Workday Inc. (WDAY) shares plunged over 10% in Wednesday trading, proving once again that beating expectations doesn't always translate to stock gains. The enterprise software company delivered solid third-quarter results, but Wall Street's reaction suggests investors were hoping for more.
The Numbers Behind the Mixed Reaction
Workday reported revenue of $2.432 billion and non-GAAP earnings of $2.32 per share, topping consensus estimates of $2.415 billion and $2.17 per share. So what's the problem? Analysts found some concerns lurking beneath the headline numbers.
RBC Capital Markets analyst Rishi Jaluria maintained his Outperform rating but trimmed his price target from $340 to $320. "We remain encouraged by early AI adoption trends and momentum with the partner network," Jaluria noted. The catch: while Workday raised full-year revenue guidance by more than the quarterly beat, organic revenue would have actually fallen short of consensus. Plus, despite beating the quarter, the company stuck with its non-GAAP EBIT margin guidance rather than raising it.
KeyBanc Capital Markets analyst Jason Celino kept his Overweight rating but slashed his target from $285 to $260. He pointed out that cRPO growth hit 17.6%, crushing Street expectations of 15.6%. But here's the asterisk: that figure includes Paradox, which contributed more than a full percentage point of growth. Strip that out, and the picture looks less impressive. Both subscription and professional services revenue came in only modestly above consensus, and the fourth-quarter outlook was broadly in-line with expectations.
What Analysts Are Saying
Citizens JMP Securities analyst Patrick Walravens held steady with his Market Outperform rating and $315 price target, noting that management guided to fourth-quarter subscription revenue of $2.355 billion and professional services revenue of $168 million, slightly above consensus of $2.351 billion and $160 million. The wrinkle: fiscal 2026 non-GAAP operating margin guidance of around 28.5% came in below consensus of 28.7%, "which may be depressed slightly by the acquisitions, in our view," Walravens wrote. Still, he sees the stock as "an attractive opportunity for long-term capital appreciation."
Guggenheim Securities analyst John DiFucci maintained his Neutral rating and $285 target, saying results and guidance landed largely in-line or slightly better than expectations. He acknowledged that Workday is better positioned now than a few years ago, having "engaged more intimately with partners, built out its product platform through inorganic and organic means, and successfully gone down market." The company is consistently delivering 12% to 15% subscription growth.
Needham analyst Scott Berg kept his Buy rating and $300 price target, highlighting that third-quarter sales were driven by the EMEA and APAC regions. The US federal government shutdown negatively impacted some deals, he noted. Sales of AI solutions "continue to be a tailwind" for cRPO growth. Berg believes the introduction of Flex Credits can drive incremental AI adoption in fiscal 2027 as customers gain more freedom to evaluate AI functionality.
The Verdict
Shares of Workday had declined 10.66% to $208.79 at the time of publication on Wednesday. It's a reminder that in today's market, beating estimates is table stakes. Investors want to see acceleration, margin expansion, and guidance that signals confidence. When those elements are missing, even a solid quarter can send a stock tumbling.
