Workday Earnings on Deck With Stock (WDAY) Underperforming – What To Expect

Workday Inc. (NASDAQ: WDAY), a prominent player in enterprise cloud applications for finance and human resources is set to announce earnings after today's closing bell. The stock is trading down 9.67% YTD leading in, underperforming broader markets, and highlighting the need for a strong print.

The company is expected to report an EPS of $2.12 against revenue of $2.34 billion, representing a healthy 12.30% growth compared to the same period last year. However, these estimates must be viewed in the context of Workday's recent performance and the challenges it faces.

A look back at Workday's Q1 2026 performance came in mixed, with revenue of $2.24 billion a beat on expectations, whilst its EPS of $0.25 fell short, and a marked a 37.5% drop from the previous year.

Net income also experienced a substantial decline of 36.4%. This divergence between revenue growth and profitability has raised concerns about Workday's ability to maintain its growth trajectory while managing costs effectively.

Subscription revenue, a key metric for Workday, reached $2.06 billion in Q1, aligning with the company's guidance and demonstrating a 13% year-over-year increase. However, Workday's forecast for Q2 subscription revenue of $2.16 billion, while in line with Wall Street expectations, signals a potential slowdown in client spending amid economic uncertainty.

Following the Q1 earnings report, analyst reactions were varied. KeyBanc Capital Markets maintained an “Overweight” rating but reduced the price target from $335 to $325, citing incremental macroeconomic uncertainty. Piper Sandler, on the other hand, maintained a “Neutral” rating while raising the price target from $230 to $255, highlighting the company's strong operating margin performance. These differing perspectives reflect the ongoing debate about Workday's future prospects.

While the prevailing sentiment leans towards caution, it is possible that the market may be underestimating Workday's long-term potential. Workday's core business of providing cloud-based finance and HR solutions remains fundamentally strong, and the company is well-positioned to benefit from the ongoing digital transformation of enterprises.

Moreover, the concerns about short-term economic headwinds may be overblown. While a slowdown in client spending is a valid concern, Workday's sticky customer base and recurring revenue model provide a degree of resilience against economic downturns. The company's continued investment in innovation and expansion into new markets could also drive future growth, potentially exceeding current expectations.

Time will tell, and we may find out sooner rather than later.