Workday AI Products Drive $100M in New Contracts

Workday reported fiscal second-quarter revenue of $2.65 billion, a nearly 13% year-over-year increase that exceeded analyst expectations of $2.64 billion, according to Reuters citing LSEG data. The enterprise software company's results provide concrete evidence that AI monetization is happening now rather than remaining a future promise.

AI drives measurable revenue growth

The company's AI products generated more than $100 million in new annual contract value during the quarter, representing over 25% of all new ACV closed. Chief Commercial Officer Rob Enslin disclosed that more than half of Workday's net new customer wins in the second quarter signed up for one or more AI solutions.

Subscription revenue climbed 13.9% to $2.471 billion, while the 12-month subscription revenue backlog grew 14.2% to $9.03 billion. AI capabilities are now approaching $600 million in annual recurring revenue, demonstrating that customers are actively paying for these features rather than waiting on the sidelines.

Profitability expands alongside growth

Workday's non-GAAP operating margin reached 31.1%, expanding 212 basis points year over year. The simultaneous expansion of both revenue growth and profitability indicates the company is absorbing AI investment costs without sacrificing bottom-line performance.

Enslin noted that AI has become "a key reason companies are modernizing their core on Workday," suggesting the technology is attracting customers to the platform rather than threatening displacement.

Growth deceleration ahead despite AI momentum

CFO Zane Rowe provided forward guidance indicating fiscal 2028 subscription revenue growth of approximately 11%, below the current 13% to 14% range and aligned with expectations for the second half of fiscal 2027. Management's own projections point to slowing growth even as AI adoption accelerates.

Company executives also characterized current AI adoption as "more substitutive than incremental," meaning some AI revenue may be replacing revenue streams Workday would have captured through other products rather than representing entirely new demand.

Why it matters

Workday's results offer tangible proof that enterprise software companies can monetize AI capabilities today while maintaining profitability, countering concerns that AI represents primarily a cost center or competitive threat. The quantified AI revenue contribution provides a concrete benchmark for investors evaluating how quickly enterprise software firms can convert AI investments into paying customer relationships. However, the substitutive nature of some AI adoption and management's own deceleration guidance suggest the path forward may be more complex than the headline beat indicates.

These details were first reported by Reuters.