Workday (WDAY) Q1 Earnings Preview: Can the Fallen Software Giant Rebound?

Key Takeaways

• Workday delivers Q1 financial results Thursday evening; Wall Street projects earnings per share of $2.52 with revenue reaching $2.52 billion
• Shares have tumbled approximately 40% since January and declined 55.6% across the trailing twelve months, currently trading near $126.61
• Cantor Fitzgerald reduced its price objective to $160 from $200, pointing to lackluster channel feedback
• Market participants will scrutinize subscription revenue performance, competition from AI infrastructure spending, and results from the Flex Credits pricing strategy
• Eagle Capital Management maintains optimism on Workday, highlighting margin expansion potential and the founder’s CEO comeback as positive factors

Workday (WDAY) unveils its first-quarter financial performance Thursday evening, with expectations sitting at rock bottom.

Workday, Inc., WDAY

Shares ended trading at $126.61 on May 20, marking a decline of approximately 40% since the start of the year and sliding more than 55% across the past year. This represents a dramatic reversal for what was previously viewed as an enterprise software heavyweight.

Wall Street analysts are forecasting earnings of $2.52 per share alongside $2.52 billion in revenue — representing annual increases of 13% and 12.5% respectively. The revenue projection sits marginally beneath the $2.53 billion Workday delivered during the previous quarter.

Earnings per share forecasts have edged higher modestly during the last sixty days, though the adjustment remains slight. Confidence appears limited as Thursday’s announcement approaches.

Analyst consensus remains at Buy for the shares, with an average price objective of $178.16 — suggesting potential gains of roughly 41% from present levels. However, recent analyst activity paints a more reserved picture.

This Tuesday, Cantor Fitzgerald lowered its price target to $160 from $200. While maintaining its Overweight recommendation, the firm noted tempered expectations and disappointing channel intelligence.

At today’s valuation, WDAY commands merely 12.3 times projected fiscal 2027 earnings — representing a substantial markdown compared to the wider software industry.

Critical Factors for Investors

Three elements will determine market response following earnings. Primary among them: subscription revenue momentum and backlog dynamics. With Workday already serving 65% of Fortune 500 enterprises, opportunities for securing additional major corporate clients remain constrained.

Secondly, market watchers need clarity on whether AI infrastructure investments are diverting budgets from conventional HCM and financial management platforms. Cantor Fitzgerald specifically highlighted this concern — certain organizations seem to be reallocating resources toward AI projects rather than enterprise applications like Workday.

Thirdly, analysts seek preliminary indications that the newly introduced “Flex Credits” consumption-based revenue framework can compensate if traditional seat-based income faces headwinds.

Workday has invested approximately $3 billion in AI-focused acquisitions and positions its Illuminate platform as its agentic AI solution. Yet this strategic pivot introduces near-term revenue ambiguity, and investors currently demonstrate limited patience.

During the previous quarter, Workday exceeded revenue expectations and achieved a record 30.6% operating margin. Nevertheless, the stock declined following cautious full-year projections, with investors focusing on decelerating expansion rates.

Institutional Investors Remain Engaged

Eagle Capital Management featured WDAY in its first quarter 2026 shareholder correspondence, arguing the market applies an overly simplistic narrative across the entire software sector.

Eagle emphasizes that Workday currently operates substantially below normalized margin levels, creating expansion opportunities. They additionally view the founder’s return to the chief executive position as a potential driver for reinvigorated innovation.

Eagle’s overarching perspective: the software sector’s recovery will prove more selective than the downturn. While some enterprises will face genuine challenges from AI disruption — others, according to their analysis, will maintain stability or potentially prosper.

Seventy hedge fund portfolios maintained WDAY positions at the conclusion of Q4, increasing from 64 during the preceding quarter. This uptick indicates certain institutional capital continues identifying value at current price levels.

Workday’s market capitalization currently stands at approximately $30.47 billion. Thursday’s earnings call will reveal whether the narrative is finding footing or remains under continued strain.

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