Workday (WDAY) Faces an AI Threat. Is the Investment Case Broken?

Brown Advisory, an investment management company, released its “Brown Advisory Global Leaders Strategy” for the second quarter of 2026 investor letter. A copy of the letter can be downloaded here. Brown Advisory’s Global Leaders Strategy delivered a net return of 4.6% in the second quarter of 2026, underperforming its benchmark, the MSCI ACWI Net Index, which returned 14.9%. The relative weakness was driven mainly by underexposure to semiconductors and technology hardware, while software, cloud services, and financial holdings also weighed on performance. The strategy benefited from holdings in areas tied to AI infrastructure, with semiconductor exposure and AI-related investments gaining from strong demand. Looking ahead, Brown Advisory sees an attractive environment for active stock-picking, with its ready-to-buy list at its highest level since the COVID-19 period and an estimated 12%-13% average five-year base-case IRR, while maintaining a focus on quality, valuation discipline, and long-term cash-flow generation. In addition, please check the Fund’s top five holdings to know its best picks in 2026.

In its second-quarter 2026 investor letter, Brown Advisory Global Leaders Strategy Fund highlighted stocks like Workday, Inc. (NASDAQ:WDAY). Workday, Inc. (NASDAQ:WDAY) provides cloud-based enterprise software for human resources, finance, and workforce management. The one-month return of Workday, Inc. (NASDAQ:WDAY) was 24.00% while its shares traded between $110.36 and $249.85 over the last 52 weeks. On August 7, 2026, Workday, Inc. (NASDAQ:WDAY) stock closed at approximately $170.24 per share, with a market capitalization of about $44.37 billion.

Brown Advisory Global Leaders Strategy Fund stated the following regarding Workday, Inc. (NASDAQ:WDAY) in its Q2 2026 investor letter:

We exited our position in Workday, Inc. (NASDAQ:WDAY) during May after a relatively brief holding period of approximately eight months. Several fundamental factors have changed since our initial investment in September of last year, prompting us to revise both our growth and margin estimates for Workday. These revisions have led us to conclude that we can no longer achieve the IRR targets embedded in our base case. Most crucially—and the ultimate trigger for a thesis break in this case—were the recent changes in the management team. When the CEO stepped down and co-founder Aneel Bhusri was re-appointed, we expected, and already see, a change in capital allocation discipline at Workday, as evidenced by the immediate moderation of the company’s margin targets. This, paired with the expected reduced discipline around stock-based compensation, materially impacted key inputs into our investment thesis. Our view on the inherent customer acquisition cost advantages that incumbents possess remains unchanged, as does our belief that “systems of record” in software are particularly resistant to disruption by AI. We did, however, adjust our estimates to reflect the expected need to ramp up investments in an environment characterized by increased competition from AI-driven challengers. Ultimately, taking into account management changes, our revised estimates, and a widening range of possible outcomes, we decided to cut our losses and exit the position. The funds have been allocated to build out a new investment in Siemens Energy.

In another article, we covered Workday, Inc. (NASDAQ:WDAY) and shared Antipodes Partners’ views on the company. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.