Workday Announces Q4 Fiscal 2026 Earnings Results

Workday Shares Tumble on Subdued Guidance, AI Concerns Mount

Workday, a titan in human resources and finance software, experienced a significant dip in its stock price, falling 10% in after-hours trading Tuesday, following the release of its quarterly earnings and, more critically, its forward-looking guidance. While the company managed to slightly surpass analyst expectations for earnings per share and revenue in the fiscal fourth quarter ending January 31, it was the outlook for the coming periods that appears to have spooked investors.

The company reported adjusted earnings per share of $2.47, edging out the $2.32 consensus estimate, and revenue came in at $2.53 billion, just above the $2.52 billion expected by LSEG. Year-over-year revenue growth stood at a healthy 14.5%. Net income saw a notable increase, reaching $145 million, or 55 cents per share, up from $94 million, or 35 cents per share, in the prior year’s comparable quarter. Adjusted earnings per share, which excludes stock-based compensation, reflects this improved profitability.

However, the forward-looking statements painted a less rosy picture. Workday projected an adjusted operating margin of 30.5% for the fiscal first quarter, falling short of the 30.9% anticipated by analysts. Subscription revenue for the same period was guided at $2.335 billion, also slightly below the $2.35 billion consensus.

Looking further ahead to fiscal year 2027, Workday anticipates an adjusted operating margin of 30%, with subscription revenue projected to reach between $9.93 billion and $9.95 billion. This range implies a year-over-year growth of 12% to 13%, a figure that may be seen as modest in the context of the high-growth software sector.

These concerns are amplified by a broader market sentiment that has grown increasingly apprehensive about the impact of artificial intelligence on established software players. In recent weeks, fears have circulated that AI models could potentially disrupt or constrain the growth trajectories of major software companies. As of Tuesday’s market close, Workday shares had already seen a substantial decline of 39% year-to-date in 2026, marking the steepest drop since its initial public offering in 2012.

Adding to the recent leadership transition, Workday announced on February 9th that CEO Carl Eschenbach would be stepping down after a three-year tenure. He is being succeeded by co-founder Aneel Bhusri, who has taken the helm as the company navigates this critical juncture.

On the technology front, Workday has been actively integrating generative AI capabilities into its product suite. The company highlighted that its annualized revenue derived from AI products now surpasses $400 million. This strategic push includes the introduction of an AI agent designed to streamline work shift modifications for frontline employees and the strategic acquisition of Pipedream, a startup specializing in tools for connecting AI agents with various external services.

Despite the market’s anxieties, Workday’s leadership remains optimistic about the role of AI in its core business. Bhusri stated during an analyst call, “You’ve all heard the narrative out there that HR and ERP will be replaced or relegated to the background by AI. I personally just don’t see that happening.” He emphasized that AI is likely to augment rather than replace existing functionalities within enterprise resource planning (ERP) and human resources systems.

However, the company acknowledged some headwinds. Rob Enslin, Workday’s chief commercial officer, noted that closing deals with large new customers, particularly in the federal government and healthcare sectors, has been taking longer than anticipated.

Zane Rowe, Workday’s finance chief, underscored the company’s strategic priorities, stating that Bhusri’s renewed focus will be on driving growth, with a balanced approach that doesn’t exclusively prioritize operating margins. This suggests a commitment to continued investment in innovation and market expansion, even as the company navigates a more cautious investor sentiment and evolving technological landscape.