Subscription Backlog↑$11.0B 24-month (+21% YoY), $4.9B current (+19% YoY)
Workday delivered strong Q2 results with revenue growing 16.4% YoY to $1.79B, demonstrating enterprise software spending resilience despite macro uncertainty. Subscription revenue accelerated to 17.5% growth while maintaining 98%+ customer retention. Operating margins expanded 450bps to 24.1% through improved sales efficiency and platform scale. The company raised FY24 subscription revenue guidance to $6.57-6.59B, suggesting continued momentum in core HCM and expanding Financials penetration.
Key Risks
Macro uncertainty impacting sales cycles and international growth
Rising AI competition requiring sustained R&D investments
Financials market expansion representing $10B+ TAM with <10% penetration
International growth potential to double addressable market
AI-driven expansion into adjacent categories like spend management
M&A opportunities supported by strong balance sheet
Bottom Line
Workday's Q2 results demonstrate the company's strengthening market position and operational execution despite macro headwinds. Accelerating revenue growth, expanding margins, and robust backlog metrics suggest the fundamental thesis remains intact. Management's aggressive AI investments and expanded partnerships position the company well for the next wave of enterprise software innovation. While near-term macro risks persist, Workday's platform strategy and market leadership in key categories provide multiple growth vectors. The key metrics to watch include Financials customer additions, international growth rates, and early AI adoption indicators. The contrarian opportunity lies in the market potentially undervaluing Workday's emerging leadership in unified HCM/Financials platforms as enterprises consolidate vendors.