Workday Earnings: Preliminary 2026 Guidance Is Light, but Is Distorted by Recent Large Deal Wins

We transfer coverage and maintain our fair value estimate at $270 per share for wide-moat Workday after good third-quarter results relative to our expectations. Shares are selling off in after-hours trading, likely based on an outlook that is lower than expected based on some contract elements for some strategic (large) wins during the quarter that will take multiple quarters to ramp. Management provided a preliminary outlook for fiscal 2026 that ultimately increases the risk in estimates—in that it takes the delayed revenue recognition and assumes revenue acceleration in the second half of fiscal 2026, which increases risk. We thought shares were fairly valued ahead of results, so we now see modest upside, assuming the selloff holds. However, we assume shares will be penalized in the near term based on the outlook.