Workday (WDAY) Stock Forecast & Price Target

Workday's performance in Q4 demonstrated significant growth, highlighted by the nearly doubling of new Annual Contract Value (ACV) from Q3, particularly in its Recruiting solution, which saw an uplift in Average Selling Price (ASP). The company reported strong adoption of its full suite among new clients, contributing to over 30% of new business, alongside an improvement in non-GAAP operating margins to 28% for FY26, reflecting successful AI investments and a strategic emphasis on balancing profitability and growth. Additionally, Workday's subscription revenue beat guidance by 0.7%, leading to a year-over-year growth of 15.9%, and reinforcing confidence in a projected 15% growth for FY26, supported by a consistent compound annual growth rate (CAGR) of approximately 14% in core customers over the past four years.

Workday's subscription revenue guidance for F1Q25 of $2.05 billion, representing a 13% year-over-year increase, fell slightly short of market consensus, while its full-year FY26 guidance remained unchanged at $8.8 billion but reflects a modest growth expectation. Additionally, the company's New Annual Contract Value (ACV) declined 7% year-over-year, indicating challenges in expanding its customer base, and guidance for FY26 Operating Cash Flow of $2.75 billion was below analysts' expectations of $2.91 billion, exacerbated by significant cash outflows from restructuring efforts. These indicators, coupled with a potential slowdown in subscription revenue growth and a current stock multiple discount to large-cap averages, contribute to a negative outlook for Workday's stock performance.