According to CNBC, Workday shares dropped as much as 10% on Wednesday after the company revised its full-year subscription revenue forecast to $8.83 billion for the fiscal year ending January 2026. This represents just 14.4% growth and was only $13 million higher than the company’s August guidance, despite including contributions from its $1.1 billion acquisition of AI company Sana and a contract with the U.S. Defense Intelligence Agency. Multiple analysts lowered their price targets, with Stifel cutting from $255 to $235 while maintaining a hold rating. Cantor Fitzgerald analysts described the new guidance as bordering on “a slight guide down,” and Evercore memorably called the outcome “like turkey without the gravy.” Despite exceeding third-quarter consensus results, the minimal guidance improvement disappointed investors who were expecting more substantial growth.
AI hype meets reality
Here’s the thing about enterprise software right now: everyone’s chasing the AI dragon, but the revenue numbers don’t always follow the hype. Workday has been aggressively expanding its AI offerings, completing its $1.1 billion Sana acquisition and launching several AI agents this year. CEO Carl Eschenbach even noted that AI products contributed over 1.5 percentage points of annualized revenue growth. But when your overall guidance only moves up by $13 million? That’s basically pocket change for a company of Workday’s scale.
The subscription slowdown
The real concern here isn’t just the weak guidance—it’s what’s happening underneath. Stifel analysts pointed out that when you remove acquisition impacts, Workday’s underlying subscription revenue backlog growth continues to slow. They wrote that “it does not appear that the underlying momentum of the business is showing any signs of stabilization.” That’s the worrying part. You can buy growth through acquisitions, but if your core business is decelerating, investors get nervous. And in today’s market, where everyone’s worried about AI disrupting established software players, that slowdown looks particularly concerning.
Wall Street’s mixed reaction
What’s interesting is how divided analysts remain despite the disappointing guidance. RBC maintained their buy rating (though they lowered their price target from $340 to $320) and said they’re “encouraged by early AI momentum.” Cantor Fitzgerald kept their $280 target. But the market clearly sided with the skeptics—a 10% drop speaks volumes. The problem? When you’re a growth company trading at growth multiples, even slight guidance disappointments get punished severely. It’s not that Workday is performing badly—14.4% growth is still respectable. It’s just not enough to justify the premium valuation in this market environment.
Where enterprise software stands
Look, the broader context matters here. Many software stocks have been under pressure in 2025 as investors worry that generative AI tools might disrupt incumbents. Workday’s situation reflects a larger trend: established players need to demonstrate that their AI investments are actually moving the needle on revenue, not just generating headlines. The company’s in a tough spot—they’re spending billions on AI while their core HR and financial software businesses face slowing growth. It’s a balancing act that every major enterprise software company is dealing with right now. The question is whether Workday’s AI bets will pay off enough to reaccelerate growth, or if this slower growth becomes the new normal.
