Workday Proves Its Value in a Solid Q4 as It Aims for More Strategic Wins; Shares Attractive

Wide-moat Workday posted solid fourth-quarter results, beating our expectations. Workday proved its value add even in the wake of more critical decision-making by its clients. Looking ahead, management is baking in a more neutral year based on overall uncertainty. While we have lowered our expectations for fiscal 2024 as a result, we share management’s sentiment that the company can return to 20%-plus top-line growth when the macro environment normalizes. In the meantime, we think Workday’s moat is helping the firm weather headwinds. For example, Workday claimed they did not see any significant price erosion on deals, which we think speaks to both a mix of its strong switching costs as well as it being early in newer enterprise resource planning, or ERP, capabilities leveraging artificial intelligence, or AI, and machine learning that are less commoditized.