Workday recently announced results for the second-quarter of fiscal 2027, beating estimates and pulling in numbers that would normally warrant an upgrade from analysts. Despite the beat, one Wall Street firm chose to step aside.
On August 28, Freedom Broker analyst Almas Almaganbetov downgraded Workday, Inc. (NASDAQ:WDAY) from Buy to Hold with a price target of $200.00, up from $180. While the firm didn’t deny the flawless quarter, it does believe that the flawless execution may already be reflected in its valuation.
The Impeccable Quarter
The company reported total revenues of $2.649 billion, an increase of 12.8% from the second quarter of fiscal 2026. Subscription revenues jumped almost 14% to $2.471 billion from the same period last year. Operating income was $313 million compared to $248 million in the same period last year.
Adjusted operating income and EPS beat forecasts significantly on the back of strict cost discipline and internal AI-driven automation.
Management also eased investor fears regarding AI disruption, noting how its AI solutions were seeing strong adoption and also driving customer wins. AI annual recurring revenue approached $600 million. This was, in majority, due to the surging interest in agentic solutions. The company now expects fiscal 2028 subscription revenue to grow by nearly 11%. This is in line with its projected growth rate for the second half of fiscal 2027.
The company has also announced a new $4.0 billion share repurchase authorization.
Why Freedom Brokers Downgraded Anyway
Despite the shining execution demonstrated by the quarter, Freedom Brokers remains on the sidelines due to a few factors. For starters, the company’s promotional Flex credits has been encouraging customers to try out its new AI tools, but only over 200 customers had signed up for Flex Credits as reported for the quarter.
While AI adoption is a key focus for the company, management has noted that revenue from usage-based models may take some time to materialize. The firm noted how management’s focus has weighed on total subscription backlog growth of 8% year-over-year.
The firm also asserted that it anticipates subscription revenue deceleration to an estimated 11% year-over-year in the second half of fiscal 2027 and fiscal 2028. Part of this deceleration is likely due to a mix shift in bookings toward the installed base.
Valuation also remains a concern, which currently reflects margin optimization gains against limited near-term revenue acceleration catalysts.
Analysis and Bottom-line
Recent hedge fund filings data from Insider Monkey shows hedge fund interest mildly decelerating from 63 hedge fund holdings in Q1 to 57 in Q2. Short interest for the stock also denoted moderate bearish skepticism against the stock. As of mid-August 2026, the stock had a short interest of 20.12 million shares, representing 10.01% of its public float.
Overall, Freedom Broker’s downgrade isn’t an implication of a weak quarter for Workday. It simply means that much of the upside is already reflected in its valuation, and that the stock needs to prove much more than a strong AI headline to convince skeptical investors of WDAY’s story.
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