By Rashika Singh
Feb 25 (Reuters) – A rout in Workday shares resumed on Wednesday after the HR and payroll software maker’s soft sales forecast fanned investor worries about whether the firm could stay competitive in the AI era, sending its shares spiraling to a more than five-year low.
The stock fell 8.3% in early trading and was on track to widen losses of about 40% this year, triggered by concerns that the growing use of artificial-intelligence tools launched by companies such as Anthropic would erode demand for traditional software.
The losses mean Workday is one of the worst-performing U.S. software stocks this year. Its CEO and co-founder Aneel Bhusri spent a large chunk of the post-earnings call on Tuesday trying to dispel those worries and touting investments in AI.
“Just for what it is worth, Anthropic, Google and OpenAI all run Workday,” Bhusri, who returned as chief executive this month after stepping down as co-CEO in 2024, told analysts.
“No amount of vibe coding is going to produce an HR or an ERP system. That kind of complexity is very hard to replicate.”
Still, about 26 analysts, more than half those covering the stock, lowered their price targets after Workday issued a softer-than-expected annual subscription revenue forecast.
The company said some large deals were taking longer to close, particularly in the government and healthcare sectors.
“In an environment where there is increased scrutinization of every metric amidst the AI debates, the guide likely does not allay investors’ general concerns for app layer names,” Piper Sandler analysts said in a note.
Beyond the disruption AI tools can directly pose to Workday, some analysts have said a broader slowdown in hiring and layoffs sparked by the nascent technology could lower overall demand for HR tools.
On Wednesday, Australian software company WiseTech Global said it would axe about 2,000 jobs, nearly a third of its global workforce, in a two‑year restructuring that could rank among the country’s largest AI-linked job cuts.
Salesforce will report quarterly results later in the day after market close, offering another key reading on how AI is affecting software spending.
Workday’s 12-month forward price-to-earnings multiple is 11.94, compared with peer Salesforce’s 13.98.
The S&P 500 Application Software Index has fallen about 29% year-to-date, underscoring the broad pressure on U.S. software names.
(Reporting by Rashika Singh in Bengaluru; Writing by Aditya Soni; Editing by Mrigank Dhaniwala and Pooja Desai)
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