Workday Shares Tumble Amid AI Concerns and Revenue Forecasts

Shares of enterprise software company Workday plummeted about 10% in premarket trading on Wednesday following a gloomy revenue forecast as companies cut back on spending under broader economic uncertainty.

The stock has already plunged around 40% this year, as a larger sell-off of software stocks has been compounded by AI startup Anthropic unveiling new enterprise tools. This has spurred investor concern that automation could affect revenue streams for traditional software vendors. Located in Pleasanton, California, Workday projected its subscription revenue to fall slightly short of analyst expectations, forecasting between $9.93 billion and $9.95 billion for the fiscal year 2027, while stating an intent to increase spending on its 'agentic AI' development.

Piper Sandler analysts expressed concern over the new guidance amid ongoing AI debates, suggesting it doesn't ease investor anxieties about application layer companies. Specializing in HR and payroll software, Workday reported prolonged sales cycles, particularly in government, education, healthcare, and certain commercial sectors, delaying some enterprise deals. Nonetheless, most remain active, and a few have closed early in the first quarter. Workday co-founder Aneel Bhusri, who recently resumed his role as CEO, sought to downplay fears at a post-earnings call, reaffirming confidence in traditional software solutions against the backdrop of AI advancements.