Wolfe Research has lowered its price target for Workday (NASDAQ:WDAY) to $150 from $220 while maintaining an Outperform recommendation. The stock is trading near multi-month lows, quoted at $130.23 and close to its 52-week low of $125.83, after a roughly 49% decline over the last 12 months.
The research firm pointed to soft performance in net new core business during Workday’s fiscal fourth quarter. Specifically, Wolfe highlighted deal slippage in federal and state and local government accounts as well as in certain industry verticals including retail. The firm also noted that sales cycles have lengthened, an effect that was pronounced among private equity-backed customers.
Workday’s reported results for the quarter showed subscription revenue of $2.532 billion, representing year-over-year growth of 14.5% and topping company guidance by $5 million. Current remaining performance obligations stood at $8.833 billion, up 15.8% from a year earlier and beating estimates by 0.2%.
Despite the recent market weakness, one analysis available to subscribers through InvestingPro flagged the shares as undervalued at current levels, calling attention to Workday’s strong 75.6% gross profit margin and a balance sheet position that includes more cash than debt. That analysis was listed among 18 InvestingPro tips available to subscribers.
Management updated its subscription revenue growth outlook, lowering expectations for the fiscal first quarter to 13.4% from roughly 14% previously. It also reduced the fiscal 2027 subscription revenue growth midpoint to 12.5% from 13% cited in the prior quarter. Company executives attributed part of the slowdown to deal elongation within enterprise cohorts, which reduced net new deal volume.
On the product front, Workday reported accelerating early traction for its AI offerings. The company generated more than $100 million in new annual contract value from emerging AI products in the fiscal fourth quarter, an increase of more than 100% year-over-year. AI-related annual recurring revenue rose to $400 million, which the company said accounts for roughly 5% of growth compared with 1.5% in the prior quarter.
The firm’s stock and outlook have been the subject of several recent analyst moves tied to leadership changes and guidance revisions. Evercore ISI moved Workday from Outperform to In Line, citing the CEO transition, the nascent state of the company’s AI strategy and the lower fiscal 2027 revenue guidance. Citizens lowered its recommendation to Market Perform after founder Aneel Bhusri returned as CEO. In contrast, Rosenblatt upgraded the shares to Buy from Neutral, pointing to valuation and the CEO’s return as positive factors.
Other broker activity included TD Cowen, which kept a Buy rating but cut its price target to $200 and cited mixed checks ahead of the fourth-quarter report while expecting results to be in line with prior guidance. BMO Capital trimmed its price target to $204 and flagged concerns about the AI transition and management changes. These analyst decisions have come as Workday prepares to formally report fourth-quarter results that had been pre-announced to align with earlier guidance.
The combination of slower net new core bookings, elongated sales cycles among specific customer cohorts and tempered subscription growth guidance has prompted reassessments across the sell-side. At the same time, management points to meaningful early AI revenue momentum, though that revenue currently represents a modest portion of overall growth.
Key points
- Wolfe Research cut its Workday price target to $150 from $220 but retained an Outperform rating; the stock trades near a 52-week low.
- Workday reported $2.532 billion in subscription revenue (+14.5% YoY) and $8.833 billion in current remaining performance obligations (+15.8% YoY), slightly above estimates.
- Management reduced subscription revenue growth guidance for the fiscal first quarter and fiscal 2027 midpoint, and noted deal elongation in enterprise cohorts.
Risks and uncertainties
- Lengthening sales cycles, particularly with private equity-backed customers, which may further pressure net new deal volume and subscription growth - this affects enterprise software and services spending.
- Management and leadership changes, including the CEO transition, create near-term execution and strategic uncertainty that has led to multiple analyst rating changes - impacting investor sentiment for the company and comparable tech names.
- Execution of the AI product strategy remains early-stage; while AI ARR is growing, the contribution to overall revenue is still modest and the transition poses integration and monetization risks for software and cloud services sectors.