Workday forecasts 2027 subscription revenue below estimates, shares fall

Feb 24 (Reuters) - Workday WDAY.O on Tuesday forecast fiscal 2027 subscription revenue below Wall Street estimates, signaling slower new client wins as corporations scrutinize large software purchases amid economic uncertainty.

Shares of the enterprise software maker fell more than 8% in extended trading.

Higher interest rates and a choppy macro backdrop have prompted companies to delay big-ticket technology decisions, weighing on new business for software vendors even as Workday pushes further into artificial intelligence.

"Some net new large enterprise deals are taking longer to close," Rob Enslin, Workday's chief commercial officer said on a post-earnings call with analysts, citing federal, state and local government and higher education, healthcare and parts of the commercial market.

While it impacted the number of new deals completed in the fourth quarter, "most opportunities remain active in our pipeline, and a few have already closed in the first quarter," Enslin added.

Workday forecast annual subscription revenue between $9.93 billion and $9.95 billion, missing analysts' average expectations of $10 billion, according to data compiled by LSEG.

While Workday remains committed to its medium-term subscription revenue growth targets, it is "prioritizing incremental investment in our agentic AI roadmap to capture a larger market opportunity," CFO Zane Rowe said.

Separately, software and services stocks sold off globally after artificial intelligence lab Anthropic announced new tools for business customers, stoking investor concerns that AI-enabled automation could pressure some vendors' revenue streams.

Total revenue for the fourth quarter ended January 31 came in at $2.53 billion, compared with analysts' estimates of $2.52 billion.

The Pleasanton, California-based company's subscription revenue came in at $2.36 billion for the quarter, in line with expectations.