Workday (WDAY) heads into fiscal first-quarter earnings Thursday afternoon facing one of the most important moments in the company’s history. The stock has become a poster child for what many investors are calling the “SaaSpocolypse” — the sharp derating across enterprise software as Wall Street reassesses whether artificial intelligence will enhance the software industry or fundamentally disrupt it. Shares of Workday are down roughly 40%-50% over the past year and have badly underperformed many of their larger enterprise software peers, reflecting growing fears around slowing Human Capital Management (HCM) growth, AI-driven disruption risks, margin pressure from elevated AI spending, and broader concerns that legacy SaaS pricing models may be entering a much tougher phase.

The stock’s technical setup heading into earnings reflects that anxiety.

Workday shares are trading near roughly $120-$135, far below prior highs above $300 reached during the software boom. The stock is also down approximately 16% since co-founder Aneel Bhusri returned as CEO earlier this year, despite hopes that his return could reignite product innovation and operational discipline. Multiple compression has been brutal across the software group, but Workday has been hit particularly hard because investors increasingly view mid-sized SaaS vendors as more vulnerable to AI disruption than mega-cap peers like Salesforce (CRM), SAP (SAP), and Intuit (INTU).

The central debate surrounding Workday right now is relatively simple:

Will AI strengthen Workday’s moat — or weaken it?

The bull case argues that Workday remains one of the most deeply entrenched enterprise systems of record in the world. The company manages critical HR, payroll, and financial data for more than 11,500 customers and roughly 75 million users globally. Bulls believe replacing those systems would be extraordinarily difficult, particularly because enterprise HR and finance systems require accuracy, compliance, security, workflow management, and massive integration capabilities that generative AI alone cannot easily replicate.

Management itself has strongly pushed that argument.

Bhusri recently described the current phase as “Chapter 4” for Workday — a return to innovation focused heavily on AI integration. Management believes Workday’s vast proprietary data sets, workflow engine, metadata, and security infrastructure position it well to monetize AI agents directly within its platform. The company has already begun integrating AI acquisitions like Sana while developing its own internally built “agentic AI” offerings.

There are also signs that AI monetization may already be starting.

During the last quarter, Workday generated more than $100 million in new annual contract value from emerging AI products, up more than 100% year-over-year. AI-related ARR climbed to roughly $400 million. Management also noted that expansion deals including AI products were nearly 50% larger on average.

Some analysts believe investors may be underestimating the durability of Workday’s business.

BMO recently argued that Workday shares now embed some of the highest levels of long-term growth skepticism within the entire enterprise software group. Piper Sandler also noted that only 4% of partners surveyed saw attempts to replace Workday functionality using AI alternatives — the lowest displacement rate among peers they tracked.

But the bear case remains powerful.

Critics argue that Workday’s core HCM market may already be approaching saturation after years of strong growth. Cantor Fitzgerald believes HCM saturation has actually become a bigger problem than AI disruption itself. Their recent channel checks came back neutral-to-slightly negative, with some partners reporting that enterprise budgets are increasingly being redirected toward AI spending instead of traditional HR and finance software deployments.

There are also growing concerns around pricing models and margin pressure.

Workday is transitioning toward a newer “Flex Credits” consumption model, and investors remain unsure whether that shift could create revenue volatility or pressure near-term growth rates. At the same time, Workday is dramatically increasing AI-related investment spending across engineering, go-to-market, and infrastructure initiatives. Management has already warned that operating margin expansion will slow meaningfully because of those investments.

Another key concern involves deal cycles.

Several analysts have pointed to elongating enterprise sales cycles, particularly within Fed, SLED, healthcare, and private equity-backed customer cohorts. Wolfe Research said some major deals slipped out of prior quarters, while Evercore warned that investors may remain cautious until Workday proves its AI investments can actually drive upside to both revenue growth and margins.

Against that backdrop, expectations for the quarter itself remain relatively modest.

Wall Street expects:

  • Q1 EPS around $2.52, up roughly 13% year-over-year

  • Revenue around $2.52 billion, representing approximately 12%-12.5% growth

  • Subscription revenue near $2.36 billion

  • cRPO growth near 14%-15%

Importantly, the market may care less about the actual EPS beat and more about leading indicators that reveal whether the core business is slowing further.

The biggest metrics to watch include:

  • Subscription revenue growth

  • Current Remaining Performance Obligations (cRPO)

  • Net expansion rates

  • AI ARR growth

  • Operating margin guidance

  • Deal pipeline commentary

  • International growth trends

  • Flex Credits adoption

  • AI monetization commentary

cRPO may be especially important.

Last quarter, Workday guided Q1 cRPO growth around 14.5%-15%, but some analysts fear that figure could disappoint because enterprise demand remains soft and some deals continue getting pushed out. Since cRPO acts as a forward-looking demand indicator, any material slowdown there could reinforce fears that growth is structurally decelerating.

Margins will also be closely scrutinized.

Management previously targeted roughly 30% operating margins, but investors increasingly worry that AI investment requirements may permanently reduce profitability expansion. Several analysts noted that Workday appears to be prioritizing long-term AI competitiveness over near-term efficiency gains.

Despite those concerns, Workday still retains several major strengths.

Gross revenue retention remains extremely high near 97%, existing customer expansion continues driving roughly 60% of subscription revenue growth, and the company generated roughly $3 billion in annual operating cash flow last year. Workday also finished the year with approximately $5.4 billion in cash and marketable securities while continuing aggressive share repurchases.

Valuation is another interesting wrinkle.

After the massive selloff, Workday now trades at dramatically compressed multiples relative to historical norms. Cantor noted the stock currently trades around 12x FY27 EPS estimates, while some bulls argue the market may already be pricing in an overly pessimistic AI disruption scenario.

Still, skepticism remains widespread across software.

The broader SaaS trade has struggled badly in recent months as investors rotate back toward semiconductors and AI infrastructure plays like NVIDIA (NVDA). The concern is that software companies may ultimately become the “cost center” side of AI while infrastructure providers capture the majority of the economics. Workday’s earnings report could become an important test case for whether high-quality enterprise application vendors can begin rebuilding investor confidence.

Ultimately, this earnings report is about far more than a single quarter.

Investors want to know whether Workday is entering a durable new AI-driven growth cycle — or whether the company is facing the early stages of structural slowing within one of the most competitive periods enterprise software has seen in years.