Key Takeaways
- Shares of Workday plummeted approximately 10% in extended trading following weaker-than-expected fiscal 2027 projections.
- Fourth-quarter results exceeded Wall Street forecasts with revenue reaching $2.53B and adjusted EPS hitting $2.47.
- Fiscal 2027 subscription revenue outlook of $9.93B–$9.95B fell short of the $9.99B Street estimate.
- Management announced plans to boost AI spending, which will compress operating margins in the short term.
- The stock has declined 39% year-to-date in 2026 and is down 50% over the trailing twelve months.
Workday delivered better-than-anticipated results for its fiscal fourth quarter on Tuesday, yet Wall Street’s attention quickly shifted to future prospects — and the outlook disappointed.
The enterprise software provider specializing in HR and financial management solutions reported adjusted earnings of $2.47 per share, topping the Street’s $2.32 projection. Total revenue reached $2.53 billion, representing a 14.5% year-over-year increase and marginally exceeding the $2.52 billion consensus.
However, the forward-looking projections for the upcoming fiscal year triggered the selloff.
During after-hours trading, WDAY plunged approximately 10%, continuing a difficult stretch for shareholders in 2026.
For the first quarter of fiscal 2027, Workday projected subscription revenue of $2.335 billion — representing 13% year-over-year growth but trailing the $2.35 billion analyst forecast. Management had previously indicated expectations for roughly 14% quarterly growth.
Looking at the complete fiscal year 2027, Workday anticipates subscription revenue between $9.925 billion and $9.95 billion, suggesting 12%–13% expansion. Wall Street’s FactSet consensus stood at $9.99 billion, while Workday’s earlier communications had pointed toward approximately 13% growth.
Profitability projections also disappointed. The company forecasts an adjusted operating margin of 30.5% for Q1 and 30% for the complete fiscal year. Analysts had been modeling 30.9% and 31.2%, respectively.
During the earnings conference call, CFO Zane Rowe explained that management is “prioritizing incremental investment in our AI roadmap to capture a larger market opportunity,” while recognizing this strategy means margin expansion will occur “at a slower pace in the near term.”
CEO Transition Sparks Investor Concerns
Earlier in the month, company co-founder Aneel Bhusri resumed the chief executive position, taking over from Carl Eschenbach, who had led the organization for three years. Eschenbach had earned a reputation for cultivating strong client relationships, especially within large enterprise accounts.
The leadership shift generated skepticism among financial analysts. On Monday, Jefferies analyst Brent Thill lowered his rating on WDAY to hold from buy, expressing worries about the “abrupt” exit of the highly-regarded former chief executive.
Bhusri addressed artificial intelligence skepticism during the earnings discussion. “You’ve all heard the narrative out there that HR and ERP will be replaced or relegated to the background by AI,” he stated. “I personally just don’t see that happening.”
The company’s annualized revenue generated from AI-powered products has now surpassed $400 million. This quarter, Workday announced plans to launch an AI agent designed to manage shift modification requests and revealed the acquisition of Pipedream, a technology startup that integrates AI agents with third-party services.
Extended Sales Cycles Present Challenges
Chief Commercial Officer Rob Enslin observed that certain substantial contracts — especially within federal government and healthcare sectors — are requiring more time to finalize than anticipated.
This pattern of prolonged enterprise sales cycles has become a common theme throughout the business software industry lately.
WDAY has fallen 39.3% during 2026 thus far, positioning it for the worst annual performance since its initial public offering in 2012. Over the past twelve months, shares have dropped 50.1%.
Fourth-quarter net income totaled $145 million, equivalent to 55 cents per share, compared with $94 million, or 35 cents per share, in the year-ago period.
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