New York, Jan 29, 2026, 20:43 ET — Markets have closed for the day.
- Workday dropped 7.7% Thursday, deepening the slump hitting major U.S. software stocks.
- Traders pointed to a fresh sell-off in software stocks, sparked by mega-cap tech earnings that reignited concerns over AI spending.
- Investors will next zero in on Workday’s results due in late February, watching closely for updates on subscription growth and margins.
Shares of Workday, Inc. fell $14.48, or 7.7%, closing at $174.66 in late trading Thursday. Earlier in the day, the stock hit a low of $169.06 but had climbed as high as $186.58 during the session.
The sell-off hit software stocks hard after disappointing earnings from big tech shook investor confidence, alongside doubts about when hefty AI investments will start paying off. “Microsoft disappointed and there are some genuine concerns that AI investments will eat the software companies’ lunches,” said John Praveen, managing director and co-CIO at Paleo Leon. Jay Hatfield, CEO and CIO of Infrastructure Capital Advisors, warned that AI might “supplant some of their services” for certain software firms. Reuters
Why it matters now: Workday is deeply embedded in corporate IT budgets, providing cloud software for managing employees and finances. When investors grow skeptical about short-term returns on big tech investments, they quickly zero in on software growth, renewal rates, and pricing power.
The selloff followed a steep drop in the sector. The iShares Expanded Tech-Software Sector ETF tumbled almost 5%, hitting major enterprise players the hardest.
Workday’s revenue mainly comes from recurring subscription fees, not one-time license sales. Investors keep an eye on operating margin — the profit made from sales after covering operating costs — since it can shift rapidly if growth falters.
Workday’s most recent outlook projects fiscal fourth-quarter subscription revenue at $2.355 billion, targeting a non-GAAP operating margin of no less than 28.5%. The company’s fiscal year wraps up on Jan. 31, 2026.
Workday’s quarterly earnings report is set for late February. The company will reveal results for both the quarter and the full year, along with revised forecasts for subscription growth and profitability.
The immediate risk is the software sector continuing to slide if investors conclude that earnings season has revealed more “spend now, payoff later” AI strategies. That means even firms meeting expectations might see their stocks fall if their forward guidance seems conservative.
Friday’s session will focus on whether the software sector can stabilize following Thursday’s drop. Looking ahead, Workday’s late-February earnings report will be key, especially any updates on subscription growth and margin forecasts.
