Workday (NASDAQ:WDAY) outlined stronger-than-expected operating margins, rising free cash flow, and accelerating artificial intelligence adoption at its Analyst Day, prompting optimism about long-term growth.
With over 75 million users, robust renewals, and expanding AI-driven products, Workday set guidance that points to higher margins and $15 free cash flow per share by fiscal 2028.
Goldman Sachs analyst Kash Rangan maintained a Buy rating on Workday with a price forecast of $280.
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Rangan turned incrementally positive on Workday after its Analyst Day, noting more substantial operating margins and free cash flow than expected. The analyst emphasized that Workday demonstrates both financial durability as a Software as a Service (SaaS) leader and meaningful progress in AI adoption.
He said that renewal, expansion of partnerships, and new product offerings built around agentic workflows should allow the company to maintain and accelerate its growth rate over the longer term.
Rangan pointed out that Workday reset subscription revenue guidance to 13%–14% CAGR through fiscal 2028, down slightly from the prior 15% through fiscal 2027. However, the analyst said rising operating leverage creates a more favorable setup for investors.
Management now targets operating margins of roughly 35% by fiscal 2028 (compared with the 32%–33% range earlier), which implies annual improvements of around 300 basis points, he noted.
Workday also guided to free cash flow per share of about $15 by fiscal 2028, 12% above the consensus of $13.50, supported by a $5 billion buyback program.
Rangan noted Workday's AI initiatives already show traction, with agentic AI contributing more than $150 million in annualized recurring revenue in the second quarter of fiscal 2026, up from less than $50 million a year earlier.
Growth could exceed expectations if AI contribution lifts net new ARR above $1.2 billion. The analyst added that strategic acquisitions such as Flowise and Sana strengthen Workday's AI product portfolio by enabling custom agents and delivering unified enterprise knowledge within workflows.
Financial estimates reinforce his constructive view. Rangan projects revenues of about $9.52 billion in fiscal 2026 and $10.77 billion in fiscal 2027. EPS estimates stand at $9.09 in fiscal 2026 and $11.29 in fiscal 2027.
Rangan compared Workday to Intuit (NASDAQ:INTU), which sustained double-digit top-line growth with rising margins. The analyst argued Workday could follow a similar trajectory as investors recognize durable growth paired with compounding cash generation.
With over 75 million users, strong renewal rates, and expansion across financials, analytics, and human capital management (HCM), he believes Workday is on track to exceed $20 billion in revenue with 35%+ margins in the long term.
Price Action: WDAY shares were trading higher by 9.08% to $238.92 at last check Wednesday.
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