Workday Shares Under Pressure Ahead of Earnings Report

Workday stock at a 52-week low as investors await crucial earnings report. Bearish sentiment fueled by AI disruption fears, CEO change, and recent layoffs.

Investor sentiment toward Workday is decidedly bearish as the company approaches a pivotal quarterly earnings release. The stock has recently touched new annual lows, reflecting broader sector-wide anxieties about the sustainability of traditional business models in the age of artificial intelligence. The market is questioning whether the return of a company founder to the CEO role and a renewed focus on AI can catalyze a recovery.

Leadership Shakeup Adds to Uncertainty

Beyond industry headwinds, the company is navigating significant internal change. Just days ago, co-founder Aneel Bhusri reassumed the position of chief executive officer, replacing Carl Eschenbach. This leadership transition was accompanied by a workforce reduction of approximately two percent, affecting some 400 employees.

Market observers view these moves as an attempt to accelerate the company's adaptation to new technological demands. However, the abrupt change has also unsettled investors, raising immediate questions about the near-term stability of corporate strategy.

Earnings Report to Provide Crucial Test

All eyes are now on the hard numbers scheduled for release after the U.S. market closes on Tuesday, February 24. For the fourth quarter, analysts are anticipating subscription revenue of approximately $2.4 billion, with an operating margin of at least 28.5 percent.

The company's full-year guidance will face particularly intense scrutiny. A central focus will be Workday's target of achieving $8.8 billion in subscription revenue. Analysts suggest that only a convincing demonstration that this growth trajectory remains intact despite AI-driven industry transformation will alleviate the significant selling pressure that has built up over recent months.

Sector Faces Existential AI Questions

The market is viewing the entire human capital management (HCM) software sector with increasing doubt. A primary concern is that AI-powered automation could fundamentally undermine classic pricing models, which are often based on per-employee fees. In this climate of uncertainty, analysts at TD Cowen lowered their price target for Workday to $200 last Friday.

This pervasive caution is clearly visible in the equity's performance. The shares remain entrenched in a pronounced downtrend, having shed roughly 30 percent of their value since the start of the year. Currently trading at €122.14, the stock is sitting at a fresh 52-week low.