TLDR
- Shares of Workday tumbled approximately 10% in extended trading following disappointing fiscal 2027 projections.
- Fourth-quarter results exceeded expectations with $2.53B in revenue and $2.47 in adjusted EPS.
- Fiscal 2027 subscription revenue forecast of $9.93B–$9.95B came in below the $9.99B Street estimate.
- Management announced plans to boost AI spending, which will pressure operating margin expansion.
- The stock has declined 39% year-to-date in 2026 and 50% over the trailing twelve months.
Workday delivered strong fiscal fourth-quarter results on Tuesday, yet the market’s attention quickly shifted to the company’s forward-looking projections — which sparked a sharp selloff.
The enterprise software provider, known for its HR and finance solutions, reported adjusted earnings of $2.47 per share, surpassing the Street’s $2.32 estimate. Total revenue reached $2.53 billion, marking a 14.5% year-over-year increase and narrowly topping the $2.52 billion consensus.
However, the company’s outlook for fiscal 2027 disappointed investors and triggered the after-hours decline.
Shares fell approximately 10% in after-hours action, compounding an already difficult year for WDAY.
For the first quarter of fiscal 2027, management projected subscription revenue of $2.335 billion — representing 13% year-over-year growth but trailing the $2.35 billion analyst forecast. The company had previously indicated it expected roughly 14% growth for the period.
Looking at the full fiscal year 2027, Workday anticipates subscription revenue between $9.925 billion and $9.95 billion, suggesting growth of 12%–13%. This missed the FactSet consensus of $9.99 billion and came in below the company’s earlier guidance implying approximately 13% expansion.
The operating margin outlook also underwhelmed. Management expects an adjusted operating margin of 30.5% in the first quarter and 30% for the full year. Analysts had been forecasting 30.9% and 31.2%, respectively.
CFO Zane Rowe explained during the earnings conference call that the company is “prioritizing incremental investment in our AI roadmap to capture a larger market opportunity,” while acknowledging that this strategy means margin expansion will proceed “at a slower pace in the near term.”
CEO Transition Raises Questions
Earlier in February, co-founder Aneel Bhusri returned to the chief executive position, taking over from Carl Eschenbach, who had led the company for three years. Eschenbach was widely respected for building deep customer relationships, especially within large enterprise accounts.
The leadership change caught Wall Street’s attention. On Monday, Jefferies analyst Brent Thill lowered his rating on WDAY to hold from buy, expressing concerns about the “abrupt” exit of the well-regarded executive.
During Tuesday’s call, Bhusri addressed skepticism around AI disruption. “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.”
Workday’s AI-related products now generate more than $400 million in annualized revenue. The company announced during the quarter that it would launch an AI agent designed to manage shift modification requests and completed its acquisition of Pipedream, a platform that enables AI agents to integrate with third-party services.
Enterprise Sales Cycles Extending
Chief Commercial Officer Rob Enslin pointed out that certain large transactions — especially those involving federal government agencies and healthcare organizations — are requiring more time to finalize than anticipated.
This pattern of elongated sales cycles has become a common theme across the enterprise software sector in recent quarters.
WDAY has fallen 39.3% in 2026 to date, positioning it for its worst annual performance since the company’s 2012 IPO. Over the past year, shares have declined 50.1%.
Fourth-quarter net income totaled $145 million, or 55 cents per diluted share, compared to $94 million, or 35 cents per share, in the same period last year.
