Workday shares plunge 9% as weak guidance deepens AI disruption fears despite CEO's defense

Workday CEO Says Anthropic and OpenAI Use His Company's Software

Workday Inc. Chief Executive Officer Aneel Bhusri said leading AI companies like Anthropic -- which investors fear will disrupt the software industry -- actually use his company's products. "Just for what it's worth, Anthropic, Google and OpenAI all run Workday," Bhusri said on a call Tuesday with analysts. Workday makes software for office tasks such as payroll and employee management. Investors have grown worried that AI tools will make this kind of work easier and wipe out demand for these products. Workday's stock has plummeted about 40% this year, a slide mirrored by peers like Salesforce Inc. Bhusri, a Workday co-founder, returned earlier this month as CEO. He had stepped down in 2024 as co-CEO while continuing to serve as chairman. Bhusri spent much of a conference call after the company reported earnings on Tuesday laying out a case for why Workday's software will remain relevant in the age of AI. "These are true systems of record that must process transactions with absolute accuracy and speed, enforce complex security models, and comply with statutory and regulatory requirements all over the world," he said. "No amount of vibe coding is going to produce an HR or an ERP system." ERP refers to software for enterprise resource planning, which consolidates many basic business tasks into a single system. Still, Workday's shares fell 9% in extended trading.

Workday's stock slumps again on weak guidance and AI disruption fears - SiliconANGLE

Workday's stock slumps again on weak guidance and AI disruption fears Shares of Workday Inc. got hammered in late trading today after the company offered weak guidance for the current quarter. It was the worst possible news for investors amid growing concerns over the existential threat it faces from the rise of artificial intelligence. And it happened even as the company delivered solid results for the quarter just gone. Workday reported fourth-quarter earnings before certain costs such as stock compensation of $2.47 per share, easily beating Wall Street's target of $2.32 per share. Revenue for the period rose 14%, to $2.53 billion, just ahead of the $2.52 billion consensus estimate. Profitability rose too, with income for the quarter coming to $145 million, rising from just $94 million a year earlier. But those positive numbers were undone by the company's dismal outlook. For the current quarter, Workday is looking for an adjusted operating margin of 30.5% and $2.335 billion in subscription revenue. Both figures were below the consensus, with analysts hoping for a margin of 30.9% and $2.35 billion in subscription revenue. For fiscal 2027, Workday sees a margin of just 30%, with subscription revenue set to fall between $9.93 billion and $9.95 billion, implying slower growth of just 12% to 13%. During fiscal 2026, the company's subscription revenue had grown at a rate of just over 14%. Investors have grown more concerned in recent weeks that AI models could end up causing major disruption for software-as-a-service companies like Workday in the coming years, or possibly even months. As of today's market close, Workday's stock was down 39% in the year to date, and it declined a further 9% in extended trading. The company is experiencing disruption in its head office too. Earlier this month, Chief Executive Carl Eschenbach revealed that he's stepping down from the role after just three years, without giving any reasons for his departure. He was promptly replaced by co-founder Aneel Bhusri (pictured), who previously served as the company's CEO. Eschenbach had joined Workday three years prior as co-CEO, sharing the role with Bhusri for the first year, before the co-founder stepped back to focus on product development, handing over full control to his colleague. It's not clear if Bhusri intends to occupy the hot seat permanently, or perhaps look for another co-CEO in the future. Bhusri addressed the AI storm clouds hanging over the company's head on a conference call with analysts, dismissing the threat entirely. "You've all heard the narrative out there that HR and ERP will be replaced or relegated to the background by AI," he said, using acronyms for human resources and enterprise resource planning. "I personally just don't see it happening." The CEO explained that Workday operates at the heart of global enterprises, where trust and accuracy are vitally important. "That gives Workday a unique opportunity to bring AI directly into the HR and finance workflows our customers rely on every day and to deliver real, measurable value," he insisted. Workday's plan to counter AI is to try and lead the disruption itself. It has added dozens of generative AI features to its platform over the last year, and Bhusri said today that its AI products now generate more than $400 million in annual recurring revenue. During the quarter, Workday announced it's going to launch a new AI agent that will be able to handle employee requests for modifying their work shifts. It also acquired a startup called Pipedream Inc., which develops tools for connecting AI agents to external software and services. The reason for the company's soft guidance is that some large customers are taking longer to close new deals, said Workday Chief Commercial Officer Rob Enslin. Workday's finance chief Zane Rowe added that Bhusri is much more focused on initiatives that will ultimately drive long term growth for the company. The implication being that Workday's AI bets will ultimately pay off in future. "Aneel is much more focused on that, more so than just hitting that operating margin exclusively," Rowe told analysts.

Workday shares extend declines as soft forecast deepens AI disruption fears

A selloff in Workday shares resumed on Wednesday after the HR and payroll software maker's soft sales forecast fanned investor fears about its ability to stay competitive in the AI era. The stock fell nine per cent in premarket trading and was on track to widen losses of about 40 per cent this year triggered by worries that growing use of artificial intelligence tools launched by the likes of Anthropic would erode demand for traditional software. The losses mean Workday is one of the worst-performing U.S. software stocks this year. Its CEO and co-founder Aneel Bhusri spent a large chunk of the post-earnings call on Tuesday trying to dispel those worries and touting investments in AI. "Just for what it is worth, Anthropic, Google and OpenAI all run Workday," Bhusri, who returned as chief executive this month after stepping down as co-CEO in 2024, told analysts. "No amount of Vibe coding is going to produce an HR or an ERP system. That kind of complexity is very hard to replicate." Still, about 23 analysts - more than half those covering the stock - lowered their price targets after Workday issued a softer-than-expected annual subscription revenue forecast. The company said some large deals were taking longer to close, particularly in the government and healthcare sectors. "In an environment where there is increased scrutinization of every metric amidst the AI debates, the guide likely does not allay investors' general concerns for app layer names," Piper Sandler analysts said in a note. Beyond the disruption AI tools can directly pose to Workday, some analysts have also said a broader slowdown in hiring and layoffs sparked by the developing technology could lower overall demand for HR tools at businesses. On Wednesday, Australian software company WiseTech Global said it would axe about 2,000 jobs, nearly a third of its global workforce, in a two‑year restructuring that could rank among the country's largest AI-linked job cuts. Salesforce will report quarterly results later in the day after market close, offering another key read on how AI is affecting software spending. Workday's 12-month forward price-to-earnings multiple is 11.94, compared with peer Salesforce's 13.98.