Workday [WDAY]
As of 2026-07-29 · spot $167.975 · Two outputs, both required and both given.
Read directly from the Q1 FY27 10-Q, not from XBRL aggregation.
| Input | Value | Source / note |
|---|---|---|
| Spot | $167.975 | 2026-07-29 close, Alpaca |
| Shares (diluted WA, Q1 FY27) | 254,313k | income statement. Screen used 220.0m — a 2018 dei value |
| Shares (basic WA, Q1 FY27) | 253,891k | income statement |
| Market cap | $42,718m | screen: $36,954m at the same price, −13.5% |
| Cash and cash equivalents | $559m | balance sheet |
| Marketable securities | $3,794m | balance sheet |
| Debt, current | ($998m) | balance sheet |
| Debt, noncurrent | ($1,990m) | balance sheet |
| Net cash (ex-lease) | +$1,365m | screen: +$679m |
| Operating leases (current + noncurrent) | $131m + $686m | incl. leases: +$548m |
| TTM revenue | $9,854m | 2,348 + 2,432 + 2,532 + 2,542 |
| TTM GAAP operating income | $1,020m | |
| TTM GAAP operating margin | 10.4% | |
| Gross margin (derived — no XBRL tag) | 76.2% total, 82.5% subscription | Research §9 |
| Enterprise value | $41,353m | |
| EV / TTM sales | 4.20x | screen: 3.50x |
| EV / TTM GAAP EBIT | 40.5x | screen: 46.3x |
dei:EntityCommonStockSharesOutstanding for Workday was last filed 2018-11-30 at 220,000,000. Workday has
Class A and Class B common stock; the cover-page count is tagged dimensionally per class, and dimensional
tagging does not survive SEC aggregation into companyfacts — the series simply stops in 2018. The screen took
the last available value, which was eight years old.
The mandated cross-check catches it immediately: net income ÷ diluted shares = 222 ÷ 254.313 = $0.873 against filed diluted EPS of $0.87 ✓. Against the screen's count: 222 ÷ 220 = $1.01 versus a filed $0.87 — a 16% discrepancy that fails the test outright.
Consequence: market cap $42,718m rather than $36,954m; EV/S 4.20x rather than 3.50x. Workday is 13.5% more expensive than the screen believed. That is not enough to change the character of the name, but it moves the implied-path margin by roughly 2pp, and this verdict is decided inside 3pp — so on this name the defect is load-bearing.
A striking coincidence worth noting. Corrected, the three "cheap" names in this cluster trade at EV/S of 4.20x (WDAY), 4.20x (ADBE) and 4.24x (CRM) — within 1% of each other, on operating margins of 10.4%, 36.1% and 20.4% respectively. The market is pricing all three at the same multiple of sales while their profit per dollar of sales differs by 3.5x. That is either a large mispricing or a statement that the market expects the margins to converge. It is the single most interesting cross-sectional fact in this cluster and it is why the EV/EBIT anchor, not EV/S, is used for the implied-path test.
Workday's organic run-rate is 13.5%, decaying toward high single digits by year 5. Comparator set, every member's growth and EV computed from its own filings on this date:
| Comparator | Latest-Q growth | TTM GAAP op margin | EV / TTM EBIT |
|---|---|---|---|
| ADP | 7.0% | n/a (tag absent) | n/a |
| CRM | 8.8% organic | 20.4% | 20.8x |
| INTU | 10.4% | 27.5% | 16.2x |
| ADBE | ~10.3% CC organic | 36.1% | 11.6x |
| WDAY (subject) | 13.5% | 10.4% | 40.5x |
| VEEV | 16.3% | 28.8% | 27.7x |
| MSFT | 17.7% | 46.8% | 18.8x |
| ORCL | 20.6% | 30.6% | 14.9x |
The set brackets the subject on growth (7.0% to 20.6% versus 13.5%). Growth-matched: SATISFIED.
Usable EV/EBIT anchors (excluding WDAY itself, whose 40.5x reflects an unnormalised margin, and ADP): ADBE 11.6x · ORCL 14.9x · INTU 16.2x · MSFT 18.8x · CRM 20.8x · VEEV 27.7x. Base 17.5x (median) · Low 11.6x · High 27.7x. The base sits inside the set; no silent haircut.
Terminal operating margin: 20% — and this is the input that decides everything. The evidence:
| Operating margin | |
|---|---|
| FY2022 | −2.3% |
| FY2023 | −3.6% |
| FY2024 | +2.5% |
| FY2025 | +4.9% |
| FY2026 | +7.5% |
| TTM | +10.4% |
| Q1 FY27 | 13.3% (9.2% prior-year clean → +4.1pp) |
| Company-guided FY27 non-GAAP | 30.5% |
The demonstrated pace is roughly +2.5pp a year over four years. Twenty percent assumes +9.6pp over five years, i.e. +1.9pp a year — slower than demonstrated, and it leaves a 10.5pp gap to the guided non-GAAP margin that SBC accounts for. It is a defensible base. It is also the least well-anchored terminal margin in this cluster, because Workday's GAAP margin is the furthest from its steady state of any of the five.
assets/reverse_dcf.py. Terminal value is 100% of EV by construction, so the reverse DCF is the primary
long-horizon output; no forward DCF verdict is reported.
Held fixed: terminal EBIT margin 20%, WACC 9.5%, 5 years, revenue base $9,854m, shares 254.313m, net cash +$1,365m.
| Exit multiple | Required 5y revenue CAGR | Demonstrated | Margin (pp) |
|---|---|---|---|
| 11.6x (anchor low) | 23.3% | 13.5% | −9.8 |
| 17.5x (anchor median) | 13.5% | 13.5% | −0.0 |
| 27.7x (anchor high) | 3.6% | 13.5% | +9.9 |
Held fixed: revenue CAGR 13.5%, terminal margin 20%, WACC 9.5%.
So the price requires Workday to grow revenue at exactly the rate it is growing, reach a 20% GAAP operating margin, and exit at exactly the median multiple of its growth-matched peers. Every input is at its central estimate and the answer is exactly zero. That is not a coincidence to admire — it is a warning that the result carries no information beyond the inputs.
| Exit multiple | 11.6x | 14.9x | 17.5x | 20.8x | 27.7x |
|---|---|---|---|---|---|
| Required CAGR | 23.3% | 17.2% | 13.5% | 10.3% | 3.6% |
| Margin vs 13.5% | −9.8pp | −3.7pp | −0.0pp | +3.2pp | +9.9pp |
Exit multiple held at 17.5x:
| Terminal GAAP operating margin | Required 5y CAGR | Margin (pp) | Verdict |
|---|---|---|---|
| 10.4% (today — no expansion at all) | 29.4% | −15.9 | FAIL |
| 13.0% | 23.8% | −10.3 | FAIL |
| 15.0% | 20.3% | −6.8 | FAIL |
| 18.0% | 16.0% | −2.5 | INSIDE NOISE |
| 20.0% (base) | 13.5% | −0.0 | INSIDE NOISE |
| 25.0% | 8.6% | +4.9 | PASS |
| 30.5% (guided non-GAAP) | 4.4% | +9.1 | PASS |
INDETERMINATE. The margin is −0.0pp — the most exactly indeterminate result in the cluster.
The analysis does not determine the answer for Workday, and the judgement input that does is identified: the terminal GAAP operating margin. It spans FAIL at 15% to PASS at 25%, across a range where every value is individually arguable — 10.4% is today's actual, 30.5% is the company's own guided non-GAAP figure, and the truth is somewhere between because the difference is SBC at 17% of revenue.
I decline to pick a point on that spectrum and call it a verdict. What can be said without judgement:
That combination — indeterminate but with the decisive variable improving and observable every 90 days — is a different proposition from CRM's indeterminacy, where the decisive variable (margin expansion) has flattened. Both score INDETERMINATE; a book may reasonably treat them differently.
P/S at fiscal quarter ends, priced ~45 days after period end, as-reported diluted share counts, no splits:
2020-04 13.9 · 2021-01 14.4 · 2021-07 15.0 · 2022-01 11.7 · 2022-04 6.5 · 2023-01 7.8 · 2023-10 10.4 ·
2024-01 10.0 · 2024-10 9.2 · 2025-01 8.0 · 2025-07 6.7 · 2025-10 6.2 · 2026-01 3.8 · 2026-04 3.3
| Value | |
|---|---|
| P/S today | 4.34x |
| Percentile within its own five-year history | 10th |
| Percentile within its full 25-quarter history | 8th |
| Five-year median | 7.97x · p25 7.18x · p75 10.00x |
| Five-year range | 3.34x – 15.01x |
Note the collapse between 2025-10 (6.2x) and 2026-01 (3.8x) — a 39% de-rating in one quarter, on a price move from $214.90 to $135.17. That is the largest single-quarter multiple compression in this cluster and it is what created the current entry point.
| Then | Now | Δ | |
|---|---|---|---|
| Revenue growth | 19.0% (FY2022, 5,139/4,318) | 13.5% | −5.5pp |
The own-multiple history spans a 5.5pp growth-regime change — the smallest of the five names, but still above the 5pp threshold. A 7.97x median set when Workday grew 19% is not a valid anchor for a 13.5% grower. Mean reversion within that history is declared UNIDENTIFIED per valuation.md; I do not report a reversion-based figure as the target. It would produce +122%.
Workday is the marginal case on this test, and that should be said: at −5.5pp it only just fails, and a reviewer who set the threshold at 6pp would treat the 7.97x median as usable and derive a target near $372. I use a uniform 5pp threshold across all five names rather than tuning it per name, which is the only way the cluster ranking stays comparable.
| Case | Multiple | 12-month value | vs spot |
|---|---|---|---|
| STATED TARGET — multiple unchanged at 4.34x | 4.34x | $203 | +20.7% |
| Half-reversion to the five-year median | 6.16x | $288 | +71.1% |
| Full reversion to the five-year median | 7.97x | $372 | +121.6% |
| Reversion down to the five-year low | 3.34x | $156 | −7.1% |
Twelve-month target: $203, +20.7% to spot — the highest flat-multiple return of the five names, because Workday combines the fastest organic growth of the three cheap names with the most aggressive share retirement.
The target credits Workday with delivering its own guidance and continuing its own buyback, and credits the multiple with nothing. The +71% and +122% cases are shown because they are arithmetically available and are explicitly a judgement input, not an output.
Cross-check against earnings — and here the two instruments DISAGREE, which must be said. At the stated target of $203, the FY27 non-GAAP P/E is ~19.1x (on ~$10.65 of non-GAAP EPS, from Q1's $2.66 run-rate) but the GAAP P/E is ~52x (on ~$3.90 of GAAP EPS). The P/S-based target looks conservative; the GAAP P/E-based view looks expensive. The entire gap is SBC at 17% of revenue. On ADBE the two cross-checks agreed; here they do not, and the disagreement is the same judgement input that makes the implied-path test indeterminate. I report both rather than choosing the flattering one.
Each is in the Catalyst Calendar with a date or a marked estimate. 1. Q2 FY27 results (~late Aug 2026) — the test of whether the reiterated (not raised) FY27 subscription guide was conservatism or a warning. Also the second clean quarter for the margin trend, with no prior-year restructuring to flatter it. 2. Q3 FY27 results (~late Nov 2026) — GAAP operating margin passing 15% is the bull-side test; it is 13.3% now. 3. Q4 FY27 results and first FY28 guidance (~late Feb 2027) — the annual gross-revenue-retention figure is disclosed here, and a third consecutive decline (98% → 97% → ?) would be material.
No professional target is on file for WDAY in this book's reference set. The check cannot be run, and that is stated rather than substituted.
Type: MEASURED. Logged, scored, and it does not reject the name.
Scenario — headcount-linked pricing meets an enterprise hiring slowdown, against a net-expansion rate that is no longer disclosed. Probability 25%.
Named cause and mechanism. Workday's subscription revenue scales with customer employee counts — the company frames its own scale as "more than 80 million users under contract." That makes it directly levered to enterprise headcount in a way a seat-priced application is not: a customer that stops hiring does not churn, it simply stops expanding. Workday's own disclosure of gross retention at ~97% would remain unchanged in that scenario, because gross retention "does not account for additional revenue earned from add-ons or net expansions, which include volume and price adjustments" — the company's words. The metric that would reveal this stopped being published in FY2025 (Research §4).
Two corroborating signals already visible: total backlog growing 10.9% against 12-month backlog at 15.5%, which means duration is shortening; and gross retention down from ~98% to ~97%.
Quantified: revenue growth falls from 13.5% to ~7% for three years and the GAAP operating margin stalls at 13–14% rather than reaching 20%, because Workday cannot cut SBC quickly without losing engineers. On the anchor's low end (11.6x) with a 14% terminal margin, the implied equity value is approximately $78–90 per share, a 46–54% permanent impairment.
Why the impairment is larger than ADBE's 35–43% despite the same probability: the combination of a stalled margin and slower growth compounds, and Workday has no margin cushion — at 10.4% GAAP today, a stall leaves the 40.5x EV/EBIT multiple with nothing to grow into. ADBE's 36% margin is the cushion Workday does not have.
Not a going-concern case. Net cash of +$1,365m, $2,939m of FY26 operating cash flow, and $2,988m of debt against $4,353m of cash and securities. Stated explicitly because criteria.md requires a going-concern case to be flagged where it exists; here it does not.
Interim control: inverse-volatility sizing. Workday's 252-day volatility is 49.0% — the highest of the five names in this cluster, so it sizes down automatically relative to ADBE (37.7%) and CRM (40.6%). That the name with the widest range of defensible outcomes is also the most volatile means the sizing mechanism and the uncertainty point the same way, which is the interim control working as designed.