Workday Faces Mixed Analyst Views: Strong Q3 Earnings Beat Offset By Growth Concerns And Guidance

Workday, Inc. WDAY shares are trading lower on Wednesday.

The company reported third-quarter earnings of $1.89 per share, surpassing the $1.76 estimate. Revenue of $2.16 billion also beat expectations of $2.13 billion, up from $1.87 billion last year. Workday revised its FY25 subscription revenue guidance.

Here are the analyst’s take on the stock:

• Piper Sandler analyst Brent A. Bracelin downgraded the stock to Neutral from Overweight, lowering the price forecast to $270 from $285.
• Goldman Sachs analyst Kash Rangan reiterated the Buy rating on the stock, lowering the price forecast to $300 from $305.
• Needham analyst Scott Berg reiterated the Buy rating on the company, with a price forecast of $300.

Piper Sandler: Bracelin has lowered the growth estimate for Workday in 2026 to 12.5%, down from 14.0%, due to concerns over weak guidance and the company’s ability to drive growth next year.

Per the analyst, until international expansion, new products, and partnerships begin to show stronger results, Workday’s growth prospects are diminishing, leading them to downgrade their rating to Neutral.

While margin expansion to 27.5% in fiscal 2026 could support more than 15% earnings per share (EPS) growth, the analyst struggles to justify Workday’s high valuation, especially given a 28x price-to-earnings (P/E) multiple for CY26 (compared to a GAAP P/E of 70x).

As a result, the analyst writes that the growth momentum for Workday has slowed.

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Goldman Sachs: The analyst notes a slight decrease in fourth-quarter growth due to delayed large-deal revenue recognition and compression in 1Q25 from leap-year comparisons.

Despite these challenges, the analyst is cautiously optimistic, noting that the macro environment in FY26 could improve following election results and potential rate cuts.

Additionally, Workday’s AI products are showing strong traction, with 30% of third quarter customer expansions incorporating AI solutions, leading to a 39% reduction in turnover and a significant boost in selling prices. While the delayed revenue recognition from strategic deals was unexpected, the analyst forecasts that the products and features delivered should result in long-term revenue benefits.

If Workday can maintain stable, durable growth and improve its margins, the stock is likely to see a re-rating, the analyst adds.

Needham: Workday is facing longer sales cycles than in FY24, with cRPO at $6.98 billion, up 15.4% year-over-year, slightly above guidance.

However, the analyst forecasts that Workday shares will be weak due to a lower-than-expected FY26 subscription revenue growth forecast of 14%, below the 15% consensus. This shortfall is attributed to revenue recognition timing on large deals.

The analyst also sees investor concern growing over the intermediate-term outlook, as the company’s new management team has recently reaffirmed its 15% subscription growth targets.

The analyst raised the FY25 EPS estimates to $7.20 from $7.12.

Price Action: WDAY shares are trading lower by 8.26% to $247.87 at last check Wednesday.

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