Workday Price Targets Slashed to $148 and $185, Q1 Guidance Falls Short
On Feb. 26, Citi cut Workday’s price target from $247 to $148 and Morgan Stanley lowered its to $185, citing margin pressures and delayed AI returns. In Q4, Workday posted $2.53B revenue and $2.47 EPS, but Q1 forecast of $2.335B subscription revenue and 30.5% margin trailed consensus.
1. Price Target Reductions
On Feb. 26, Citi lowered its price target for Workday from $247 to $148, while Morgan Stanley trimmed its target to $185 and BTIG reduced its to $230 earlier in the month. All firms cited near-term margin pressures driven by elevated AI investment and a longer timeline to realize AI-driven returns.
2. Q4 Performance
In the fourth quarter, Workday delivered $2.53 billion in revenue and $2.47 in adjusted earnings per share, both figures exceeding analyst expectations and reflecting continued strength in its subscription-based model across financial and human capital management solutions.
3. Q1 Guidance Shortfall
For fiscal Q1, Workday forecast $2.335 billion in subscription revenue and a 30.5% adjusted operating margin, both below consensus estimates, as the company ramps up spending on AI initiatives that are expected to pressure near-term profitability.
4. AI Investment Impact
Management has prioritized strategic AI investments to drive long-term differentiation in cloud-based enterprise software, but these initiatives are weighing on margin expansion and have prompted analysts to reassess near-term valuation and growth trajectories.