Enterprise software company Workday (NASDAQ: WDAY) announced better-than-expected revenue in Q1 CY2026, with sales up 13.5% year on year to $2.54 billion. Its non-GAAP profit of $2.66 per share was 5.7% above analysts’ consensus estimates.

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StockStory’s Take

Workday delivered a well-received Q1, as the market responded positively to growth in both revenue and profitability. Management attributed the strong performance to renewed momentum in its core business and the rapid adoption of its AI-powered agent solutions, which are helping customers automate HR and finance processes. CEO Aneel Bhusri pointed to this being Workday's best first quarter for new annual contract value (ACV) in five years, citing increased customer demand for AI-driven functionality and improved operational focus. Bhusri emphasized, “We are seeing momentum once again building in the business,” highlighting that AI agents and the integration of Sana and Paradox platforms were key contributors.

Looking ahead, Workday’s guidance is shaped by its commitment to scaling AI agent adoption and expanding into adjacent markets such as IT service management. Management is focused on streamlining operations and investing in high-impact areas, with CFO Zane C. Rowe stating, “We remain focused on the potential for AI to transform our HCM and finance solutions.” The company expects continued growth in agentic AI revenue, broader deployment of newly launched AI solutions like the Sana Travel Agent and Sana for ITSM, and increased uptake of its flex credits pricing model. Management believes this focus will support long-term revenue growth and further margin expansion as AI-driven efficiencies materialize.

Key Insights from Management’s Remarks

Management credited the quarter’s positive results to accelerating AI agent adoption, operational discipline, and increased customer expansion, especially in key international markets.

• AI agent adoption accelerates: The number of customers using Workday’s organically developed AI agents more than doubled quarter over quarter, with over 4,000 customers now leveraging at least one agent. These agents automate processes in HR and finance, contributing to a 200% year-over-year increase in new ACV from agentic AI products.

• Deployment agent reduces implementation barriers: Workday’s deployment agent achieved a 44% year-over-year increase in supported hiring processes and is estimated to reduce implementation hours and costs by up to 30%, with a target of reaching 50% reductions in future projects. This reduction addresses historic barriers, particularly for mid-market customers, and is already being used by organizations like the University of Arkansas System.

• Sana platform integration: The full integration of the Sana platform is now providing a new user interface for Workday customers and forms the foundation for ongoing AI innovation. Management announced the launch of Sana Travel Agent and Sana for ITSM, both aimed at expanding Workday’s addressable market by automating business travel and IT service workflows.

• Flex credits model gains traction: The unified flex credits pricing model, which simplifies AI monetization across agents, APIs, and data cloud, is seeing growing adoption. Expansion deals that included AI were over 50% larger on average, indicating that AI is driving deeper customer engagement and higher contract values.

• International and partner momentum: International operations saw notable expansion, including entry into Vietnam and the launch of an EU-based data residency in Frankfurt. Additionally, approximately 30% of net new ACV was sourced by partners, and new statewide deals were signed with the state of Delaware and the Commonwealth of Massachusetts, supporting broader growth beyond North America.

Drivers of Future Performance

Management’s outlook is anchored by AI-driven product expansion, operational efficiency, and investments in new market opportunities.

• Scaling AI agent adoption: Workday expects the continued rollout and integration of AI agents—such as the self-service and deployment agents, as well as new solutions like Sana Travel Agent—to drive both customer acquisition and deeper platform usage. Management anticipates that as more customers adopt agentic solutions, especially under the flex credits model, revenue growth will accelerate and the company’s competitive position will strengthen.

• Margin expansion through efficiency: The company is prioritizing operational discipline and leveraging AI to improve internal productivity. Management aims to keep headcount nearly flat while benefiting from AI-driven efficiencies, expecting these efforts to translate to higher non-GAAP operating margins over time. CFO Zane C. Rowe noted the potential for further margin expansion as these efficiencies scale.

• Expansion into new markets: Workday is investing in adjacent areas such as IT service management (ITSM) and expanding internationally, including new operations in Vietnam and enhanced data residency in Europe. Management believes that these strategic moves will open up additional sources of growth and further diversify the company’s revenue streams.

Catalysts in Upcoming Quarters

In future quarters, the StockStory team will monitor (1) the pace of customer adoption and monetization of newly launched AI agents, including the Sana Travel Agent and Sana for ITSM; (2) the impact of the flex credits pricing model on deal sizes and customer retention; and (3) continued international expansion, especially in new markets like Vietnam and EMEA. The integration and performance of AI-driven solutions across broader use cases will also be key signposts for execution.

Workday currently trades at $135.25, up from $121.82 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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