Weak Guidance Overshadows Workday's Solid Q4 Results, Shares Tumble

Core Insights - Workday reported strong Q4 FY2026 results with a non-GAAP EPS of $2.47, exceeding the consensus estimate of $2.32, and total revenue of $2.532 billion, reflecting a year-over-year growth of 14.5% [1] - The company's guidance for FY2027 subscription revenue is projected between $9.925 billion and $9.950 billion, indicating a growth rate of 12-13%, which is a deceleration compared to FY2026 [1] - Following the guidance announcement, Workday's shares fell 8% in after-hours trading and nearly 13% in premarket trading, signaling investor concerns about future growth [1] Financial Performance - Workday's Q4 FY2026 non-GAAP EPS increased by 28.6% year-over-year to $2.47 [1] - Total revenue for the quarter reached $2.532 billion, driven by subscription revenue of $2.36 billion, which grew by 15.7% year-over-year [1] - The non-GAAP operating margin improved by 420 basis points to 30.6%, and full-year free cash flow rose by 26.86% to $2.777 billion [1] Guidance and Market Reaction - The FY2027 subscription revenue guidance of $9.925 billion to $9.950 billion represents a slowdown from the previous year's growth rate [1] - The 12-month subscription backlog stands at $8.833 billion, reflecting a 15.8% increase, which suggests sustained demand [1] - The market's reaction to the guidance was negative, with shares dropping significantly, raising questions about whether the guidance reflects conservative estimates or actual demand weakness [1] Strategic Initiatives - Co-founder and CEO Aneel Bhusri emphasized the company's commitment to innovation in HR and finance through AI, highlighting the completion of 1.7 billion AI actions across its platform in FY2026 [1] - Workday has made strategic acquisitions, including Paradox, Sana, and Pipedream, to enhance its AI capabilities [1]