Dayforce Delivers a Beat, But Is the Stock a Buy? Here’s What You Need to Know

Dayforce (NASDAQ: DAY) just served up a Q1 earnings report that outperformed expectations, but investors sent shares down 7% in premarket trading. Let’s dig into the numbers to see if this HR tech leader is worth buying now—or if there are storm clouds on the horizon.

The Numbers: A Solid Beat, But Not a Home Run

Dayforce reported an adjusted EPS of $0.58, besting the FactSet estimate of $0.55, a 6.9% beat. Revenue hit $481.8 million, a 11.7% year-over-year rise, with recurring revenue (excluding float) growing 14.4% to $323.1 million. The company’s customer base expanded to 6,929 live accounts, up 5.4% year-over-year, with recurring revenue per customer hitting $167,600—a 11.5% jump.

What’s Driving the Growth?

1. Sales Momentum: Dayforce signed its best Q1 bookings ever, with full-suite deals (their priciest contracts) accounting for 50% of all deals. Add-on sales rose 30%, showing customers are deepening their commitments.
2. Product Innovation: The AI Copilot feature—which now powers 50% of new deals—and compliance updates for global markets are locking in retention. The Dayforce Wallet’s direct-to-bank payroll feature is another growth lever.
3. Partnerships: Microsoft’s Azure Marketplace integration and soaring sales via System Integrators (SIs) are fueling enterprise adoption.

The Risks: Cost Cuts and a Pricy Valuation

• Workforce Reduction: A 5% global layoff aims to save $65 million this year, but it came with a $29.2 million Q1 charge. While this should boost margins long-term, near-term profits took a hit.
• Valuation Stretch: Dayforce’s P/E ratio of 529 is nosebleed territory. Analysts’ price targets range from $55 to $95, but the stock’s $9.21 billion market cap demands flawless execution.
• Macroeconomic Headwinds: The company assumes three Fed rate cuts in H2, but if the economy stumbles, hiring could slow.

The Guidance: A Glass Half-Full?

Management reaffirmed full-year revenue guidance of $1.929–1.944 billion (12.1%–13.1% growth), with recurring revenue (ex-float) expected to grow 13.6%–15.7%. However, Q2 revenue guidance of $454–460 million is below estimates, hinting at softness ahead.

The Verdict: Buy the Dip or Wait for a Better Entry?

Dayforce’s core metrics—customer growth, retention, and recurring revenue—are firing on all cylinders. The AI-driven platform and strategic partnerships position it to dominate the $32 billion HR tech market.

But here’s the catch: The stock trades at 53x next year’s earnings, and the Q2 guidance miss shows execution risks. Investors who buy now are betting on long-term margin expansion and market share gains.

Final Take: Dayforce is a buy for long-term investors willing to stomach volatility. The $19.5 million free cash flow and 32.5% EBITDA margins are solid foundations. However, if you’re skittish about high valuations or macro risks, wait for a pullback.

Bottom Line: This is a company that’s built to last, but pay attention to how it navigates the workforce cuts and Q2’s softer outlook. If the AI push and SI partnerships deliver, Dayforce could be a multiyear winner. Stay tuned!