Workday (WDAY) Stock Forecast & Price Target

Workday is exhibiting strong revenue growth driven predominantly by its existing customer base, which contributed approximately 60% of its growth, up from 50% the previous year, indicating effective cross-selling strategies. The company has also significantly expanded its total addressable market (TAM), growing it by 18% to over $160 billion, reflecting increasing demand for its solutions, particularly in the AI segment, which added over $450 million in annual recurring revenue (ARR). Moreover, Workday is on track to enhance its operating margins by nearly 1,000 basis points from FY23 to FY26, showcasing a robust improvement in operational efficiency alongside revenue growth.

The outlook on Workday's stock is primarily negative due to concerns over customer retention which may be adversely affected by the company's competitive positioning and potential operational issues. The company has lowered its near-term subscription revenue growth guidance, reflecting a trend towards underperformance, particularly in large enterprise deals and international markets. Additionally, although you can see a positive trend in free cash flow margins and stock-based compensation, there remain significant risks that could hinder overall performance, leading to skepticism about its long-term growth trajectory.