Workday Inc. shares fell about 10% in premarket trading on Wednesday after the enterprise applications vendor set a subscription revenue target for fiscal 2027 that came in under analyst expectations and said it would dedicate additional resources to its agentic AI program.
The Pleasanton, California-based company projected subscription revenue in a range of $9.93 billion to $9.95 billion for fiscal year 2027, a hair below the roughly $10 billion that analysts had been anticipating. The guidance coincided with a reaffirmed emphasis on spending tied to the company’s agentic AI roadmap.
Investors have punished shares this year, with the stock down about 40% year-to-date, a decline that has tracked a wider sell-off among software names. Market concern intensified after AI startup Anthropic introduced new enterprise tools, prompting speculation that automation-focused competitors could compress revenue opportunities for incumbents in the software sector.
In commentary on the company’s outlook, Piper Sandler analysts observed: "In an environment where there is increased scrutinization of every metric amidst the AI debates, the guide likely does not allay investors’ general concerns for app layer names."
Workday pointed to elongated sales cycles as a material factor in its revenue pacing. The company said longer closing timelines - particularly in government, education, healthcare and segments of the commercial market - had pushed out some large enterprise transactions. Management added that most of those opportunities remained active and that a subset of deals had already closed early in the first quarter.
Leadership changes have also been in focus. Co-founder Aneel Bhusri returned to the CEO role earlier this month after stepping down as co-CEO in 2024 while remaining chairman. On the company’s post-earnings conference call, Bhusri sought to temper narratives that AI will displace traditional enterprise software.
From a valuation standpoint, Workday’s 12-month forward price-to-earnings multiple stands at 11.94, compared with Salesforce’s 13.98.
Given the firm’s guidance and the market reaction, the near-term outlook for Workday remains centered on the interplay between demand timing in regulated verticals, ongoing competitive pressures related to AI-driven offerings, and the company’s increased investment in its product roadmap.