Workday: Institutions Are Buying This Stock, Shouldn’t You?

Key Points

• Workday is well-positioned to continue growing and outperforming consensus estimates, thanks to its use of AI.
• The Q3 and full-year guidance increases failed to trigger a rally but did not diminish the long-term outlook.
• The consensus forecast suggests this stock will rebound by as much as 30% within two to three quarters.

Workday NASDAQ: WDAY stock price action has struggled to maintain traction in 2025, but the worst that can be said is that caution has crept into the outlook. Aside from the fear of slowing growth, this company continues to perform at a high level, outpacing consensus estimates while it doubles down on growth efforts. The company’s expanding use of AI, its various use cases, and its ecosystem partners make it a vital block in the enterprise automation industry, as evidenced by the results.

The FQ2 results and guidance update include beat-and-raise results underpinned by client growth, large clients, and improving operational quality.

Operational quality is critical because this profitable tech company is improving its margins. The highlights from Q2 include an approximate doubling of the GAAP margins and a significant improvement in the adjusted margins, several hundred basis points, to drive accelerated bottom-line growth.

The result is improving balance sheet quality and shareholder value, including share repurchases. The buybacks aren’t aggressive, but there are sufficient to offset share-based compensation and may increase over time. The company is forecasted to sustain a low-double-digit revenue and earnings CAGR through the middle of the next decade. 

Workday Outperforms and Raises Guidance for Q3

Workday had a solid quarter, outperforming the consensus for revenue by a slim margin. The $2.35 billion in net revenue is up nearly 13% YOY, driven by a 14% increase in the core subscription service, offset by a slim contraction in services. Growth was seen across client sizes, underpinned by the development of large clients and service penetration. 

The strength is expected to continue through the year’s end despite the macroeconomic headwinds, and growth may accelerate. The backlog grew by 16.4% across the network and 17.6% among large clients and will likely continue growing as businesses digitize and automate.

Regardless, the company forecasts a greater than 14% revenue increase for Q3 and the year, which was better than expected and provided no reason for the market to sell off. 

The balance sheet reflects the company’s growth efforts, including recent acquisitions, and the strength of cash flow and profitability. The critical details are that cash and equivalents are up, assets are flat, long-term debt is flat, and total liabilities are falling. Leverage is ultra-low, with total liability of less than one times the equity and debt of approximately 0.3 times the equity, leaving it in a strong position to continue investing in growth.

Analysts' Trends Point to Rebound in WDAY Stock Price This Year

The analyst trends include some recent price target reductions but are otherwise bullish and in alignment with a rising stock price. They include steady coverage, firm sentiment, and a consensus target near $290 as of late August.  While the downward revisions capped gains in Q3, they align with the consensus, suggesting a robust rebound is coming.

Likewise, the institutional trends are robust, with the group owning nearly 90% of the stock and buying on balance every quarter this year. The balance of activity in Q1, Q2, and the first half of calendar Q3 is nearly two dollars in purchases for every $1 sold. 

The early price action aligns with the forecast for a rebound. The market pulled back by 5% but remained above a critical support target that has triggered numerous rebounds over the preceding 12 months.

In this scenario, the stock price could begin rebounding immediately and advance to the $260 level quickly. The critical support target is near $210, and the resistance target is near the cluster of moving averages at $235.