Nucor earnings beat by $0.08, revenue fell short of estimates
On Friday, Goldman Sachs increased its price target for Workday (NASDAQ:WDAY) shares to $300 from $275, while keeping a Buy rating on the stock. According to InvestingPro data, analysts maintain a bullish consensus on Workday, with price targets ranging from $250 to $340, and 27 analysts have recently revised their earnings expectations upward. This adjustment comes in the wake of Workday’s first-quarter earnings for fiscal year 2026, which revealed several financial metrics exceeding consensus estimates. The company’s subscription revenue saw a 13.4% increase, slightly above the consensus by 0.3%. Operating margins (OpM) were reported at 30.2%, which is 200 basis points higher than anticipated, and calculated remaining performance obligations (cRPO) grew by 15.6%, with a 15.1% increase excluding tenant adjustments, closely aligning with the consensus prediction of a 15.0% rise.
Despite these positive outcomes, Workday’s stock experienced a 7% decline in after-hours trading, currently trading at $238.01, representing a 12.8% decline over the past week. Investors reacted to the company’s forecast for the second quarter, which suggested a more conservative outlook than expected. InvestingPro analysis reveals the company maintains strong financial health with a "GOOD" overall score and holds more cash than debt on its balance sheet. The guidance for F2Q subscription revenue is set at 13.5%, marginally lower than the consensus of 13.7%. Similarly, the F2Q cRPO excluding tenant adjustments is projected at 14.5%, slightly below the consensus of 14.7%. Nevertheless, the company’s overall top-line guidance remains unchanged, even with a positive net currency impact of $10 million factored in.
Goldman Sachs analyst believes the market’s response to this conservative guidance is exaggerated. The firm points to Workday’s strategy of emphasizing the second half of the fiscal year for revenue growth, which is expected to be driven by the ramp-up of already signed deals. The analyst notes that Workday’s significant margin outperformance in the first quarter and the raised margin guidance for FY26, which now anticipates an additional 50 basis points, should reassure investors about the company’s ability to meet its 30% operating margin target for FY27.
The report also highlights several key growth drivers that should instill confidence in Workday’s performance for FY26 and beyond. Recent financial data from InvestingPro supports this outlook, showing impressive revenue growth of 15% in the last twelve months to $8.7 billion, with a robust gross profit margin of 75.7%. Get access to 10+ additional exclusive ProTips and comprehensive analysis through InvestingPro’s detailed research reports. These include the continued momentum in artificial intelligence (AI), with AI net new annual contract value (NNACV) more than doubling year-over-year and AI products featured in 25% of expansions. Additionally, the scaling of the partner-led pipeline, which now contributes to over 20% of NNACV, supports Workday’s expansion into smaller markets. Lastly, the successful execution of Workday’s full suite strategy, which has led to more than 30% of new wins, validates the company’s comprehensive platform approach.
In conclusion, Goldman Sachs asserts that these initiatives are likely to sustain durable growth and further margin leverage, which could facilitate a re-rating of Workday’s stock to align with its peers that follow the Rule of 40+ at 9 times enterprise value to CY26 sales, compared to Workday’s current 6 times. Based on InvestingPro’s Fair Value analysis, Workday appears to be currently undervalued, presenting a potential opportunity for investors. The company’s strong financial metrics, including a current ratio of 2.07 and an Altman Z-Score of 5.75, further support its solid market position.
In other recent news, Workday has reported its first-quarter fiscal year 2026 results, meeting expectations in revenue and calculated remaining performance obligations (cRPO). The company exceeded its margin forecast by 220 basis points and reaffirmed its fiscal year guidance. Despite this, several analysts have adjusted their price targets for Workday. DA Davidson raised its target to $250 while maintaining a Neutral rating, citing the company’s margin performance and AI investments. Stifel reduced its target to $275, retaining a Hold rating, pointing to expectations of mid-to-low teens growth in subscription and bookings. Bernstein also lowered its target to $325 but kept an Outperform rating, highlighting the need for growth stabilization in the mid-teens. KeyBanc cut its target to $325, maintaining an Overweight rating, and noted the inclusion of tenant contracts in cRPO growth calculations. Workday continues to focus on AI opportunities, collaborating with industry leaders and expanding its presence across various sectors.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.