$WDAY Faces a “Show Me” Test as Bank of America Questions Its AI Growth

Workday’s AI agents are generating real revenue, with AI annual recurring revenue approaching $600 million. However, Bank of America says the company still needs to prove that AI can accelerate overall growth ahead of its Nov. 24 earnings report.
Analyst Tal Liani reiterated a Neutral rating and a $205 price target, calling Workday a “show me” story. BofA expects subscription revenue to grow approximately 12% in the October quarter, while 12-month subscription backlog growth is projected at 11.5%, below Wall Street’s 12% estimate. Backlog growth slowed from 14.2% in the July quarter and 17.6% a year earlier.
Workday customers purchasing AI agents spend approximately 12% more on average. Management expects AI to generate around 70% of new recurring revenue from existing customers in fiscal 2028. However, BofA projects subscription growth will slow to 11% that year, down from 14.4% in fiscal 2026. The bank also questions whether Workday can demonstrate a differentiated return on investment, noting that HR software ranked last among technology spending priorities in its survey of more than 300 technology executives.
Workday faces additional competition for employee attention from platforms such as Slack and Microsoft Copilot. BofA says the company must demonstrate stronger backlog growth and provide a firmer fourth-quarter outlook to convince investors that AI is generating new demand rather than replacing existing sales. Its $205 price target already reflects a valuation near the high end of software peers based on 2027 cash flow.