Workday, Inc. (WDAY): what the price requires
At today's price, Workday, Inc. (WDAY) is priced for today's economics sustained for ~8.2 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/WDAY
Headline
| Field | Value |
|---|---|
| Ticker | WDAY |
| Company | Workday, Inc. |
| Current price | $143.95/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 4.8% |
| Operating margin today | 9.2% |
| Margin compression implied | -4.4pp |
| Must persist for | 8.2y |
| Multiple paid | 40x operating income |
The operating-margin requirement is derived from the framework's value band at year 7, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.2% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2 years.
How unusual the bet is: elevated
| Reference | Value |
|---|---|
| cohort percentile (of 177 peers) | 70 |
| sustained it ~8.2 years at this level | 19% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 3.39x | 4 | expensive |
| Earnings | 2.38x | 4 | expensive |
| Relative | 1.21x | 5 | expensive |
| Growth | 0.64x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $378.30 | 0.38x | yes | FCF base $3.3B, growth 13% (input: historical growth), terminal g 4.0%, WACC 8.2%, 6yr projection |
| DCF Exit Multiple | Growth | $224.28 | 0.64x | yes | Exit EV/EBITDA: 30.7x / 32.7x / 34.7x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $119.07 | 1.21x | yes | P/E 35x (static sector reference · 2026-04), scenarios: 29.0x / 35.0x / 41.0x (bear / base = reference held flat / bull), EV/EBITDA 25x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $36.01 | 4.00x | yes | BV/sh $26.28, ROE (TTM) 12.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $41.83 | 3.44x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $136.82 | 1.05x | yes | Rev $9.9B, growth 13% (input: historical growth; tapered), Terminal P/S: 3.1x / 3.7x / 4.4x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $38.52 | 3.74x | yes | EPS $3.21, growth 1% (input: historical EPS growth), PEG=41.69 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $0.01 | 14394.50x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.36B × (1−37%) / WACC 8.2% → EPV (no growth) (excluded from median) |
| Residual Income | Asset | $43.04 | 3.34x | yes | BV $26.28 + 5yr PV of (ROE (TTM) 12.7% − Kₑ 9.3%) × BV; BV grows 8.2%/yr |
| Graham Number | Asset | $43.57 | 3.30x | yes | √(22.5 × EPS $3.21 × BVPS $26.28) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $106.19 | 1.36x | yes | EBITDA $1.25B × sector EV/EBITDA 25.0x |
| FCF Yield | Earnings | $109.65 | 1.31x | yes | FCF $2972.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $42.66 | 3.37x | yes | SBC-adj FCF $1.40B (FCF $2.97B − SBC $1.58B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $103.58 | 1.39x | yes | EPS $3.21 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $6.18 | 23.29x | yes | BV $26.28 × (ROIC 1.9% / WACC 8.2%) (excluded from median) |
| P/Sales Sector | Relative | $309.98 | 0.46x | yes | Revenue $9.85B × sector P/S 8.0x |
| PEG Fair Value | Relative | $120.38 | 1.20x | yes | EPS $3.21 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $34.70 | 4.15x | yes | EPS $3.21 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net cash | $1.4b |
| Net debt / NOPAT (after-tax) | -2.47x (net cash) |
| Net debt / operating income (pre-tax) | -1.54x (net cash) |
| Interest coverage | 7.6x |
| Share count CAGR (dilution) | 0.3% |
| Burning cash | no |
Bullet Takeaways
- Workday sells cloud applications for human resources and finance on a subscription, and the subscription is the franchise: subscription revenue rose 14.3% to $2.354 billion in the first quarter of fiscal 2027, on top of a high gross revenue retention rate that keeps the existing base intact.
- The biggest risk is the price, not the operations: at $117 the asset-value and earnings-power methods read the stock as expensive, and the price is supported only by peer multiples and the cash-flow methods that credit years of continued margin expansion.
- What to watch is the AI agent transition: management reiterated its fiscal 2027 subscription outlook of roughly $9.925 to $9.950 billion and raised its non-GAAP operating margin target to 30.5%, with executives crediting agentic AI adoption for the best first-quarter new bookings growth in five years.
Bull Case
Start with what the market is willing to pay, because it tells you what investors believe about durability. At $117 the price sits above where most of the conventional valuation methods land, and only the peer-multiple lens and the cash-flow methods that project continued growth reach it. That spread is the market pricing Workday as a high-retention software franchise whose margin expansion has years left to run, and the first quarter of fiscal 2027 gave that view fresh support. Subscription revenue rose 14.3% to $2.354 billion, total revenue rose 13.5% to $2.542 billion, and the operating story transformed: GAAP operating income reached $338 million, or 13.3% of revenue, against just $39 million and 1.8% a year earlier. That is the operating leverage of a subscription model finally showing through.
The foundation under the growth is the recurring revenue base and how well it holds. Workday derives its revenue primarily from subscription fees that give customers access to its cloud applications, with related support, and it points to a high gross revenue retention rate as evidence it keeps its customers and earns strong satisfaction. For enterprise HR and finance systems, that retention is the moat: once a large organization runs payroll and financial close on Workday, switching is expensive, disruptive, and rarely worth the risk. High retention plus steady new bookings is what lets the company expand margins without sacrificing growth, and it is why the price can be supported by methods that assume the model keeps compounding.
The forward bet management is making is the AI agent transition, and it is starting to show in the numbers rather than just the narrative. The company reiterated its fiscal 2027 subscription revenue outlook of roughly $9.925 to $9.950 billion and raised its non-GAAP operating margin guidance to 30.5%, a combination of held revenue and higher margin that signals confidence in profitable growth. Leadership has shifted emphasis from acquisitions to organically developing AI agents, monetized through a usage-based Flex Credits model that meters API and agent activity across the platform, and credited agentic AI adoption for the strongest first-quarter new bookings growth in five years. If consumption-based AI revenue layers on top of the seat-based subscription, it adds a second growth vector to a business the market already credits for durability.
Bear Case
The threat that matters most to Workday is competitive, and it comes from companies far larger than Workday with the resources to wage a long war on price. The company's own filings are candid about it, warning of substantial price competition and noting that competitors may form cooperative relationships among themselves or with third parties to enhance their offerings, and that many hold major distribution agreements with consultants, system integrators, and resellers. In enterprise HR and finance software, the competitors are some of the deepest-pocketed firms in technology, and they are bundling AI into suites that already sit in the same accounts Workday is trying to expand within. A vendor that can give away an AI feature to protect a broader platform relationship can pressure Workday's pricing and its expansion motion at the same time.
The AI transition that powers the bull case is also the bear's sharpest concern, because it is unproven at scale and it changes the revenue model under the company. Moving from predictable seat-based subscriptions toward usage-metered Flex Credits introduces consumption volatility into what has been a clean, forecastable revenue stream, and it invites direct comparison with AI-native competitors and the hyperscalers whose models the agents may run on. If customers adopt third-party agents or build their own on cheaper infrastructure, Workday risks becoming the system of record that others monetize on top of, rather than the platform capturing the AI spend itself. The subscription model also has a built-in drag the company acknowledges: revenue is recognized over the contract term, so rapid sales gains do not translate into rapid revenue gains, and a surge in new customers can mean recognizing more cost than revenue in the early periods. Growth is real but slow to show.
Then there is the valuation, which leaves no margin for a stumble. The methods grounded in current assets and current earnings power land far below the price, and the earnings-power lens in particular reflects how thin GAAP profitability still is relative to the multiple. The price is supported only by peer comparables and by cash-flow methods that assume the non-GAAP margin keeps climbing toward the 30.5% target and beyond. The bull and the bear agree the retention is excellent and the AI push is real; they disagree on whether a price that already embeds six-plus years of continued margin expansion has room left, given that a single competitive or AI-adoption disappointment would knock out the only methods that currently reach the price.
Valuation
What the price embeds is patient, durable margin expansion: at today's level the market is paying for Workday to keep growing its subscription base while lifting operating margins for years, an assumption the company's own 30.5% non-GAAP margin target and reiterated revenue outlook are built to validate. Today's GAAP operating margin is around 13%, up sharply from a year ago but still well below where the model is supposed to land, so the price is a bet on the distance between the two closing.
The method families split the way they do for a high-quality software compounder that is still early in its margin ramp. The asset-value and earnings-power lenses land far below the price; the earnings-power method especially, because it capitalizes today's modest GAAP profit with no growth, reads the price as expensive. Peer multiples land right around the price, and the cash-flow methods that project the growth and margin expansion forward reach it. That pattern is the signal: the static frames cannot price a subscription franchise whose value is in its future margin, so only the forward and peer lenses support the quote. The free-cash-flow yield method also lands near the price, which matters for a software company, because subscription businesses convert to cash well ahead of GAAP earnings; on a cash basis the company looks far healthier than the GAAP operating line alone suggests.
Solvency is a non-issue and a quiet strength. Workday holds net cash of roughly $1.4 billion and is not burning cash, so it funds the AI agent build and any margin investment from its own balance sheet without dilution-to-survive or refinancing risk. The decisive question for the value is not any single method's number; it is whether the AI agent transition and the Flex Credits monetization extend the growth runway long enough to justify a price that the conventional, present-tense methods do not reach. Peer multiples sitting essentially at the price say the market is treating Workday as fairly valued against its software cohort rather than cheap, so the upside case rests on the company outgrowing that cohort, not on a re-rating toward it.
Catalysts
The fiscal 2027 first-quarter report on May 21, 2026 was the most recent catalyst and it was a clean beat with an operating inflection. Total revenue rose 13.5% to $2.542 billion, subscription revenue rose 14.3% to $2.354 billion, and GAAP operating income jumped to $338 million, or 13.3% of revenue, from $39 million and 1.8% a year earlier. Management reiterated its fiscal 2027 subscription revenue outlook of roughly $9.925 to $9.950 billion and raised its non-GAAP operating margin guidance to 30.5%.
The forward catalyst is the AI agent ramp. Executives attributed the best first-quarter new bookings growth in five years to adoption of agentic AI products, and described a strategic shift from acquisitions toward organically developing agents, monetized through the usage-based Flex Credits model that meters API and agent activity. The things to watch over the next several quarters are whether Flex Credits consumption becomes a measurable revenue line, whether the non-GAAP margin tracks toward the raised 30.5% target, and whether new bookings momentum holds against larger competitors bundling AI into their own suites. The next quarterly report is the event that shows whether the agent monetization is translating into the durable growth the price assumes.
Peer Cohorts (Per Segment, With Filing Citations)
Cloud applications (single segment) (reported)
- PEGA (PEGASYSTEMS INC.)
- (no filing in the citation store)
- CRM (Salesforce, Inc.)
- (no filing in the citation store)
- NOW (ServiceNow, Inc.)
- (no filing in the citation store)
- HUBS (HubSpot, Inc.)
- (no filing in the citation store)
- PAYC (Paycom Software, Inc.)
- (no filing in the citation store)
- INTU (INTUIT INC.)
- (no filing in the citation store)
- OTEX (OPEN TEXT CORP)
- (no filing in the citation store)
- ZM (Zoom Communications, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Q1 FY2027 earnings release, May 21 2026; FY2025 10-K, accession 0001327811-25-000056 · Q1 FY2027 earnings release and call, May 21 2026 · Q1 FY2027 earnings release, May 21 2026 · FY2025 10-K, accession 0001327811-25-000056 · Q1 FY2027 earnings call, May 21 2026