Workday on Tuesday issued a fiscal 2027 subscription revenue forecast that came in under Wall Street expectations, a development the company tied to slowing wins of new customers as corporate technology spending tightens in response to an uncertain economic outlook. In extended trading, Workday's shares fell 7% following the guidance.
The Pleasanton, California-based enterprise software firm pointed to a challenging macroeconomic backdrop, noting that higher interest rates and broader economic uncertainty have led many businesses to scrutinize large software purchases and postpone purchasing decisions. That dynamic has weighed on the company's ability to secure new client contracts, according to the guidance.
Workday's forecast for annual subscription revenue ranged from $9.93 billion to $9.95 billion, below analyst estimates of $10.00 billion compiled by LSEG. For the quarter ended January 31, the company reported total revenue of $2.53 billion, slightly above analysts' projections of $2.52 billion. Subscription revenue for the fourth quarter was $2.36 billion, which matched expectations.
Separately, market reaction was compounded by developments in the artificial intelligence space. Anthropic, an AI lab, released a legal plug-in and unveiled 10 new integration options aimed at business customers, including tools to assist human resources functions - such as adapting new-hire materials to a company's tone and policies - and investment banking tasks like deal review. That announcement sparked an $830 billion global selloff across software and services stocks, including shares of some companies that partner with the startup, as investors worried about potential revenue pressure from AI-powered automation.
The combination of Workday's below-consensus subscription outlook and the wider market's unease over AI integrations contributed to the downward move in software and services valuations. While Workday reported quarterly subscription revenue in line with expectations and total revenue slightly above estimates, its guidance for fiscal 2027 highlighted a near-term slowdown in new client momentum driven by constrained corporate technology budgets.