Last Update 11 Dec 25

Fair value Decreased 0.59%

WDAY: AI And Margin Framework Will Drive Renewed Market Confidence

Workday's analyst price target has edged slightly lower to approximately $276 from about $277, as analysts weigh solid, largely in line quarterly results and ongoing AI product momentum against concerns over decelerating organic growth, margin durability, and the inorganic tilt to recent cRPO outperformance.

Analyst Commentary

Bullish analysts highlight that Workday delivered a solid, largely in line quarter, with revenue, subscription revenue, and cRPO all tracking above consensus expectations, reinforcing confidence in the core execution story despite a volatile macro backdrop.

Several firms point to the company’s expanding AI and agentic capabilities, along with targeted M&A, as enhancing Workday's product differentiation and long term growth optionality, even if the near term contribution to reported growth is modest.

Valuation views remain mixed, with a cluster of targets in the mid to high 200s and some outliers above $300, reflecting differing levels of conviction on the durability of double digit subscription revenue growth and the pace of margin expansion.

Bullish Takeaways

Bullish analysts argue that Workday's consistent beats on key metrics and raised multi year subscription revenue guidance support a premium multiple versus peers, even after recent share price volatility.
Early traction in AI and agentic workflow products is seen as a structural growth driver, with some expecting these capabilities to deepen customer adoption and expand deal sizes over time.
Improving margin frameworks and management's commitment to further operating leverage lead some analysts to model a more attractive growth and profitability trade off than is currently reflected in the stock.
Strong momentum with the partner ecosystem and resilient demand in verticals such as technology, media, financial services, and enterprise customers underpin expectations for sustained mid teens subscription growth.

Bearish Takeaways

Bearish analysts caution that a growing share of cRPO and growth is being supported by acquisitions, which may cause investors to discount headline beats and question the quality of the growth profile.
Concerns persist that medium term subscription revenue targets, including guidance around FY27, signal a gradual deceleration that could pressure the valuation multiple if not offset by stronger AI monetization.
Some worry that reiterated non GAAP margin guidance, rather than a more aggressive upward revision, limits the near term re rating potential, especially following a sharp post earnings pullback in the shares.
There is skepticism that the expanding AI toolkit and accelerated M&A strategy will be enough to quickly shift investor sentiment on growth durability, leaving the stock vulnerable if macro or enterprise budgets soften further.

What's in the News

Workday launched the EU Sovereign Cloud to keep HR and finance data and AI processing fully resident and controlled within the European Union, addressing rising regulatory and data sovereignty demands (Product-Related Announcements).
The company introduced and expanded multiple AI offerings, including Workday Illuminate agents for HR, finance, and industries, a new Custom AI Model Library for contract intelligence, and the Workday Build developer platform with Flowise Agent Builder to accelerate enterprise AI adoption (Product-Related Announcements).
Workday announced Workday Data Cloud, giving customers zero copy access to HR and finance data in leading analytics platforms such as Databricks, Salesforce, Snowflake, and Google BigQuery to power AI driven insights and forecasting (Product-Related and Client Announcements).
Workday provided updated guidance for fiscal 2026, projecting fourth quarter subscription revenue of $2.355 billion, up 15.5%, and full year subscription revenue of $8.828 billion, up 14.4%, underscoring expectations for continued double digit growth (Corporate Guidance: New/Confirmed).
The Board authorized a new share repurchase program of up to $4 billion with no expiration date and reported completing prior buyback tranches totaling roughly $1.6 billion, signaling sustained capital return to shareholders (Buyback Transaction Announcements and Buyback Tranche Updates).

Valuation Changes

Fair Value Estimate has edged down slightly to approximately $275.64 from about $277.28, reflecting modestly more conservative assumptions.
Discount Rate has risen slightly to about 8.66 percent from roughly 8.56 percent, implying a marginally higher required return on equity.
Revenue Growth has decreased slightly to around 12.72 percent from about 12.85 percent, signaling a small tempering of long term top line expectations.
Net Profit Margin has fallen modestly to roughly 16.52 percent from about 17.31 percent, indicating a somewhat softer medium term profitability outlook.
Future P/E has ticked up slightly to approximately 41.1x from about 40.9x, suggesting a marginally higher valuation multiple on expected earnings.

Strong adoption of AI-powered products and targeted acquisitions are boosting cross-selling opportunities and supporting sustained growth and higher average contract values.
Expansion into new markets and investment in global presence are increasing revenue diversity while operational efficiency initiatives are enhancing profit margins.
Rapidly evolving competition and regulatory complexity threaten Workday's pricing power, growth momentum, and profitability, while heavy investments may not yield corresponding efficiency improvements.

Catalysts

About Workday

Provides enterprise cloud applications in the United States and internationally.What are the underlying business or industry changes driving this perspective?

Workday is positioned to benefit from the accelerating demand for cloud-native and AI-powered enterprise solutions, as organizations continue replacing legacy on-premise systems and prioritize digital transformation, driving sustained subscription revenue growth and expanding backlog.
Broad adoption of Workday's AI-enabled HR and finance products (with >70% of customers using Workday Illuminate and >75% of net new deals including at least one AI product), along with acquisitions like Paradox and Flowise, is fueling cross-sell/upsell activity, increasing average contract values and bolstering future topline growth.
Expansion into new product lines and verticals-particularly financial management, federal government (via Workday Government), and medium/enterprise segments with offerings like Workday GO-is increasing the company's total addressable market, supporting elevated growth in revenue and multi-year backlog.
Investments in global footprint (notably UK, Germany, Japan, and now India with local data centers and leadership) are unlocking new revenue pools while providing geographic diversification that can help stabilize and grow overall revenue.
Continued focus on operational efficiency, ecosystem and marketplace development (Workday Extend, partner-driven ACV >20%), and scalable AI infrastructure is enabling operating leverage and margin expansion, driving long-term improvement in non-GAAP operating margin and free cash flow.

Workday Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Workday's revenue will grow by 13.0% annually over the next 3 years.
Analysts assume that profit margins will increase from 6.5% today to 14.3% in 3 years time.
Analysts expect earnings to reach $1.8 billion (and earnings per share of $6.42) by about September 2028, up from $583.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $2.1 billion in earnings, and the most bearish expecting $1.5 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 52.9x on those 2028 earnings, down from 105.7x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 0.75% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.57%, as per the Simply Wall St company report.

Workday Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The emergence of highly capable AI-powered HCM and ERP start-ups, enabled by rapid innovation in generative AI and "fast fashion SaaS," increases the risk of commoditization, weakening Workday's pricing power and potentially leading to customer churn and revenue pressure over the long term.
Heightened regulatory and data privacy requirements, especially in sectors like government and healthcare, may increase compliance costs and operational complexity as Workday expands; this could compress net margins and slow the pace of innovation.
Sustained high levels of R&D, M&A spending (e.g., Paradox, Flowise) and near-term operating investments needed to maintain competitiveness in AI, platform extensibility, and regional expansion may not deliver sufficient efficiency gains at scale, pressuring profitability and long-term earnings.
Ongoing macroeconomic uncertainty, funding constraints in key verticals (such as state/local government and higher education), and variability in early renewals could cause unpredictable demand cycles and elongate sales cycles, potentially impacting revenue predictability and growth.
Intensifying competition in core international markets (Europe, Japan, India) from established incumbents (SAP, Oracle) and new disruptive SaaS entrants may slow Workday's international market share gains, affecting topline revenue growth and long-term backlog expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $279.048 for Workday based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $340.0, and the most bearish reporting a price target of just $220.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $12.9 billion, earnings will come to $1.8 billion, and it would be trading on a PE ratio of 52.9x, assuming you use a discount rate of 8.6%.
Given the current share price of $230.73, the analyst price target of $279.05 is 17.3% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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