Workday’s (NASDAQ: WDAY) stock price decline did not end with its Q4 2025 earnings report; it continued to long-term lows, creating an even more attractive opportunity for investors. While guidance fell short of the consensus and AI disruption fears linger, the bar was set high, the miss is slim, guidance is solid, and disruption, well, it may not happen quite the way the market expects.
AI-first companies may try to move into Workday’s territory by turning models into full HR/finance software.
But incumbents like Workday are embedding AI into their existing platforms. And, because they’re already deeply integrated into enterprise workflows and data, they may be harder to displace than the market fears.
The analyst response to the earnings news was unfavorable. A downgrade to Hold by Jefferies and numerous price target reductions came with commentary highlighting the abrupt CEO change mentioned in the release, as co-founder and Executive Chairman Aneel Bhusri is returning to the helm to navigate the company through its next phase.
Workday Accelerates Growth and Profitability in Q4 2025
Workday had a solid quarter in Q4, with revenue growth accelerating sequentially to 14.5%. The $2.53 billion in revenue outpaced MarketBeat’s reported consensus by 40 basis points, driven by strength in subscriptions, up 15.7% YOY, and the strength carried through to the bottom line.
Margin news was equally strong with the GAAP and adjusted operating margins widening by several hundred basis points. The 420 bps improvement in adjusted operating margin led to a 32% increase in operating income and 28% increase in adjusted earnings, 650 bps better than expected.
Guidance was the sticking point, as the Q1 and full-year 2026 revenue forecasts fell short of consensus. However, the company forecasts 13% topline growth in Q1, 12.5% for the year, and an adjusted operating margin that remains strong. In this environment, price action may reset but is unlikely to stay down long. As it is, WDAY’s consensus target is about 100% above its critical support levels, while even the low-end range offers some upside.
Institutional Support and Share Buybacks Underpin WDAY Rebound Outlook
Two factors underpinning WDAY’s potential for a rebound are its capital returns and institutional support. Capital returns consist entirely of share repurchases, which are reliable and reduce the share count annually. The 2025 repurchase activity reduced the count by approximately 0.4%, a level sufficient to improve shareholder leverage, and institutions are buying into it.
Institutional data reveals this group owns more than 90% of the stock and has been accumulating on a quarterly basis for 7 consecutive quarters, including the first two months of Q1 2026. The balance in Q1 2026 is only about $1.15 bought for each $1 sold, but is trending bullish, and the ramp in buying to offset a ramp in selling suggests this group will keep buying despite the “tepid” guidance.
Workday’s balance sheet reflects the impact of its capital return, acquisitions, and growth investments, but no red flags are raised. The cash balance is healthy, flat YOY, and the decrease in current assets is offset by an increase in total. Liabilities are also up, causing equity to contract, but leverage remains light at two times cash and under 0.5 times equity, providing an easy path for debt reduction and improving equity as 2026 progresses.
Catalyst for Workday Stock: Yes, They Exist
Catalysts for Workday in 2026 include continued growth, improving cash flow, and the potential for outperformance relative to Q1 and full-year guidance. The company noted caution in the outlook, citing macroeconomic uncertainty and a longer timeline to deal closing. The likely outcome is that Workday outperforms quarterly throughout the year, leading to guidance improvement and a rebound in analyst and market sentiment. The question now is whether the stock will rebound from the new lows, which is likely. Trading near $115, WDAY is in a zone not fathomed since the depths of the COVID-19 panic.
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The article "Workday, Seriously, It’s Time to Buy This SaaS Leader" first appeared on MarketBeat.
