What Happened?
Shares of enterprise software company Workday (NASDAQ: WDAY) jumped 6.1% in the morning session after Monness, Crespi, Hardt upgraded the stock to Buy from Neutral with a $150 price target.
The firm highlighted that Workday had been the worst-performing stock in its coverage universe in 2026, falling 45%. Despite concerns that AI could impact the software industry's growth, Monness cited the company's depressed valuation, attractive margin profile, and strong cash flow generation as key reasons for the upgrade, viewing the shares as compelling at their current levels.
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What Is The Market Telling Us
Workday’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock dropped 4.4% on the news that a confluence of high-profile AI talent departures from Alphabet, and a regulatory overhang pulled the entire communication-services and software complex lower.
Alphabet fell roughly 6%. Microsoft slipped as well. When the two largest software-adjacent megacaps decline together, the sector indices follow mechanically given their index weight. But the deeper driver was the market's persistent fear that AI agents would erode the subscription model that underpins traditional enterprise software economics.
That fear had been compounding all year. Salesforce trades around $152, down roughly 43% year-to-date and near its 52-week low. Adobe fell approximately 49% over the past year and has not traded this cheap on earnings in over a decade. The previous week's Accenture collapse, a near-20% single-day drop after the consulting giant cut its growth outlook and explicitly cited AI compressing demand for traditional IT services acted as a fresh confirmation of the thesis. If the largest IT services firm in the world is signaling that AI is eating its billable hours, investors extend the same logic to the software vendors whose products those hours configure.
The counterargument is that the selling has become indiscriminate. Salesforce is a Rule-of-40 company retiring 10% of its shares through a $25 billion buyback, carrying the largest AI revenue line in the category, and it is acquiring usage-based billing platforms like m3ter precisely to monetize AI agent actions rather than seats. Monness upgraded the stock to Buy the previous week on valuation. The market is pricing the cannibalization as if it already happened; the income statements might be indicating otherwise. But until these companies can prove that AI revenue scales faster than it erodes the legacy subscription base, software might remain in the penalty box even on days when the rest of tech (especially chip stocks) is celebrating.
Workday is down 41% since the beginning of the year, and at $121.40 per share, it is trading 51% below its 52-week high of $247.69 from September 2025. Investors who bought $1,000 worth of Workday’s shares 5 years ago would now be looking at only $499.75.
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