A brokerage downgrade has left Workday’s stock rating at Hold, with a $200 price target raised from $180, as Freedom Broker flagged valuation concerns despite robust operational performance.
The firm cited margin optimization gains as largely priced in, noting limited near-term catalysts for revenue acceleration beyond current levels. Workday’s second-quarter fiscal 2027 results exceeded consensus on revenue and earnings, driven by strict cost control and internal AI automation. Subscription revenue grew 13.35% year-over-year, while gross profit margin reached 75.8% over the last twelve months. AI-related annual recurring revenue surpassed $600 million, supported by strong demand for agentic solutions.
Freedom Broker expects subscription revenue growth to slow to about 11% in the second half of fiscal 2027 and fiscal 2028, partly reflecting a shift in bookings toward the installed base. The company also announced a $4.0 billion share repurchase authorization, though the brokerage viewed this as insufficient to offset valuation headwinds.
Almas Almaganbetov, Freedom Broker’s analyst covering the stock, emphasized that Workday’s dual-class share structure and robust free cash flow reduce the likelihood of a private equity buyout, despite the strong financial profile.
Rival brokerages have adjusted their outlooks following Workday’s results and guidance. Cantor Fitzgerald lowered its target to $205 from $220 while maintaining an Overweight rating, citing guidance misses. KeyBanc raised its target to $215 from $158, citing in-line results but mixed guidance. DA Davidson lifted its target to $190 from $135, highlighting AI momentum but flagging weaker fiscal 2027 guidance. Bernstein SocGen Group increased its target to $238 from $216, focusing on positive margin prospects and fiscal 2028 revenue projections. Stifel raised its target to $160 from $115, citing significant AI adoption with AI products accounting for over 25% of new annual contract value.
