Workday's fiscal 2027 subscription revenue outlook light, but Bhusri optimistic

Workday reported a solid fourth quarter, but its subscription outlook was light.

The company reported fourth quarter earnings of 55 cents a share on revenue of $2.53 billion, up 14.5% from a year ago. Non-GAAP earnings were $2.47 a share.

Wall Street was expecting Workday to report fourth quarter non-GAAP earnings of $2.32 a share on revenue of $2.52 billion.

For the year, Workday reported net income of $2.59 a share on revenue of $9.55 billion.

Aneel Bhusri, who returned to the CEO role, said AI will enable Workday to "bring innovation back to the worlds of HR and finance."

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For the first quarter, Workday projected subscription revenue of $2.335 billion, up 13%, with a non-GAAP operating margin of 30.5%.

Workday CFO Zane Rowe said fiscal 2027 subscription revenue will be between $9.925 billion to $9.95 billion, up 12% to 13%. Non-GAAP operating margin for fiscal 2027 is expected to be about 30%. Wall Street was looking for non-GAAP operating margins of 31% on subscription revenue of $10 billion.

Now that miss isn't huge but given the current freak-out over SaaS competition from the likes of Anthropic and OpenAI investors are skittish. Anthropic outlined a bevy of new Claude Cowork integrations and plugins. It has yet to be seen whether Anthropic turns out to be a complement to enterprise software vendors or a killer.

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Bhusri’s defense of the Workday moat

On an earnings conference call, Bhusri said Workday’s system of record is hard to replicate. He argued that AI will better enable that system, but LLMs are not deterministic and accurate enough for financial processes. AI and Workday’s platform go together.

Specifically, Bhusri said there will be a hybrid approach that melds Workday’s core with LLM. This Workday chapter revolves around a return to innovation. He said:

• “You've all heard the narrative out there that HR and ERP will be replaced or relegated to the background by AI. I personally just don't see that happening. Our application domains are really, really hard to build. I've been working in the HR and ERP space for over 30 years. These are true systems of record that must process transactions with absolute accuracy and speed, enforce complex security models and comply with statutory and regulatory requirements all over the world. That kind of complexity is very hard to replicate. No amount of vibe coding is going to produce an HR or an ERP system.”
• “Our underlying business processes are deterministic. By nature. There is a start and end to a business process. Its goal is to deliver consistent audible outcomes. AI for all of its incredible capabilities, is probabilistic by nature. It reasons, predicts and recommends based on patterns and likelihoods. Maybe you'll eventually become a state machine, a system that follows the same steps and gets the same result every time. But it is not there today.”
• “What is the future? It's the marriage of deterministic enterprise apps with probabilistic AI that leads to three things, a redefined user experience that is prompt based a greatly improved business process automation, execution platform with work done by agents and humans, and lastly, much deeper AI generated insights. Marrying the best system of record for HR and finance with the reasoning capabilities of domain specific LLMs is the future.”

Bhusri said Workday’s fleet of AI agents both acquired and built are available in early access and generating returns.

Gerrit Kazmaier, President, Product and Technology at Workday, said the company has delivered 1.7 billion AI actions across Workday. The company will leverage forward deployed engineers to boost adoption. Annual recurring revenue from emerging AI products are on a revenue run rate of $400 million and usage is expected to grow meaningfully in fiscal 2027.

“We have 12 new, organically developed role based agents that are now starting to move into general availability for all our customers, and more than 400 customers are already using them and get real ROI,” said Kazmaier. He added that Sana Core and Sana Enterprise went to GA on February 15. “Our strategy is to build new business processes designed around virtually unlimited AI reasoning, to automate entire business processes into the background with AI agents, and to deliver a beautiful AI, first user experience,” said Kazmaier.

Rob Enslin, Workday’s Chief Commercial Officer, said some deals expected to close in the first quarter slipped into the first quarter. Nevertheless, Enslin noted multiple expansions with customers like Anthropic, Ally Financial and Otis Elevator. “While it's still early days, we've seen great initial traction with Sana. Since the acquisition closed in November, we started to see customers go all in on agents and agentic workflows,” said Enslin.

CFO Rowe noted that Workday is committed to medium-term subscription revenue growth rates, the company is prioritizing investments in AI. “We are prioritizing incremental investment in our agentic AI roadmap to capture a larger market opportunity,” said Rowe.

My take

Workday had to answer all the AI questions that every SaaS vendor will have to answer.

Bhusri said he was optimistic about fiscal 2027. He said the core business is strong and the ability to build agentic AI on top of it can drive revenue growth into the future.

Here are key questions to answer over 2026:

• Does it make sense for enterprises to leverage your existing platform provider for the agentic interface or layer in another vendor like Anthropic?
• Can companies realistically vibe code their way to an ERP or HR suite?
• And if these enterprises could roll their own ERP is this move the best use of time?
• Can Workday use its recent acquisitions to drive growth and blend agentic AI into the platform?
• Will Workday's planned innovation monetize quickly?
• Are enterprise customers going to play wait-and-see before renewing contracts for longer than a year?

It's too early to get answers to those questions about Workday or any other vendor. However, knowing the questions to ask and how to frame them are a good start.