Workday Beat Q4 Earnings. Its Stock Fell Anyway. Here's Why Guidance Is Everything.

Workday reported Q4 results after the close Tuesday that beat expectations on both revenue and earnings, but the stock dropped about 6% in after-hours trading because its guidance for fiscal 2027 disappointed Wall Street.

The numbers

Revenue came in at $2.53 billion, up 14.5% year-over-year. Adjusted earnings per share were $2.47, ahead of the $2.30 estimate. So far, so good. The problem was forward guidance: Workday projected Q1 subscription revenue of $2.335 billion and full-year 2027 subscription growth of 12–13%. Analysts were looking for more.

The AI fear hanging over enterprise software

Workday sells cloud-based HR and finance software to large corporations. Their products include the kind of systems companies use to manage payroll, benefits, budgeting, and workforce planning. The company's stock is already down about 39% year-to-date, largely because of AI fears: specifically, the concern that AI agents could eventually automate many of the functions that Workday's software platforms handle.

CEO Aneel Bhusri, who returned to day-to-day leadership in February after a period as executive chairman, pushed back directly on Tuesday's call: 'I don't see HR and ERP being replaced by AI.' He described AI as an addition to enterprise systems rather than a replacement. But the market's reaction to the guidance miss suggests investors aren't fully convinced.

Why this matters broadly

Workday is a bellwether for the enterprise software sector, the category of companies that build and sell the complex software systems large organizations depend on. If AI tools genuinely allow companies to replicate those functions in-house, the entire sector faces a structural threat. This afternoon’s Salesforce earnings will be watched closely for similar signals.

Sources: CNBC, Bloomberg, Yahoo Finance, Workday