Workday (WDAY) Q2 2027 earnings call transcript

I will hand it over to Justin Furby, Vice President of Investor Relations. Please go ahead. Thank you, operator. Welcome to Workday's second-quarter fiscal 2027 earnings conference call. On the call, we have Aneil Bushree, our CEO, Garrett Katzmeyer, our President, Product and Technology, Gabe Benroy, our Chief Technology Officer, Rob Enflin, our President and Chief Commercial Officer, and Zane Rowe, our CFO.

Following prepared remarks, we will take questions. Our press release was issued after a close-up market and is posted on our website where this call is being simultaneously webcast. Before we get started, we want to emphasize that some of our statements on this call, particularly our guidance, are based on the information we have as of today and include forward-looking statements regarding our financial results, applications and solutions, customer demand, operations, and other matters.

These statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. Please refer to the press release and the risk factors and documents we file with the Securities and Exchange Commission, including our fiscal 2026 annual report on Form 10K for additional information on risks, uncertainties, and assumptions that may cause actual results to differ materially from those set forth in such statements.

In addition, during today's call, we will discuss non-gap financial measures, which we believe are useful as supplemental measures of Workday's performance. These non-gap measures should be considered in addition to and not as a substitute for or in isolation from gap results. You can find additional disclosures regarding these non-gap measures, including reconciliation with comparable gap results, in our earnings press release, in our investor presentation, and on the Investor Relations page of our website.

The webcast replay of this call will be available for the next 90 days on our company website under the Investor Relations link. Additionally, the prepared remarks of this call and our quarterly investor presentation will be posted on our Investor Relations website following this call. Our third quarter fiscal 2027 quiet period begins on October 15th, 2026. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of our fiscal 2026.

With that, I'll pass the call to Aneel.

Thanks, Justin, and thanks everyone for joining us today. It's hard to believe I've been back in the CEO's seat for six months. Time flies and we're having fun, and I'm having a lot of fun. This is a fun time to be back in the tech industry.

Q2 was another strong quarter, and AI played an increasingly bigger role. AI products alone drove more than 100 million of new ACV, which accounted for more than 25% of all new ACV close in the quarter. And it's starting to lift our core business, too, including our win rates.

We had commercial success with AI in the quarter, including strong early returns with flex credits, and we expect this to accelerate going forward. But I'm watching more closely as adoption. Today, more than 5,500 customers are using one or more of our organic agents. That's up more than 35% from last quarter. As we continue to build organic agents on Workday, we're also deeply integrating acquired agents, like those from Paradox, HiredScored, and Discord into our platform.

And we've signed some of the world's largest brands for our LIDUS program, which gives strategic customers some enterprise free for a year. We've rolled it out to our own workmates last month, and they're hooked. I expect these customers will be, too, and we know that if we deliver the value, modernization will follow.

After two strong back-to-back quarters, I really like the momentum we have going into the second half of the year. Garrett and our product and technology teams have our innovation engine humming again. While Robin and his team have done a phenomenal job building pipeline that will drive more new business. They will cover the numbers shortly, including the impact of AI adoption on our outlook for the second half and fiscal year 28.

I spent much of the past six months with customers. Last quarter, I told you I had met a single customer looking to replace Workday with something they're building internally or buying from a startup. A quarter later, that hasn't changed. The reason is the deterministic rails I've talked about before. Our agents are lawful. They work inside the permissions, policies, and business processes a company already runs on. That's why our customers can trust them with the work that matters, and it's why we're seeing our organic agents really take off this year.

One of those customers is BMO, a top 10 bank in North America. They piloted self-service agent with 500 employees in May, and successfully rolled it out to all 55,000 employees in June. SSA gives BMO employees and managers a personal, intuitive way to get HR questions answered and worked on faster and easier. And because it's native to Workday, the agent understands employee permissions and which HR policies apply to them.

That built-in context is exactly what makes this a responsible and scalable AI deployment for BMO. BMO is one of many. More customers are moving from pilots to production with our agents.

But we know that no one company will build every agent. The future will be open and CIOs need a trusted platform to connect at all.

We're building for that world with Data Cloud and Developer Agent. Data Cloud lets customers use their Workday data alongside the other systems they run on without copying or moving it. Customers see the value and demand is building.

Developer Agent, which we announced at DevCon in June, makes it dramatically faster and easier for developers to build on Workday using natural language. It's one of the innovations I'm most excited about. I'll add just one thing, because I don't think it's fully understood. Workday is not just an enterprise apps company. We're an enterprise context platform and we're built that way from the start.

Agency context to do anything useful. Who reports to whom, what the policies are, how money moves. So whether a customer runs our agents or builds their own on top of Workday, we win either way. Gay will go deeper on this shortly.

Finally, rising has come into Las Vegas October 12th through the 15th. I have to tell you, Karen's team have walked me through our rising announcements and I was blown away by how much innovation we have to show, not slides.

Live demos and customers talking about the work our agents are already doing inside their businesses. That's the proof I care about most.

We'll also be hosting our financial analyst day at Rising and I hope to see you all there. To close, as many of you know, I'm an unabashed optimist, but I'm not leaning on optimism here. We're shipping air products. Our customers are adopting them rapidly and it's happening across the board from the agents who built ourselves to the ones we've acquired.

This is Workday's moment and never felt better about where we're headed. With that, I'll hand it to my Vulcan mind-milled friend, Garrett.

Thanks, Anil and hello everyone. In Q2, once again, we have accelerated our roadmap and added new AI capabilities across our platform. All of it builds on our unique world model of work and we keep moving more agents into production at scale.

So let me put this into numbers for you. Nearly $600 million in ARR from our AI SKUs, and that is up more than 200% over year and up over 20% from last quarter. Here is what this looks like in practice. In recruiting, more than 30 million candidates interacted with our talent acquisition agent and the AI automatically scheduled more than 8 million interviews last quarter alone.

In functions like procurement and legal, Workday contract intelligence agent drove nearly 70% year-to-year growth in agreements processed. And in HR case resolution, more than 100 customers moved SANA self-service agent into production last month. Since February, we have nearly doubled AI tools and skills in the agent that run in production. So now, let's talk about three key innovation highlights from last quarter, SANA, adaptive decision intelligence, and our deployment and adoption agents.

Let's talk about SANA Enterprise first. SANA Enterprise is our AI workbench for HR Finance and IT to build, orchestrate, and run AI across the entire enterprise. In Q2, we have shipped 23 new capabilities in SANA that open up what customers can do with it. For example, our brand new SANA agent builder lets any user create an agent in natural language and then run it on a schedule or trigger it on a business event. Every one of those agent runs in a secure sandbox.

We now have one shared agent in box in SANA. Their work is managed in one place, human or AI. And we have added custom MCP connectors so SANA can connect to any third-party application out there. This innovation, it's already changing AI adoption inside and outside of Workday. Here is what we have done. We wrote out SANA Enterprise internally on August 4th and already have 12,000 active users on it. These workmates have built 22,000 custom agents in three weeks alone.

Now this is what AI looks like when it's embedded into real work. We have also brought Workday Learning and SANA Learn together into one product. It is in GA now with a learning admin agent, AI-based course generation, and AI tutor for self-paced learning and MCP support as part of our open platform. And the results are clear. In SANA, monthly active users grew almost 190% over year, and 78% of all published courses were created with AI.

And we are taking the next major step of SANA for Workday. As we have shared in the past, SANA is our vision for the IT ribbon work experience across Workday and beyond. With our unique meta-driven platform, we can now unlock all Workday processes through Generative UI in SANA. So by Workday Rising in October, SANA's conversational AI experience will be the default home screen for Workday.

The second big AI innovation is decision intelligence. As you know, frontier models are good at analyzing data, and they are unable to close the loop back to work actually happens. Adaptive decision intelligence is different. It is our AI agents for analytics and planning that runs, analysis, generates plans and takes government action directly inside Workday, always under our security model audit rails and governance rules.

On July 31, Adaptive Decision Intelligence entered into GA. And this was one of the fastest products GIF ever delivered, from concepts to general availability in four months. And it's built organically within Workday. Here is what we have shipped all AI agents based. Life analysis of plan data, scenario modeling, sensitivity analysis, regression models, version comparison, and AI recommendations that you can submit as government plan updates with approval, audit trails, and stay in this detection.

And as of today, 170 customers have already purchased it. And one AI customer told us it gives finance teams answers they can actually defend.

And you're not stopping here. We just kicked off the early adopter program connecting Adaptive Decision Intelligence directly into Workday Finance to give it access to journal lines, plan data, and to our accounting center. Our customers can now tie AI to financial outcomes with transaction level evidence. And next, we're going to move this to workforce analytics, connecting live people data with financial decisions in one AI agent experience.

And our third AI highlight for this quarter is deployment and adoption agent. Deployment age momentum has been dynamite. As of today, we have more than 4,600 customers, almost 24,000 users, and query volume searching nearly 500% in Q2. Muhegan gaming is now life. And Muhegan says the downstream impact is priceless. Deployment age and deploys updates so rapidly that employees remain focused on their core business.

An hour long-term target is to reduce deployment task time with this agent by 80 to 90%. And once customers are live, adoption agent helps keeping them ahead of what's new. It surfaces the releases that matter and recommends the next step for their environment. Adoption agent entered G8 just last week. We had more than 200 customers signed on in the first three days alone, with 20,000 release notes evaluated and achieved a 94% customer satisfaction rate.

One customer solution health used adoption agent on their latest release. They ran it across every functional area, and they've cut that release time down by 70%. And here is why this matters so much. Faster deployments, faster adoption, and a lower cost to serve. A fueling, workday goes, momentum in the medium enterprise. Workday goes, win rates, and deal volume of both increasing in Q2.

And here is one more note for you. Travel agent and SANA for ITSM have both moved into early adopter with the first customers already boarded.

And the bottom line of this is this. The world model of FERC is not a thesis. It is in production. It is compounding. And you can see it in the numbers. A key part of this question is our open platform strategy, unlocking the power of workday for our customers and for the entire ecosystem around us. I'm going to pass it to our very own G8 Monroy, Workday CTO, and the leader of our technology platform to share our progress here. G8, take it away.

Thanks, Garrett. It's good to be here. Building on what Anil said, it's almost as though Workday was built for AI 20 years ago. Having one day to model, one security model, one version for every customer from the start is an incredible advantage. And it's a big reason why it came to Workday. Over the last several years, we modernized that foundation to handle the complexity of running AI at scale. We built tools that can query Workday using industry standard analytic solutions and an MCP layer so AI models can talk to our APIs in natural language.

But access is only half of it. The stakes are different in the world of people and money. That's why we've updated our security model and built the agent system of record, so our agents act with the same permissions, rules, and controls our customers already trust. An agent isn't just a model. It's identity, permissions, guardrails, logs, and governance, all working together.

That's what separates a lawless agent from a lawful one. A lawless agent will attempt to take action on its own. A lawful agent takes action because the system allows it. Inside Workday's deterministic rails, every step is checked against the security model, the business process framework, and the compliance logic before it runs.

In Q2, we advance our platform strategy in three ways, making it more open, extensible, and lawful. Starting with being open, CIOs aren't going to settle for a single rigid AI stack, so we built Workday with three paths in. Developers building custom agents on their own AI stacks need safe, governed access to Workday, both for querying data and for taking action.

Data Cloud gives external agents and partners like Snowflake, AWS, and Google zero copy access to HR and finance data. In Q2, we close six deals with all customers choosing our premium Data Cloud Pro Edition. Data Cloud remains on track for GA and Q3. And at DevCon, we launch agent-ready tools over MCP. These agent APIs allow third-party agents on any stack to safely get worked on inside Workday, like updating an employee record or approving an invoice without breaking corporate rules.

Agent-ready tools are now available to early adopters through Workday extend Pro with GA and Q3. Today, more than 1,600 customers use Workday across third-party services like Teams and Slack, as well as Copilot and Gemini, which we added in Q1. Over 100 of those customers are already leveraging self-service agents directly in the tools they use every day. Whether a manager approves spend or logs and expense right in chat, the underlying policy checks and compliance stay securely anchored inside Workday.

And some work simply outgrows a chat bubble, travel, and IT service management, which Garrett mentioned earlier, those need a canvas that work lands in Sana, where we own both the reasoning engine and the experience. Whether a customer uses their own agent, uses our agents with their own front door, or Sana, we meet them wherever they work. And because all of it runs through Flex Credits, we monetize every action happening on our rails, regardless of the path. In Q2, custom maps built on Workday extend grew over 90% year over year, even when building required specialized engineers.

Our new developer agent removes that bottleneck. Now, builders can generate policy compliant workflows using plain language directly inside tools like cursor, codecs, and cloud code. This takes development time from weeks to minutes and opens up the platform to all builders. Customer uptake was instant. Developers had built more than 3,000 custom apps and agents since DevCon. As we expand these plain language tools across our user base, we fundamentally shift our business model. You don't have to be an engineer to build on Workday.

Finally, none of this matters if the transactions are not lawful. In Q2, we launched Agent Passport. It gives security teams a verified, audible record that an agent was tested against critical risks before it deployed and is monitored after. Cisco joined as a launch partner, bringing Cisco AI defense to test agents against leading standards and protect them in production.

We'll add more security partners and attestation stamps in coming months, giving CSOs the confidence required to route higher value work through Workday. In short, our customers can work where they want, build in plain language, and trust every execution.

With that, I'll hand it to Rob.

Thanks, Gabe, and hello, everyone. Our customers trust Workday with the most important parts of their business, and we see it in the field every day. Companies on legacy HVM and ERP systems are realizing they can't get value from AI without modernizing their core. They want one platform they can trust with security and reliability, which is a big driver behind the demand for Sonic Enterprise. AI is amplifying the value of the software stack.

Customers already trust. You can see those tailwinds in our Q2 results. With more than 65% of the Fortune 500 running on Workday, we continue to bring on some of the world's leading brands. In Q2, we form new relationships with companies such as KPMG, U. S. , Dankskabunk, BWX Technologies, and Guide Us. In medium enterprise, as you heard from Garrett, Workday Go is taking off. Customer volume increased more than five times over Q1.

Across large and medium enterprises, AI is a key reason companies are modernizing their core on Workday. In fact, over half of our net new wins in Q2, signed up for one or more AI solutions. And we're seeing even faster AI adoption across our base. As customers leverage our unmatched HR and finance context to truly unlock the value of AI in the enterprise.

Genesis is using our new financial audit agent, the Chief Accounting Officer described it as the first step toward the dream of getting a touchless audit. Seminole Hardrock Services is using payroll agents to automate complex tax and compliance calculations for 28,000 employees.

In Carlisle Investment, one of our first 20 customers back in 2007 added Sonic Enterprise to power an AI layer over the employee experience. This falls on the other AI agents they recently added, including recruiting, contract intelligence, and planning.

Sonic Enterprise had an exceptional launch in Q2. New customers included AstraZeneca, Novotas, Caterpillar, and Delivery Hero Group. Since we combine TONA Learn with our core learning management system, we've seen a sizable jump in our overall learning business, which more than tripled quarter over quarter.

Adaptive decision intelligence helped drive strong performance across the entire planning business. And our ecosystem is moving fast with it. Partners have held both more than 100 industry-specific use cases in a little over a month. In late May, we made Sonic for Workday, and Sonic's self-service available to all our customers on our AI terms of service.

That drove a surge in the number of customers that have found a universal main service agreement, which gives them access to our agents' and our AI capabilities.

That strategy clearly worked. More than half of our customer base is already migrated to the UMSA, and that momentum is exhilarating.

Our focus now shifts to driving adoption through Flex Credits. We've already signed 200 customers this quarter, and we expect to significantly grow that number in the second half as R2 adds more GA agents and expands our platform and data cloud capabilities.

We continue to see strong execution across the globe. North America, our largest market, had an exceptional quarter, anchored by U. S. large enterprise and another strong quarter in Canada.

A mere growth solid growth. A strong performance in France, Germany, and the Nordics. AI now accounts for nearly one-third of new ACV in a mere.

Japan also had a standout quarter. Further proof that our continued investment is paying off. I'm proud of the results our teams delivered across the business in Q2. Let me close where I started with trust.

For more than 20 years, organizations have trusted Workday with their most critical work and now with the AI. That's a durable advantage, and it sets us up one even stronger second half. Now over to Zane.

Thanks, Rob. Good afternoon, everyone, and thank you for joining us. Building on Rob's remarks, our second quarter results reflect the continued strength of our platform as organizations rely on Workday to power their most critical HR and finance operations.

Subscription revenue in Q2 was $2.471 billion, up 14%. Professional services revenue was $178 million, resulting in total revenue of $2.649 billion, growth of 13%. Looking at our results by geography, U. S. revenue totaled $1.97 billion, an increase of 12%, while international revenue was $682 million, up 17%, benefiting from stronger performance over the last few quarters.

Turning to backlog, 12-month subscription revenue backlog, or CRPO, ended the quarter at $9.03 billion, an increase of 14.2%. Growth was again fueled by expansion within our existing customer base, with AI increasingly a driver alongside a steady contribution from new logos.

Total subscription revenue backlog ended Q2 at $27.4 billion, up 8% from a year ago. The year of a year growth rate was impacted by a continued mix shift towards customer-based bookings versus net new, and the mix of industries that drove our net new bookings. Growth revenue retention remained strong at 97% for the quarter, and net expansion from existing customers once again led to about 60% of our subscription revenue growth.

Non-GAP operating income was $824 million for the quarter, representing a non-GAP operating margin of 31.1%, driven by a combination of revenue outperformance and ongoing cost discipline.

Our gap results in the quarter included a $374 million non-recurring tax benefit related to an internal IP transfer. Operating cash flow totaled $520 million in the quarter, and free cash flow was $460 million. The year of a year decline was impacted by the timing of the payroll calendar, which had an additional payroll run to this Q2.

We repurchased $1.3 billion of shares during the quarter, completing the $5 billion repurchase plan that we discussed at our Financial Analyst Day last September, six months ahead of our target. Buybacks will continue to be an important part of our capital allocation philosophy, and our board has recently approved a $4 billion open-ended share repurchase program. We ended the quarter with cash and marketable securities of $3.4 billion.

Our headcount, as of quarter-end, stood at 20,896 workmates around the globe. Turning to our outlook, we are pleased with our first half results, and we now expect FY27 subscription revenue of $9.94 to $9.95 billion, growth of 13%.

For the third quarter, we expect subscription revenue of approximately $2.515 billion, growth of 12%. We expect Q3 CRPR growth of 11 to 12%. We lapped the paradox acquisition in the third quarter, which added over a point to last year's Q3 CRPR growth. For Q3, we expect professional services revenue of $175 million, and for the full year, we expect $710 million.

We continue to prioritize investment in AI alongside strategic investments in the core, while driving efficiencies across the business. With that, we are increasing our FY27 non-gap operating margin guidance to 31%. For the third quarter, we expect a non-gap operating margin of approximately 30%. We expect to continue expanding margins while positioning ourselves for future growth.

We expect Q3 gap operating margin to be approximately 18% points lower than our non-gap operating margin, and the full year FY27 gap operating margin to be approximately 18 to 19 points lower. Our FY27 non-gap tax rate estimate remains 19%.

We are maintaining our FY27 operating cash flow outlook of $3.45 billion, and we continue to expect FY27 capital expenditures of approximately $270 million, resulting in free cash flow of $3.18 billion, growth of 15%.

As our Q2 progress demonstrates, embedding AI across Workday's platform provides a significant opportunity to drive customer value. While we're still in the early innings, demand for our agent portfolio is building. We're focused on driving discovery and adoption through initiatives like our Lighthouse program, which we believe will benefit subscription revenue growth over time. And we continue to execute against a framework that delivers both top-line growth and margin expansion.

With that in mind, and ahead of our upcoming financial analyst day, I'd like to provide some early context for how we're thinking about next year. Our current target for FY28 subscription revenue growth is consistent with our expected second half FY27 growth rate of approximately 11%. We also see potential upside across new products, including SANA Enterprise, Workday Extend with Data Cloud, and our AI agents, all of which are seeing great early demand.

In addition, we expect our non-gap operating margin to expand by at least two percentage points next year. We're encouraged by the significant opportunity ahead to continue to deliver long-term earnings and free cash flow growth. We look forward to diving deeper into our platform innovation at our financial analyst day on October 13th in Las Vegas. And we hope to see many of you there.

With that, I'll turn it back over to the operator to begin Q&A.

Thank you. Yeah, so I'll take the first part on the headless transactions. We are pretty much indifferent whether somebody uses from a profitability perspective. I think it'll show in a revenue perspective whether a company buys our agent uses our APIs which we get to monetize or go through data cloud which we get to monetize. So, or the other option is to build their own agents using Workday Extend AI. So we feel like we're pretty covered in all ways that AI gets used and it doesn't take away any opportunity.

If anything, it grows our market opportunity where it has been before. The second part I'll probably ask Rob to weigh in. What I actually see, Gabriel, is that customers are making five-year, seven-year decisions on new platforms and AI is a huge decision point for them. And if anything, it's impacting our win rates on the platform because we're viewed as the much stronger player on terms of an AI vision and AI agents than our legacy competitors that we all know so well.

Gabriel, from my side, in anti-compression on the core, what I see is customers starting with the AI discussion and wanting us to be the AI platform for GenTix on ACM and on finance.

And I think that's driving a broader conversation and a much broader conversation to the value we offer. You can see it actually in the amount of uptake on the agents that we've started to announce and bring to the fore, where customers, this is where they actually want to see where HR is going and where finance is going in the future. And just to add to what Rob said, our competitors don't have one data model across their multiple versions of their applications.

These legacy companies might have six or seven different versions. And as a result, they can't aggregate the data model to drive the AI models.

And so we're just way ahead of where they can be, not just where they are now, but where they can ever be from that AI perspective in terms of driving outcomes using AI. Hey, Gabriel, I'll just add the early look into FY28. It's just to give you a target in how we're thinking about it. As you can tell, we have a number of initiatives in place and we're very enthused by what we're seeing as early indicators in our AI products.

Not all of that has been factored into our FY28 outlook.

Thank you. I obviously can't comment on the latter. On the former, we're going to do what's in the best interest of our customers. And so I'm going to ask Garrett to talk about how we think about the different models.

And, you know, we work with all of them, but we're trying to do what's best for our customers, both from our performance but also from a cost perspective. As Neil has said, right, we're really focused on driving the right ROI and economics for our customers. So as of today already, we deploy a large set of models for multiple vendors. We have small models, open weight models, and large frontier models, all in this set of models that we use to build our AI systems and agents with.

And quite frankly speaking, we are pretty excited about open weight models. We're going to adapt this over them. They give us a much stronger optionality when you think about international and sovereignty. So it's a core tenant, you know, for us as Neil has said to be model agnostic and because of the different characteristic already, we get great benefit from them.

And now as the benchmarks that are getting closer, we have signed the open weight initiative as well as other companies. We truly see, you know, a real big upside, you know, for us and our customers to drive better ROI out of our our investment. And last comment, we also started our own research foundation inside of Workday. So we have an own research lab which specifically actually focuses on getting high accuracy HR and finance, AI systems in place.

One of the things that this team is doing right now is actively actually exploring opportunities for us to not only use open weight models, but truly to specialize them to our purposes and see what lift we get out of that.

Yeah, I'll start. Thank you for the question, Kirk. So first of all, you're right in that it's early days. The difference on these agents versus traditional applications, they iterate and become better so much faster. So I'm very optimistic that we're going to see, you know, ramping up usage of these agents faster than we ever saw of our apps.

And we're also new to the Flex Credit Consumption Model. And, you know, that's a delayed gratification model that is, frankly, newer to work day. Again, very optimistic. We're seeing great early signs, but I think that's one of the reasons for cautious optimism going into next year, because we are aggressively moving towards a hybrid model between subscription and this consumption model.

I don't actually see it as crowding out. I actually see it as, you know, customers, new customers, choosing workday because of our ejectic strategy, existing customers, they have an AI budget. And now we have products that actually fit in that AI budget, which is the big win for us. But again, a lot of these new AI products are consumption based. So we won't see the impact from the revenue until, you know, until months or a year down the road.

So Rob, Rob, what do you want to add to that? Yeah, I would add there's a lot of excitement around AI. But our focus has really been about getting adoption. And when you look at bringing the agents, you've got to harden them. So you've got to get them adopted. The more customers that go through early access, the more customers they're adopting, these products just get better, really fast.

And so that's our emojis being around, how do we get adoption for us? The more customers we have access to our agents, the more they're using those agents, and that's how we're measuring them and moving the company in that direction. And I think you can actually see it in the amount of UMSAs we find. Like our UMSAs have really started to take off. Customers really want that. They need to have the UMSA to actually get into the AI world.

And then you link that to the data play and the extend pro and what you're doing with the developer agent. As Neil says, this is a lag in it. But our conversations are really good. And it's in almost every conversation irrespective of the level of customer. I'm speaking to whether it's a C-level executive or the ACM team or the finance team. People really start to understand that work is really into the genetic world in a big way.

Hey, Kirk, and just to add to that, as we mentioned, we've got 5,500 customers using our organic agents. And just over 200, I think, that have actually signed up for Flex Credit. So that's the delay that Neil's alluding to, and that's been factored into our CRPO guide as well as our revenue guide for the remainder of this year. But also our cautious optimism heading into FY28 and beyond.

I'll start. And I think both Garrett and Gabe should weigh in. We are trying to be very thoughtful in the way that we're building our agentic solutions. They're not meant to solve simple problems. Anybody can solve the simple problems. I want to look at what we're doing with the self-service agent. It's really hard. What we're doing with the financial audit agent is really hard.

But by building these agents and coming out the other end, they add tremendous value to our customers. And frankly, from a competitive perspective, they're really, really hard for anybody to compete with because they're so deeply embedded in the bowels of Workday.

I don't know when we arrive. I think we're arriving now. And I think it just gets better over the next couple of years. But it's all about adoption and customer success. We have to have agents that have real ROI. And that's been the lens we've been looking at it since I came back. We had a lot more agents when I came back. We killed a lot or we rolled them into bigger agents.

And the ones that we have right now, I'm very optimistic.

They're all very meaningful to our customers. Let's have Garrett and Gabe add to that. Yeah, I had a couple of points on the top of the stack, if you will, and then Gabe on the platform side. But to give you a few concrete points on what are the key milestones that we're looking at that we truly believe are landmark moments for Workday, as well as for the industry of moving into the AI era and enterprise SaaS.

And one of the biggest ones for us is how Work is going to change and the Work experience with SANA. You heard in the prepared remarks that SANA is going to be the default home screen for Workday coming rising this year. Rob spoke about the Lighthouse program as SANA Enterprise. And I have shared, you know, I just changed the world of work inside Workday already.

We have 24,000 agents being built in just three weeks. You know, we really see this coming this rising as a key moment because the face of SaaS and frankly we believe it's a stark difference to what that work experience is than what you get from generic JET co-pilots because they're deeply tethered into the system of action and the system of work.

Secondly, you heard, you know, that our agents are making a lot of progress. And then we say agents, we really mean AI systems that automate large parts of the value chains and it's our in-finance. We just put decision intelligence into GA which is truly a reimagination of how you, you know, collaborate with AI on enterprise data. We are about, you know, to bring new functionality to recruiting agents. You've heard earlier how much momentum that has already. We are making great progress in one of the areas that Anil is most excited on, financial audit and financial compliance agents. All of these agents are coming out, you know, either they are out already or coming out at the rising and at the end of the year.

And I think when we come together in the next callbacks and you look at the age of momentum we have built until then, I think there will be no question mark left anymore about work being an AI company or not because the world of SaaS will have changed. Gabe, over to you for platform.

Yeah, and thanks for that and thanks for the question. In terms of just the timeline view on this on the platform side, it's pretty obvious that the AI technology evolution has been at a frantic pace, right? We're seeing rapid and continuous evolution and I don't really see an end to that. It's going to be continuous constant evolution and so the way we're looking at this is as these new integration patterns change, as protocols change, as identity approaches change, we're on a process of taking the new capabilities, pulling them into the platform, driving adoption, as Rob was mentioning, and then delivering outcomes and ROIs. And the key is going to be doing that continuously in a loop.

That is the art of building AI systems. And that's going to be a long journey. This is not something that's going to end anytime soon.

So maybe let me start and then I hand it over to Rob and probably saying on the outlook question. What we are seeing is that the workload that these agents are driving are quite substantial. When you heard about early the numbers and our volumes, we are driving recruiting already and the key of the ambient agents, the agents that are running in the background, you know, we see a substantial opportunity, but we are not comparing it to software spend. Actually, you know, what we are modeling it against is the labor spend that companies have in those given roles already and think about what is the share of the agent that actually will, you know, get, you know, basically transferred from a labor spend into an AI agent spend for that specific task group.

You know, right now, though, and Rob has said it, so I want to repeat that, our focus is really on adoption, adoption, adoption, right? This is the way, you know, how you actually build great AI systems. And so what we are doing right now, and Rob spoke about it, right? We are incentivizing this with programs like the Sana Lighthouse program that we basically allow customers to use it for free in the first year, self-service agent, one of the most consequential agents we do, we put out a promotion that we are not, you know, putting on a flex-weighted meter until the end of August or September.

So, you know, the question that you're asking, you know, how does this translate now to sales and dollars?

Right now, it's difficult to answer because this has not been our focus point, but then you ask me for the, you know, potential that we have because on how much workload it actually processes, it is incredibly substantial, and this is why saying as that, right, we are so bullish as this being an upside because we can see on the one side the usage increasing and we see it on the inside that this represents significant monetization opportunity for us.

I mean, you kind of said it, look, I'm super excited, you know, we focus on the adoption side of things, now we stand to focus really on the consumption side of things. So, as we move into this, the sales motion changes, and what you see with, you know, broad adoption of SONA self-service agents, it can arise all the other agents as well because it gives it a completely different look and feel on how you utilize Workday in the future and what kind of users can work with Workday, pretty much anyone.

I watched the CFO and a COO look at the decision intelligence agents and it was just, you know, they were completely blown away. So, I think the opportunity for us is really good. The back half of the year looks really positive for us. And I can't see that changing.

And we are, you know, locked step in making certain that these agents as you adopt them and consume them, the quality of the agent continues to improve all the time. And I think that's what gave men by, it's a circle, it's a loop. And I think we got a really good process on how to define that loop. The field is excited by it. Every single one of my customer conversations is really, really interesting. And even customers that I've known for years that are not really in the HCM or finance space really want to understand what we're doing and want Workday to lead in the space of HCM and finance. And then lastly, I would just say, you know, don't forget, but we've also got agents like talent acquisition agents and a document where we actually measure by different statistics.

And that, you know, with a look at talent acquisition agent, we had more than 30 million candidate interviews in Q2 with 8 million interview schedule.

So the numbers are starting to show up, and it'll continue to improve over the next month and quarters. Yeah, Alex, I would just add, you know, this quarter we talked about, you know, roughly $600 million in AI, ARR, which is up from, you know, around just over 150, just a year ago. So we expect that trend to continue, as Inil mentioned earlier on the call, this is all about customer success and customer value, and that's going to be the ultimate driver of our revenue. So, you know, we've got some of that built into the back half of this year, as you would expect, but really growing from F by 28 and beyond where the AI component becomes a significant part of our incremental ARR.

So we're excited about the future, as you can tell, and we just want to be thoughtful as we monetize it.

I'm assuming there's no big change in the prioritization on investing, so perhaps you'll probably address this at the investor day, but a couple of things that might be driving that, thanks so much.

Yeah, Carl, thanks for the question. You know, as Inil mentioned earlier this year, this was the year where we intentionally invested heavily in AI and brought on some great talent and feel like we're doing a lot in that area. And I think we've done a credible job prioritizing and then leveraging size and scale and really being thoughtful on how we drive just thoughtful expenses in the future. So it's a continuation of that. We're doing, I think, a pretty good job utilizing AI ourselves internally and expect that trend to continue. So it's really been about the team focusing on what matters and rethinking what we are doing and as importantly what we're not doing and where we're not going to be spending money in the future.

And it's that kind of focus that I think is also driving the increase. And we believe that the two points for next year is a good starting point.

As you know, we've increased to 31% this year and we believe we can continue to see that improvement as well as leaning in as much as we have in investments and critical areas around AI and our platform. I would just add we're leveraging AI internally and we're doing more with, you know, flathead count. That's the goal and I think that's a really important direction for us to head.

Thank you. Well, I'll just say that they're all doing well, but most importantly, they're all deeply integrated already. We don't ever buy technology and just leave it on the outside. We deeply integrate it right away so we can deliver that unified experience.

Maybe, Garrett, you want to talk about where the products are headed. Yeah, awesome. So it's a great question because actually, you know, we kind of spoke about it earlier.

The big products that you can think of is hired score on the recruiting side in paradox. They're actually both are part of our talent acquisition agent now. So basically, agentic skills as we involve our AI systems. And both of them have tremendous momentum. I'm going to hand it over to Rob in a second to talk about that. But we are not really thinking about this as this is separate from the core as an ELAS set. You know, we have a really good M&A regime that we look for strong technical fit.

And so as we move forward with work, they're recruiting hired score and paradox. They are an integral part of that. And they're all coming to get on the role-based agent for talent acquisition. Again, write a sole idea. This is the embodiment of an actual recruiter with all of these skills. And on the side, which had an absolutely blowout quarter as well. Gang bust the growth.

We put it into TA in a combined product. So Workday Learning and SANA Learning is actually one product now. It's in TA already. And it's driving substantial growth of our customers. But as we take it to them, we don't portray this as Workday and others. You know, this is the learning agent from Workday. This is the recruiting agent from Workday.

And those acquisitions, they are just widening the breadth of skills these agents have. Rob? Yeah, I'd simply say, I mean, we drove more than 100 million of new ACV with our AI products, which is 25% of all new ACV. So you just look at those numbers. And then our ARR numbers are up at 600, close to 600 million now.

More than half of the new Intel Q2 signed up for AI solutions.