Evercore ISI downgraded Workday Inc. to In Line from Outperform and reduced its price target to $160 from $200, citing a cluster of near-term uncertainties at the enterprise software company. The firm highlighted a CEO transition, the early-stage status of Workday's agentic artificial intelligence strategy, and a lowered fiscal 2027 revenue guide as the primary factors behind the move.
Workday reported fourth-quarter results that were in line with expectations, but Evercore ISI said the company will face challenges shifting the investment narrative toward a more favorable stance in the near term. The research firm emphasized that the company’s agentic AI efforts are at an early adoption phase and that real-world uptake still needs to be demonstrated.
Evercore ISI further noted that elevated levels of AI spending reduce the potential for near-term operating leverage. According to the firm, these higher investment requirements make Workday’s previous operating margin target of roughly 35% for fiscal 2028 appear unlikely. The firm also lowered its free cash flow projections and does not see clear catalysts in the near term tied to agentic AI development.
The firm pointed to delays in larger contract closures across federal, state and local government accounts and in the commercial market. Evercore ISI described these deals as remaining in the company’s pipeline, but the timing of when they will convert into revenue is uncertain.
Market valuation metrics were also part of Evercore ISI’s assessment. The firm said the stock is trading at about 20 times GAAP earnings per share, and it expects value-oriented investors to remain cautious until organic investments translate into upside versus revenue and operating margin assumptions.
At the time of Evercore ISI’s note, the share price was reported at $130.23, close to a 52-week low of $125.83, and the stock has declined nearly 49% over the last 12 months. Evercore ISI’s reduced price target and rating reflect its more conservative view on revenue growth and operating margin potential under the current investment trajectory.
Workday has also undergone an executive change. Co-founder Aneel Bhusri returned to the chief executive role effective immediately, replacing Carl Eschenbach. This leadership switch arrives as the company navigates its evolving approach to artificial intelligence and the associated investment decisions.
In tandem with those developments, Workday preannounced fourth-quarter results that it said were in line with prior guidance.
Broker reactions to the company’s results, leadership change and AI strategy were mixed. TD Cowen maintained a Buy rating but trimmed its price target to $200, citing mixed checks ahead of the earnings report scheduled for February 24. BMO Capital reduced its price target to $204, attributing the cut to concerns about the AI transition and management turnover. Rosenblatt took a more positive stance, upgrading the stock to Buy from Neutral and citing both valuation and the returning CEO as favorable factors. Citizens downgraded the stock to Market Perform, pointing specifically to the CEO change and business checks.
Evercore ISI also lowered its free cash flow estimates and signaled an absence of near-term catalysts tied to agentic AI development. The firm’s view underscores the tension between sustaining higher AI-related investments and delivering near-term margin expansion.
Context on valuation and balance sheet
Despite the selloff and the downgrade from Evercore ISI, the company’s balance sheet remains a notable element in the broader view: Workday reported having more cash than debt. Some analysts still rate the name as a Buy overall, and alternative analyses cited in market commentary have flagged the stock as trading below certain fair value measures. Evercore ISI’s adjustment to forecasts and the rating change reflect a more cautious stance until tangible revenue and margin benefits from current investments are realized.