Workday's AI Push: A Turnaround in the Making? Buy Now?

Workday (WDAY) has been on a mission to reinvigorate its stock price, and its recent focus on artificial intelligence (AI) seems to be paying off. The company's shares have gained following its strong Q4 results and guidance, but the question remains: is now the right time to buy the stock? Let's dive into the details and see what the numbers say.



Workday's Q4 results topped analyst expectations, with revenue growing 15% year over year to $2.21 billion, and adjusted EPS climbing 22% to $1.92. The company's AI solutions were a significant driving factor in its revenue growth, with 30% of customer expansions including at least one AI product. Workday's Extend Pro product, which allows customers to build AI applications on top of its platform, saw its ACV (annual contract value) more than double sequentially. Additionally, the company's Recruiting Agent AI solution saw its ACV nearly double quarter over quarter.

Looking ahead, Workday expects its subscription revenue to grow by 14% to $8.8 billion in fiscal 2026, with an adjusted operating margin of around 28%. The company is also investing in AI and government contracts, which may pose uncertainties, potentially impacting margins and causing short-term revenue volatility. However, Workday's AI integration is expected to continue driving revenue growth and expanding operating margins in the future.



So, should investors buy Workday stock right now? With the company's strong Q4 results, expanding AI offerings, and positive guidance, it seems like a compelling case can be made for buying the stock. However, investors should also consider the potential risks, such as increased competition from other enterprise cloud applications providers and the challenges of scaling growth sustainably. Additionally, Workday's investments in AI and government contracts may pose uncertainties, potentially impacting margins and causing short-term revenue volatility.

In conclusion, Workday's AI push appears to be working, with strong Q4 results and positive guidance. While there are potential risks to consider, the company's AI integration is expected to continue driving revenue growth and expanding operating margins in the future. As such, interested investors may want to consider buying Workday stock right now, but should also keep a close eye on the company's progress and the broader market landscape.