Workday (WDAY) Faces an AI Threat. Is the Investment Case Broken?

2 weeks ago 8

Attiya Zainib

Mon, August 10, 2026 astatine 8:09 AM CDT 4 min read

Brown Advisory, an concern absorption company, released its "Brown Advisory Global Leaders Strategy" for the 2nd 4th of 2026 capitalist letter. A transcript of the missive tin beryllium downloaded here. Brown Advisory's Global Leaders Strategy delivered a nett instrumentality of 4.6% successful the 2nd 4th of 2026, underperforming its benchmark, the MSCI ACWI Net Index, which returned 14.9%. The comparative weakness was driven chiefly by underexposure to semiconductors and exertion hardware, portion software, unreality services, and fiscal holdings besides weighed connected performance. The strategy benefited from holdings successful areas tied to AI infrastructure, with semiconductor vulnerability and AI-related investments gaining from beardown demand. Looking ahead, Brown Advisory sees an charismatic situation for progressive stock-picking, with its ready-to-buy database astatine its highest level since the COVID-19 play and an estimated 12%-13% mean five-year base-case IRR, portion maintaining a absorption connected quality, valuation discipline, and semipermanent cash-flow generation. In addition, delight cheque the Fund's apical 5 holdings to cognize its champion picks successful 2026.

In its second-quarter 2026 capitalist letter, Brown Advisory Global Leaders Strategy Fund highlighted stocks similar Workday, Inc. (NASDAQ:WDAY). Workday, Inc. (NASDAQ:WDAY) provides cloud-based endeavor bundle for quality resources, finance, and workforce management. The one-month instrumentality of Workday, Inc. (NASDAQ:WDAY) was 24.00% portion its shares traded betwixt $110.36 and $249.85 implicit the past 52 weeks. On August 7, 2026, Workday, Inc. (NASDAQ:WDAY) banal closed astatine astir $170.24 per share, with a marketplace capitalization of astir $44.37 billion.

Brown Advisory Global Leaders Strategy Fund stated the pursuing regarding Workday, Inc. (NASDAQ:WDAY) in its Q2 2026 capitalist letter:

We exited our presumption successful Workday, Inc. (NASDAQ:WDAY) during May aft a comparatively little holding play of approximately 8 months. Several cardinal factors person changed since our archetypal concern successful September of past year, prompting america to revise some our maturation and margin estimates for Workday. These revisions person led america to reason that we tin nary longer achieve the IRR targets embedded successful our basal case. Most crucially—and the ultimate trigger for a thesis interruption successful this case—were the caller changes successful the absorption team. When the CEO stepped down and co-founder Aneel Bhusri was re-appointed, we expected, and already see, a alteration successful superior allocation subject astatine Workday, as evidenced by the contiguous moderation of the company's borderline targets. This, paired with the expected reduced subject astir stock-based compensation, materially impacted cardinal inputs into our concern thesis. Our presumption connected the inherent customer acquisition outgo advantages that incumbents person remains unchanged, arsenic does our belief that "systems of record" successful bundle are peculiarly resistant to disruption by AI. We did, however, set our estimates to bespeak the expected request to ramp up investments in an situation characterized by accrued contention from AI-driven challengers. Ultimately, taking into relationship absorption changes, our revised estimates, and a widening scope of imaginable outcomes, we decided to chopped our losses and exit the position. The funds person been allocated to physique retired a caller concern successful Siemens Energy.

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