Workday: The Market Underestimates Profit Growth

Workday uses a lot of stock rewards and the growth of the total backlog is lower than the short-term growth. Find out why WDAY stock is a strong buy.

Summary - Workday receives a Strong Buy rating at $145, with valuation at 13.5x FY2027 and 11.5x FY2028 earnings, reflecting market pessimism. - Agentic AI is driving larger expansion deals, with new contract value up over 200% year-over-year, though its revenue contribution remains undisclosed. - WDAY’s platform expansion, high gross retention (97%), and margin improvements support profit growth, aided by significant share buybacks.

- Key risks include slowing subscription backlog growth and heavy stock-based compensation, but stable cash flows and AI upsell potential offer upside. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in WDAY over the next 72 hours. I wrote this article myself, and it expresses my own opinions.

I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.