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On Wednesday, Goldman Sachs analyst Kash Rangan updated the firm’s outlook on Workday (NASDAQ:WDAY), increasing the price target from $310 to $345 while maintaining a Buy rating. The adjustment follows Workday’s solid fourth-quarter fiscal year 2025 results, which aligned with previous announcements. According to InvestingPro data, Workday maintains a strong financial health score of 2.85 (GOOD) and currently appears slightly undervalued based on Fair Value analysis. As a prominent player in the Software (ETR:SOWGn) industry, the company has demonstrated robust revenue growth of 16.8% over the last twelve months. The company reported a 15.9% year-over-year growth in Subscription Revenue, slightly surpassing Consensus expectations by 0.7%, and an operating margin (OpM) of 26.4%, which is an improvement of 130 basis points.
The analyst highlighted Workday’s consistent backlog, which supports a revenue re-acceleration in the second half of the fiscal year 2026, and noted the company’s increased operating margin guidance by 50 basis points. The stock experienced a 12% rise in after-hours trading, driven by positive performance indicators, including a record quarter of net dollars added to remaining performance obligations (RPO) and calculated remaining performance obligations (cRPO), both increasing by 15.6% year-over-year.
Goldman Sachs’ optimism is also fueled by Workday’s growing full suite of services, which now accounts for 30% of net new wins and boasts over 2,000 customers. The firm also recognized Workday’s success in artificial intelligence (AI) upsells, with AI product sales contributing to 30% of customer expansion and the Recruiting Agent’s net new annual contract value (NNACV) nearly doubling quarter-over-quarter.
The report further acknowledges the strategic role of partners in Workday’s sales strategy, now sourcing over 15% of NNACV, up from 10% in the third quarter of fiscal year 2024. Goldman Sachs also welcomed the recent addition of experienced leaders Rob Enslin and Gerrit Kazmaier to Workday’s executive team.
Despite concerns about potential AI-induced headcount reductions within Workday’s customer base, the analyst believes that the company’s AI tools will not only help retain customers but also provide additional monetization opportunities. The report suggests that Workday’s continued growth and margin leverage could lead to a re-rating of its stock, aligning with peers that trade at higher multiples based on the "Rule of 40+" principle. InvestingPro analysis reveals the company’s strong market position with a market capitalization of $67.8 billion and healthy return on assets of 10.68%. For deeper insights into Workday’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Workday Inc . reported impressive financial results for Q4 2025, surpassing Wall Street’s expectations in both earnings and revenue. The company reported an earnings per share (EPS) of $1.92, exceeding the forecasted $1.78, and generated $2.21 billion in revenue, beating the expected $2.18 billion. Workday also achieved a 15% increase in total revenue year-over-year for the quarter, with subscription revenue growing by 16% to reach $2.04 billion. Additionally, the company’s non-GAAP operating margin was reported at 26.4%, and its operating cash flow for the quarter was $1.11 billion.
Looking ahead, Workday has provided optimistic guidance for FY 2026, projecting a subscription revenue of $8.8 billion, indicating a 14% growth. The company anticipates faster subscription revenue growth in the second half of FY 2026 and has set a target for a non-GAAP operating margin of 28%. Workday’s strategic initiatives include a focus on AI, with CEO Carl Eschenbach emphasizing its importance in the company’s future plans. Meanwhile, the company is undergoing workforce reductions and leadership changes as part of its strategic efficiency improvements. These recent developments underscore Workday’s strong market position and growth trajectory.
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