Last Update 10 Feb 26

Fair value Decreased 3.12%

WDAY: Returning CEO And AI Focus Will Shape Next Chapter

Analysts have trimmed their price targets for Workday, leading to a lower fair value estimate of about US$264 from roughly US$272, citing a tougher path for share gains, questions around mid term targets after leadership changes, and a more measured view on growth and AI driven upside.

Analyst Commentary

Recent research paints a mixed picture for Workday, with many firms trimming price targets while still seeing room for execution on growth, AI and margins. For you as an investor, the key threads are how dependable the growth profile looks, how leadership changes shape the AI roadmap, and whether the stock already discounts current concerns.

Bullish Takeaways

Several bullish analysts keep positive ratings even after lowering targets, pointing to solid quarterly results where revenue, subscription revenue and cRPO were all above consensus. This supports the current business execution case.
Some research points to raised FY26 subscription revenue guidance and slightly higher full-year revenue. Even if this is partially offset by organic growth questions, it signals confidence in the subscription model and medium term growth potential.
Commentary around early AI adoption and momentum with partners, along with views that a returning CEO is well suited to lead the AI transition, is seen as a potential long term driver for product relevance and customer stickiness.
Certain firms maintain Overweight or Outperform stances while trimming targets, suggesting they see the recent pullback, including a 6% to 7% share move after earnings, as more about an expectations reset than a breakdown in fundamentals.

Bearish Takeaways

Bearish analysts cite a tougher path for additional share gains, with some expecting the next phase of market share improvement to be harder to achieve. This can cap how much investors are willing to pay for growth.
Several target cuts, including reductions of up to US$100, point to concerns that mid term subscription revenue guidance near 13% leaves investors questioning whether growth will stabilize or keep slowing.
There is caution that parts of recent cRPO and guidance are supported by M&A contributions rather than purely organic strength, which can make growth quality a focus and weigh on valuation multiples.
Leadership changes and questions around mid term targets are adding a layer of uncertainty, with some bearish analysts flagging that it may take time for the market to gain confidence in the updated plan, especially around AI monetization and margin trajectory.

What's in the News

Co founder Aneel Bhusri is returning as CEO, with former CEO Carl Eschenbach shifting to a strategic advisor role, as Workday focuses on its next chapter around AI and kicks off fiscal 2027 (Key Developments).
Workday plans to cut 2% of its workforce in customer facing roles, according to a Bloomberg report, which ties directly into how the company is reshaping its go to market and cost structure (Periodicals, Bloomberg).
The company launched Workday EU Sovereign Cloud to offer AI powered HR and finance tools with data residency and control inside the EU, targeting customers that prioritize data sovereignty and regulatory compliance (Key Developments).
Workday expanded its Workday GO offering, including Workday GO Global Payroll, to provide midsize companies with a unified way to manage HR, payroll, and AI capabilities as they operate across multiple countries (Key Developments).
New product and partnership announcements, including the Military Skills Mapper for veteran hiring and multiple certified integrations with partners such as Google Cloud and others, highlight a continued focus on AI agents, recruiting, and data connectivity within the Workday ecosystem (Key Developments).

Valuation Changes

Fair Value Estimate reduced slightly to about US$264 from roughly US$272, reflecting a modestly lower central case.
Discount Rate edged up slightly to about 8.67% from 8.62%, implying a slightly higher required return for the cash flow stream.
Revenue Growth adjusted down marginally to about 12.54% from 12.65%, indicating a small reset to top line expectations in the model.
Net Profit Margin nudged up slightly to about 16.67% from 16.62%, suggesting a small improvement in long run profitability assumptions.
Future P/E moved down modestly to about 39.18x from 40.38x, indicating a slightly lower valuation multiple applied in the updated analysis.

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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