Workday Inc. was set to report first-quarter results after Thursday’s closing bell, and Jefferies went into the print warning that the software company still faces execution risk. The bank said it saw limited upside to near-term estimates, even as it expected subscription revenue growth of about 13% and cRPO to be appropriate heading into the report.
That caution landed as Workday shares traded down 4% at $121, leaving the wday stock down about 43% year to date. Jefferies kept a Hold rating on the stock and said the latest quarter would need to do more than meet expectations to change the near-term setup.
The concerns were not just about one earnings release. Jefferies said Workday’s artificial intelligence roadmap remained relatively unclear, with AI accounting for about 4% of revenue and adoption of AI-focused products still at an early stage. Partners, the firm said, described the integration of acquired assets and new AI tools as still developing, which left questions about how quickly those products can start contributing in a meaningful way.
Jefferies also pressed management on the same point investors have been asking for months: how AI will add to revenue growth, when it might become a meaningful driver of sales, and whether the company can still reach its fiscal 2028 growth target of 13% to 14%. The bank said that goal implies market share gains against SAP and Oracle, a harder ask now that Workday has seen slowing growth trends and broader uncertainty around its long-term revenue path.
International expansion is another pressure point. Jefferies said overseas markets represent roughly half of Workday’s total addressable market, but growth in the company’s international segment decelerated and lagged the U.S. in the most recent fiscal year. At the same time, the company has pointed to a fiscal 2027 operating margin expansion toward 30%, a target that could come under strain if AI-related investment costs keep rising before new products are fully monetized.
The company still has assets many rivals would envy. Jefferies said Workday’s customer retention rate is about 97% and its user base is roughly 75 million, signs of a product that remains deeply embedded in large organizations. But Bhusri’s return as chief executive has not yet been enough to calm the market, and Jefferies said the combination of slower growth, an unsettled AI strategy and mounting cost pressure leaves the stock vulnerable unless the company can show a clearer path from investment to sales.
