Should You Buy Workday Stock?
Workday (NASDAQ: WDAY), the cloud-based software vendor, is still down about 9% in 2025 — even after a sharp 7% surge on Wednesday, September 17. That rally came after upbeat developments that renewed investor optimism, though the stock remains well behind the S&P 500’s 12% year-to-date gain. We discuss more below.
That said, investing in a single stock comes with risk. For investors who seek lower volatility than individual stocks, the Trefis High Quality Portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately check, Buy Or Sell Duolingo Stock?
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Big Headlines
Elliott Investment Management recently bought a stake exceeding $2 billion in Workday, signaling confidence in the company’s leadership and long-term strategy. That announcement caught the market’s eye.
Adding to the momentum, Workday announced plans to acquire Sana, an AI company specializing in workplace tools, for approximately $1.1 billion. This marks Workday’s third AI-related acquisition in under two months and shows a clear push to integrate AI-driven capabilities – from smarter data searches to automated document creation. In short, Workday is betting heavily on AI to stay competitive in the fast-evolving HR software market.
The Growth Story
Workday’s fundamentals still hold weight. Over the past three years, the company’s top line has grown at an average of 16.5%, well above the S&P 500’s 5.3% pace. In the past twelve months, revenue climbed from $7.9 billion to $9 billion, and the most recent quarter showed a 12.6% year-over-year increase.
Profitability is moderate but steady. Workday’s operating margin was 8.7% in the past 12 months, net margin around 6.5%, and operating cash flow hit nearly $2.6 billion. These numbers suggest a company that can grow while maintaining a solid cash position, even if it isn’t yet delivering the outsized margins some investors might hope for.
Financially, Workday is strong. Debt stands at $3.8 billion against a $58 billion market cap, yielding a low debt-to-equity ratio of 6%. Cash and equivalents make up 45% of total assets, giving the company flexibility to invest, acquire, and weather challenges.
Risks and Resilience
Of course, no stock is without risks. Workday has shown weaker downturn resilience than the S&P 500. During the 2022 inflation shock, the stock fell nearly 56% from peak to trough, though it recovered fully by early 2024. The 2020 COVID crash saw a 43% decline, followed by a full recovery in months. These episodes highlight that while Workday can bounce back, it is not immune to market shocks or business-specific events.
In addition, valuation remains high. Workday trades at price-to-sales ratio of 7 and price-to-free cash flow of 26. Investors are paying a premium for future growth and AI integration, not just current operations. That makes execution critical – from managing acquisitions to maintaining profitability and scaling AI offerings.
The Bottom Line
Workday boasts strong growth, solid finances, and ambitious plans to integrate AI across its offerings. Yet the stock carries high risk and trades at a premium valuation. Current investors will need patience and close attention to execution, while those considering a purchase should weigh the risks carefully and avoid chasing momentum.
Investing in a single stock carries inherent risks, and a diversified approach may offer more stability. You could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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