Workday shares extend declines as soft forecast deepens AI disruption fears

Investors fear Workday can not stay competitive in the AI era.

A selloff in Workday shares resumed on Wednesday after the HR and payroll software maker’s soft sales forecast fanned investor fears about its ability to stay competitive in the AI era.

The stock fell nine per cent in premarket trading and was on track to widen losses of about 40 per cent this year triggered by worries that growing use of artificial intelligence tools launched by the likes of Anthropic would erode demand for traditional software.

The losses mean Workday is one of the worst-performing U.S. software stocks this year. Its CEO and co-founder Aneel Bhusri spent a large chunk of the post-earnings call on Tuesday trying to dispel those worries and touting investments in AI.

“Just for what it is worth, Anthropic, Google and OpenAI all run Workday,” Bhusri, who returned as chief executive this month after stepping down as co-CEO in 2024, told analysts.

“No amount of Vibe coding is going to produce an HR or an ERP system. That kind of complexity is very hard to replicate.”

Still, about 23 analysts - more than half those covering the stock - lowered their price targets after Workday issued a softer-than-expected annual subscription revenue forecast.

The company said some large deals were taking longer to close, particularly in the government and healthcare sectors.

“In an environment where there is increased scrutinization of every metric amidst the AI debates, the guide likely does not allay investors’ general concerns for app layer names,” Piper Sandler analysts said in a note.

Beyond the disruption AI tools can directly pose to Workday, some analysts have also said a broader slowdown in hiring and layoffs sparked by the developing technology could lower overall demand for HR tools at businesses.

On Wednesday, Australian software company WiseTech Global said it would axe about 2,000 jobs, nearly a third of its global workforce, in a two‑year restructuring that could rank among the country’s largest AI-linked job cuts.

Salesforce will report quarterly results later in the day after market close, offering another key read on how AI is affecting software spending.

Workday’s 12-month forward price-to-earnings multiple is 11.94, compared with peer Salesforce’s 13.98.

(Reporting by Rashika Singh in Bengaluru; Writing by Aditya Soni; Editing by Mrigank Dhaniwala and Pooja Desai)