Workday, Inc. (NASDAQ: WDAY) reported strong third-quarter earnings on November 27, 2024, with earnings per share of $1.89, exceeding the $1.76 estimate. However, concerns about future growth and revised guidance led to mixed reactions from analysts, resulting in a decline in the company’s stock price.
- Workday's Q3 earnings surpassed expectations.
- Analysts express mixed views on stock.
- Piper Sandler downgraded rating to Neutral.
- Goldman Sachs maintains Buy rating.
- Needham forecasts weaker FY26 subscription growth.
- Workday shares fell 8.26% post-results.
Workday’s third-quarter results showed a revenue of $2.16 billion, surpassing the anticipated $2.13 billion and up from $1.87 billion in the previous year. Despite these positive figures, analysts are worried about the company’s growth trajectory. Piper Sandler downgraded Workday’s stock to Neutral from Overweight, citing a lowered growth estimate for 2026 from 14.0% to 12.5% due to weak guidance. They also noted challenges in justifying Workday’s high valuation, given its price-to-earnings multiple of 28x for CY26.
Goldman Sachs maintained a Buy rating but reduced its price target from $305 to $300, acknowledging a slight decrease in fourth-quarter growth. They highlighted the potential for improved macro conditions in FY26 and noted that 30% of customer expansions in Q3 incorporated AI solutions, which may bolster long-term revenue. Needham also reiterated a Buy rating but expressed concerns over longer sales cycles and a lower-than-expected FY26 subscription revenue growth forecast.
As a result of these mixed analyst views, Workday shares fell by 8.26% to $247.87 during trading on Wednesday. The overall sentiment reflects a cautious outlook on the company’s ability to sustain growth amid evolving market conditions.
In summary, while Workday’s Q3 earnings exceeded expectations, the company’s revised growth outlook and analyst concerns have led to a significant drop in its stock price, indicating a cautious sentiment in the market.
