Workday's AI Ambitions Can't Overcome Sales Slowdown Fears

Workday CEO Aneel Bhusri has returned to lead the company with ambitious plans for agentic AI, but investors remain unconvinced as the HR software giant forecasts slower growth despite its core platform's strength.

During Workday's fourth quarter earnings call, Bhusri attempted to reassure stakeholders about the company's AI strategy while emphasizing the durability of its HR and financial applications. "I'm very optimistic about what we're doing on the agentic front," Bhusri told investors, positioning Workday's two-decade expertise in HR data as a significant competitive advantage.

The company forecasts subscription revenue growth of 12 to 13 percent for the fiscal year ending January 31, 2027, projecting between $9.925 billion and $9.95 billion. This represents a slowdown from the 14.5 percent growth achieved in the fiscal year just ended, triggering a more than nine percent drop in after-hours trading.

Bhusri's return comes at a challenging time for enterprise software companies facing AI disruption fears. The stock had already declined 50 percent over the past year as investors grew concerned about Workday's ability to maintain its market position against emerging AI competitors.

Despite the cautious outlook, Bhusri emphasized Workday's unique position in the market. "We built these great HR financial applications, and they continue to grow," he said. "We have this opportunity to build these agentic solutions on top. I'm very bullish on where we're headed."

The CEO claimed Workday's 20 years of experience with HR and financial data has positioned the company "at least five to seven years ahead of the best AI," suggesting a significant moat against competitors. However, he acknowledged that resting on these laurels isn't an option.

"So we want to get to a model where we're pretty much indifferent if it's third parties or us building apps on top, we get compensated either way through the consumption model," Bhusri explained, indicating a shift toward a more flexible platform approach.

Bhusri's return to the CEO position follows the departure of Carl Eschenbach, who stepped down from his roles as CEO and board member earlier this month. According to Workday's statement, Eschenbach will continue supporting Bhusri and the company as a strategic advisor.

The leadership transition comes amid broader challenges for Workday, including recent job cuts affecting around 400 staff and concerns about customer hiring freezes that could impact future growth. The company also recently completed its acquisition of Pipedream, an integration platform for AI agents with 3,000 connectors to business applications, announced in November.

Workday's situation reflects broader challenges facing enterprise software companies as they navigate the AI transition. While the company maintains that its core HR and financial applications remain strong, investors appear skeptical about whether this foundation is sufficient to weather the coming AI-driven changes in the enterprise software landscape.

The forecast slowdown and leadership changes suggest Workday is at a critical juncture, attempting to balance its established strengths with the need to innovate rapidly in the AI space. Whether Bhusri's vision for agentic AI solutions can restore investor confidence remains to be seen, but the market's initial reaction suggests significant skepticism about the company's growth trajectory in an increasingly competitive environment.