Workday Q4 Revenue Grows 14.5% to $2.53B, But FY 2027 Outlook Disappoints

Workday delivered a solid fourth quarter with revenue of $2.53 billion, up 14.5% year-over-year and slightly above the $2.52 billion estimate, but the company's fiscal year 2027 subscription revenue outlook disappointed investors, triggering a sharp 9%+ decline in after-hours trading.

The enterprise software company reported Q4 subscription revenue of $2.16 billion, representing 14.3% growth, while total revenue reached $2.53 billion. Workday's non-GAAP earnings per share came in at $1.71, exceeding the $1.65 estimate.

However, the market reaction focused on Workday's forward guidance. For fiscal year 2027, the company expects subscription revenue between $9.25 billion and $9.30 billion, which falls below analyst expectations. The midpoint of this range suggests approximately 14% growth, continuing the deceleration trend from previous quarters.

Workday's billings for Q4 were $2.52 billion, up 13% year-over-year, while remaining performance obligations (RPO) grew 16% to $15.3 billion. The company ended the quarter with 4,200 customers, adding 65 net new customers during the period.

CEO Carl Eschenbach highlighted the company's progress in AI capabilities, noting that customers are increasingly adopting Workday's AI-driven solutions. The company has been investing heavily in artificial intelligence features across its human capital management and financial management platforms.

The stock's after-hours decline reflects investor concerns about the sustainability of Workday's growth trajectory. At current levels, Workday trades at a premium valuation multiple, making the market particularly sensitive to any signs of slowing momentum.

Workday's fiscal year 2026 results showed subscription revenue of $8.98 billion, up 14.1% from the prior year. The company's ability to maintain its growth rate while expanding its customer base and increasing average contract values has been a key driver of its market performance.

The enterprise software sector has faced increased scrutiny as companies evaluate their software spending in a challenging economic environment. Workday's results suggest that while demand remains strong, the pace of growth is moderating as the company matures.

Analysts had been looking for stronger guidance given Workday's positioning in the cloud-based enterprise software market and its investments in AI capabilities. The company's ability to execute on its AI strategy and demonstrate clear ROI for customers will be critical for maintaining its growth trajectory.

Workday's Q4 performance included strong results in its international markets, with EMEA and APJ regions showing robust growth. The company continues to see opportunities in expanding its footprint among large enterprise customers and increasing penetration within its existing customer base.

The disappointing outlook comes as Workday faces increasing competition in the enterprise software space, with rivals like Oracle, SAP, and Microsoft all investing heavily in cloud-based solutions and AI capabilities. Workday's ability to differentiate its offerings and demonstrate clear value propositions will be crucial for maintaining its market position.

Investors will be watching closely to see how Workday addresses these growth concerns and whether the company can accelerate its AI-driven innovation to drive future revenue growth. The enterprise software market remains competitive, and companies are increasingly looking for solutions that can deliver measurable business outcomes.

Workday's stock performance in the coming months will likely depend on its ability to meet or exceed its FY 2027 guidance and demonstrate progress in its AI initiatives. The company's strong customer base and continued investment in product development provide a foundation for future growth, but execution will be key to maintaining investor confidence.

The broader enterprise software market has shown mixed signals, with some companies reporting strong growth while others face headwinds from economic uncertainty and budget constraints. Workday's results suggest that while demand for cloud-based enterprise solutions remains robust, the pace of growth is moderating as the market matures.

As Workday moves into fiscal year 2027, investors will be looking for signs of acceleration in its growth rate and evidence that its AI investments are translating into increased customer adoption and revenue growth. The company's ability to navigate these challenges while maintaining its market leadership position will be critical for its long-term success.