Workday Sees 53% Upside Potential: Is WDAY a Buy Now?

Workday has reported a 14% YoY increase in subscription revenue to $2.17 billion and a 12.6% YoY increase in total revenue to $2.4 billion. The company's customer adoption has increased across various sectors, and it has announced plans to launch services in India. Wall Street forecasts a 53% upside in Workday stock, despite a 12.9% YTD decline. The company's AI-driven innovation and platform expansion strategy are paying off, making it a one-stop platform for businesses looking to integrate human resources and finance.

Workday, Inc. (NASDAQ: WDAY) reported its second-quarter (Q2) fiscal year 2026 earnings, highlighting a 14% year-over-year (YoY) increase in subscription revenue to $2.17 billion and a 12.6% YoY increase in total revenue to $2.4 billion. Despite these robust financial results, the company's stock faced a decline post-announcement, reflecting broader market concerns.

The company's customer adoption has expanded across various sectors, including mid-enterprise and European markets. Notably, Workday welcomed new customers such as Banamex, Carrefour, Masan Group, Memorial Health, and Red Coats. Additionally, the company expanded existing relationships with Google, Nationwide Insurance, Qantas Airways, Randstad, Tokyo Electron, and the University of Virginia.

Workday's AI-driven innovation continues to be a key growth driver, with 100% net-new AI annual contract value growth in Q2. The company's recent product launches, such as Workday Developer Co-Pilot and the Workday Agent Partner Network, underscore its commitment to AI innovation. Furthermore, Workday's acquisitions of Flowise and the planned acquisition of Paradox aim to enhance automation capabilities.

Workday's strong financial performance is evident in its operating margin, which stood at 29% on a non-GAAP basis. The company reported $616 million in cash from operating activities and $8.19 billion in cash and cash equivalents as of July 31, 2025.

Despite the mixed market reaction, long-term investors may find Workday's dip an attractive entry point, given the company's robust financial position, AI-driven growth, and strong market position. However, the stock's volatility and the need for above-expectation execution to sustain momentum should be considered.

Wall Street forecasts a 53% upside in Workday stock, despite a 12.9% year-to-date (YTD) decline. Analysts have mixed outlooks on the company's future performance, with targets ranging from $220 to $340, reflecting a mix of cautious optimism and concern over future guidance.

Workday continues to invest in its AI capabilities with the announced $1 billion acquisition of Paradox AI, which Needham views favorably despite estimating the purchase at approximately 16 times revenue. This acquisition aims to enhance Workday's natural language-based recruiting solution for frontline workers.

In other recent news, several analyst firms have adjusted their stock price targets for Workday following its Q2 earnings report. Despite delivering a modest revenue beat and showing solid expense execution, analysts have expressed cautious outlooks. Stifel lowered its price target to $255, citing a lack of acceleration in the company’s business momentum. DA Davidson also reduced its target to $225, noting that the earnings report beat expectations but came with unchanged forward guidance. BMO Capital adjusted its target to $285, highlighting a continuation of existing trends amidst an uneven macroeconomic environment. Goldman Sachs decreased its target to $280, despite Workday’s subscription revenue growth of 14% and operating margins of 29%, due to implied lower guidance for the second half of fiscal 2026. Lastly, BofA Securities lowered its target to $265, acknowledging that Workday’s current remaining performance obligations growth exceeded expectations by 2.4%.

Workday's strong Q2 results reflect the company's continued progress across several growth initiatives, including its AI and platform innovation, international momentum, and an expanding ecosystem. However, the mixed market reaction underscores the need for above-expectation execution to sustain momentum and address broader market concerns.

References:
[1] https://www.investing.com/news/analyst-ratings/needham-reiterates-buy-rating-on-workday-stock-despite-modest-quarter-93CH-4206477
[2] https://www.ainvest.com/news/workday-earnings-surge-26-revenue-growth-fails-impress-investors-2508/
[3] https://investor.workday.com/2025-08-21-Workday-Announces-Fiscal-2026-Second-Quarter-Financial-Results