Workday’s pop-up pavilion ahead of the World Economic Forum (WEF) in Davos, Switzerland, Saturday, January 19, 2025.
Holly Adams | Bloomberg | Getty Images
Software maker stock price working day Shares fell as much as 10% on Wednesday after the company revised its full-year subscription revenue forecast and analysts lowered their price targets, citing lack of upside.
Many software stocks are under pressure in 2025 as commentators worry that generative artificial intelligence tools that can quickly write lines of code could pose a risk to incumbent companies.
This year, Workday announced the launch of several AI agents and expanded its services through startup acquisitions. Earlier this month, Workday completed its $1.1 billion acquisition of AI and learning software company Sana.
Despite the move, Workday’s third-quarter earnings report on Tuesday failed to impress Wall Street.
The company expected subscription revenue of $8.83 billion for the fiscal year ending January 2026, representing 14.4% growth, but that number was only a $13 million increase from the company’s guidance in August. Zane Lowe, Workday’s finance chief, told analysts on a conference call that the new numbers include contributions from Sana and a contract with the U.S. Defense Intelligence Agency.
“Investors probably would have wanted more of a beat-and-raise quarter,” Cantor Fitzgerald analysts Matt VanVleet and Mason Marion wrote in a note to clients. They have an equivalent Buy rating on Workday stock. They wrote that the new numbers are “with little guidance.” Analysts maintained their 12-month price target for Workday stock at $280.
Stifel has a hold rating on the stock and lowered Workday’s price target from $255 to $235.
“The underlying momentum of the business does not appear to show any signs of stabilizing,” Stifel’s Brad Riback and Robert Galvin said in a note.
Rybak and Galvin said Workday has hinted that growth from its 12-month subscription revenue backlog will continue to slow once the impact of acquisitions is removed. They write that they expect this trend to continue as customers sign up for Workday’s AI products.
The results were “like turkey without gravy,” Evercore analysts wrote in the title of a note that rated the stock a buy.
RBC analysts, who have a Buy rating on Workday stock, also lowered their price target to $320 from $340. Despite the mixed guidance, they wrote in a note to clients that fiscal third-quarter results beat consensus. Additionally, Workday CEO Karl Eschenbach said on a conference call Tuesday that AI products contributed more than 1.5 percentage points to annual revenue growth.
“We remain encouraged by early AI momentum,” RBC analysts wrote.
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