Units Transitioned away from strictly time-based awards and apportioned 75% of executives’ annual equity award as RSUs • Incentivizes long-term stockholder value creation and aligns to stockholder interests • Helps attract and retain key executive talent Performance Restricted Stock Units Introduced three-year PSUs equal to 25% of executives’ annual grant subject to adjusted subscription revenues and adjusted non-GAAP operating margin performance metrics • Responds to stockholder feedback received in fiscal 2025 to incorporate performance-based equity and aligns with our pay for performance philosophy • No shares vest or are released until after the end of the full three-year performance period, which aligns our NEOs with long-term performance and promotes long-term retention • Award design aligns with the company’s plans to drive durable growth while expanding operating margins The initial compensation arrangements with our executive officers were generally the result of arm’s-length negotiations between us and each individual executive officer at the time of his or her hire, appointment, or promotion.
May 2026 proxy statement: implemented fiscal 2026 executive compensation components and performance conditions · Filed 05/05/2026
Non-GAAP operating income and non-GAAP operating margin differ from GAAP in that they exclude share-based compensation expense, employer payroll tax-related items on employee stock transactions, amortization expense for acquisition-related intangible assets, acquisition-related costs, and restructuring costs.
Fiscal 2027 second-quarter earnings release: non-GAAP operating measure exclusions · Filed 27/08/2026
Our Board has adopted an Executive Officer Recoupment Policy providing that it will require reimbursement or forfeiture of all or a portion of any incentive compensation that was paid to an executive officer based on financial results if a restatement of those results is required and may require the forfeiture, recovery, or reimbursement of all incentive compensation and time-based equity from a Section 16 officer or certain other executive officers in the event of misconduct.
May 2026 proxy statement: adopted Executive Officer Recoupment Policy · Filed 05/05/2026
Lead Independent Director Mr. Hawkins serves as Vice Chair of the Board and as Lead Independent Director of the Board of Directors.
May 2026 proxy statement: serving Lead Independent Director · Filed 05/05/2026
Our Audit Committee is comprised entirely of independent directors who regularly evaluate cybersecurity risks.
Fiscal 2026 Form 10-K: Audit Committee independence · Filed 06/03/2026
The dual class structure of our common stock has the effect of concentrating voting control with our Co-Founders, as well as with other executive officers, directors, and affiliates, which limits or precludes the ability of non-affiliates to influence corporate matters.
July 2026 Form 10-Q: concentrated dual-class voting control · Filed 27/08/2026
Fiscal 2027 Second Quarter Results
•Total revenues were $2.649 billion, an increase of 12.8% from the second quarter of fiscal 2026.
Fiscal 2027 second-quarter earnings release: total revenue result · Filed 27/08/2026
Subscription revenues were $2.471 billion, an increase of 13.9% from the same period last year.
Fiscal 2027 second-quarter earnings release: subscription revenue result · Filed 27/08/2026
Comments on the News
“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,” said Aneel Bhusri, co-founder, CEO, and chair, Workday.
Fiscal 2027 second-quarter earnings release: CEO statement on AI adoption and new ACV · Filed 27/08/2026
The markets and monetization strategies for certain of our offerings, including our agentic AI solutions and Workday Data Cloud, remain relatively new and uncertain and as a result, our expansion into such offerings, and related investments, may present additional risks and challenges.
July 2026 Form 10-Q: uncertainty of AI and Data Cloud monetization · Filed 27/08/2026
In connection with recent macroeconomic events, we have experienced and may continue to experience delays in purchasing decisions from existing and prospective customers, increased demand for price concessions and delayed payment terms, and a reduction in customer demand.
Fiscal 2026 Form 10-K: purchasing delays and demand for pricing and payment concessions · Filed 06/03/2026
For example, in August 2025, we were targeted as part of a social engineering campaign against many large organizations, resulting in unauthorized access to some of our internal systems including some commonly available business contact information in our third-party customer relationship management platform.
April 2026 Form 10-Q: August 2025 unauthorized access to internal systems · Filed 22/05/2026
We are currently defending against a lawsuit alleging that certain of our AI-related products and services enable discrimination, and although we believe that such claims lack merit, and the majority of the claims have been dismissed, legal proceedings can be lengthy, expensive, and disruptive to our operations and customers (particularly where, as in the present litigation, the plaintiff may seek to also litigate against certain of Workday’s customers).
July 2026 Form 10-Q: AI discrimination litigation and disclosed claim dismissals · Filed 27/08/2026
