Workday shares sink on subscription revenue guidance concerns

Shares of software maker Working day It fell as much as 10% on Wednesday as analysts lowered their price targets, citing the lack of upside after the company revised its full-year subscription revenue forecast.

Many software stocks remain under pressure in 2025 as commentators worry that generative AI tools that can quickly write lines of code could pose risks to established companies.

This year, Workday announced the launch of several AI agents and expanded its offerings through startup acquisitions. Workday earlier this month complete $1.1 billion acquisition of artificial intelligence and learning software company Sana.

Despite these moves, Workday’s third-quarter earnings report on Tuesday failed to impress Wall Street.

The company claimed $8.83 billion in subscription revenue for the fiscal year ending January 2026, representing 14.4% growth, but that figure was only up $13 million from the company’s expectation in August. The new figure includes contributions from Sana and a contract with the U.S. Defense Intelligence Agency, Workday finance chief Zane Rowe told analysts on a conference call.

“Investors were likely looking for more beat-up quarters,” Cantor Fitzgerald analysts Matt VanVliet and Mason Marion wrote in a note to clients. They are the equivalent of a buy rating on Workday stock. The new number, they wrote, “restricts a slight guide downward.” Analysts kept their 12-month price target for Workday shares at $280.

Stifel cut its target for Workday to $235 from $255 with a hold rating on the stock.

“The underlying momentum of the business does not appear to show any signs of stabilizing,” Stifel’s Brad Reback and Robert Galvin wrote in a note.

Reback and Galvin said Workday implied that 12-month subscription revenue backlog growth would continue to slow once the impact of acquisitions was eliminated. They wrote that they expect the trend to continue even as customers sign up for Workday’s AI products.

The outcome was “like a turkey without gravy,” Evercore analysts wrote in the headline of their note, with the equivalent of a buy rating on the stock.

Analysts at RBC, which has the equivalent of a buy rating on Workday shares, lowered their price target to $320 from $340. Despite the mixed guidance, results for the fiscal third quarter beat consensus, they wrote in a note to clients. Additionally, Workday CEO Carl Eschenbach said on Tuesday’s conference call that AI products contributed more than 1.5 percentage points to annual revenue growth.

“We continue to be encouraged by the early momentum of AI,” RBC analysts wrote.

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