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.