Key Stats for Workday Stock
- Price Change for Workday stock: -7.9%
- $WDAY Share Price as of Nov. 26: $215
- 52-Week High: $294
- $WDAY Stock Price Target: $278
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What Happened?
Workday (WDAY) stock dropped close to 8% yesterday, even as the HR and finance software company beat Wall Street’s earnings and revenue expectations for its fiscal third quarter. The culprit was its fiscal Q4 margin guidance, which fell slightly short of analyst expectations.
Workday reported adjusted earnings per share of $2.32, easily topping the expected $2.17. Revenue came in at $2.43 billion, just above the $2.42 billion consensus.
However, Workday guided for a fourth-quarter adjusted operating margin of at least 28.5%, missing the StreetAccount consensus of 28.7%. It also forecast $2.355 billion in subscription revenue for Q4, roughly in line with the $2.35 billion estimate.
For the fiscal third quarter ended October 31, subscription revenue totaled $2.24 billion, up 15% year over year, and the adjusted operating margin was 28.5%.
The company’s 12-month subscription revenue backlog increased 17.6% to $8.21 billion, slightly above guidance even before accounting for the recently closed Paradox acquisition.
CEO Carl Eschenbach highlighted that AI products are gaining serious traction, contributing more than 1.5 points to ARR growth in the quarter.
More than 75% of net new deals and 35% of customer expansions included at least one AI product. The company has logged over 1 billion AI actions on its platform year-to-date, with adoption accelerating.
Workday closed its acquisition of conversational AI recruiting platform Paradox during the quarter and announced plans to buy AI learning startup Sana for $1.1 billion.
It also revealed an expanded Workday GO offering, including global payroll capabilities and an AI-powered deployment agent that can cut implementation time by up to 25%.
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What the Market Is Telling Us About Workday Stock
The decline in Workday stock reflects investor sensitivity to margin execution, even when the top-line story remains solid.
While management maintained its fiscal 2027 subscription revenue growth target of approximately 13% and expects Q1 fiscal 2027 subscription revenue growth of about 14% year over year, the market wanted to see stronger margin performance.
Management addressed concerns about AI disruption head-on during the earnings call. Eschenbach noted that early fears about AI startups threatening established cloud software players have proven “overblown” and “flat out wrong.”
He pointed out that customers are returning to trusted enterprise platforms like Workday that have clean data, strong security, and proven business outcomes rather than experimenting with disconnected point solutions.
Some headwinds emerged during the quarter, particularly with higher education institutions that rely heavily on federal grants, which saw delays due to government funding uncertainties.
However, Eschenbach emphasized that customer headcount continues to grow modestly on a net basis, and the company is offsetting any potential seat-based pressure by increasing revenue per seat through cross-selling AI and platform solutions.
International markets delivered solid performance across Europe, APAC, and Japan, with healthcare becoming Workday’s sixth industry vertical to exceed $1 billion in ARR.
The company also landed a notable win-back at a large U.S. health insurer that had previously switched to a competitor but returned to Workday with a 10-year commitment for the full suite.
Workday stock slid on slightly cautious margin guidance despite strong AI momentum and solid execution across the business.
Investors appear to be demanding more proof that the company’s aggressive investments in AI talent, new markets, and M&A will translate into sustained margin expansion alongside revenue growth.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
