WDAY Stock: Will Workday Sink or Swim in the S&P 500?

Introduction

On December 6, S&P Dow Jones Indexes announced that Workday [WDAY] will join the S&P 500 before the start of trading on Monday, December 23, replacing Amentum Holdings [AMTM].

This news saw WDAY jump 9% on the day, but can the US cloud-based HR software provider sustain this growth?

What’s New with WDAY?

Inclusion in the S&P 500 is big news, but it is not the only recent change for the company. 

On December 11, Workday announced its upcoming Illuminate product, which will introduce artificial intelligence (AI) features aimed at streamlining HR feedback analysis. This product is geared towards boosting employee satisfaction and thus improving staff retention. 

At the beginning of December, Workday also elected Liz Centoni, Executive Vice President and Chief Customer Experience Officer at Cisco [CSCO], to its board of directors. 

Centoni played a key role in Cisco’s $28bn acquisition of Splunk in March, which moved the company firmly to the forefront of the AI software revolution. Her expertise in the customer success space could prove attractive to investors considering WDAY.

WDAY’s Rocky Road

WDAY stock has had a varied year. The stock is down 0.87% year-to-date as of December 13’s close, having recovered from a tumble at the end of May prompted by lackluster Q1 2025 earnings.

Growth since the end of October has been choppy, despite robust net revenues showing a 15.8% year-over-year increase in Q3 earnings. Overall, though, the stock has climbed 17.03% since October 31.

WDAY vs. ORCL vs. PAYC

Workday’s key fundamentals are mixed compared to its competitors in the software-as-a-service space. With a P/S ratio of 9.02, investors might consider WDAY overvalued, although it is worth noting that key competitor Oracle’s [ORCL] P/S ratio is not far behind, at 8.97.

Oracle is a giant in the HR software space, with a portfolio covering customer relationship management and enterprise resource planning as well as human capital management (HCM). By contrast, Workday’s offering is more focused, offering HCM and financial management for businesses of all sizes.

Oracle’s year-over-year revenue growth in its most recent earnings report, published last week, lagged slightly behind Workday at 9%. The company’s shares dipped in light of EPS guidance of $1.50–1.54: analysts had been expecting $1.57 per share.

Paycom [PAYC], another well-known name in the HR software space, is more directly comparable to Workday in terms of product offering. The company works with small and medium enterprises, rather than the large corporations featured in Workday’s client list.

PAYC stock rose following a positive Q3 earnings report at the end of October. The report — including 11% year-over-year revenue growth — saw the stock jump 34.15% within a week.

While both competitors’ projected revenue growth lags behind Workday’s, analysts have more positive outlooks for ORCL and PAYC than WDAY.

Source: Yahoo Finance

WDAY: The Investment Case

Given Workday’s imminent inclusion on the S&P 500 — and any lift the stock may see as a result — is WDAY currently a ‘buy’, or should investors expect to see a pullback?

The Bull Case for WDAY

Workday’s rise to the upper reaches of the HR software world is evident in its upcoming inclusion in the S&P 500, but this alone is not enough to sustain growth. There are other positives on WDAY’s scoresheet, however.

Workday’s Q3 earnings, published on November 26, showed cash flow slightly down, but both total revenues and subscription revenues increased by 15.8% year-over-year.

In addition to robust revenue growth, Workday announced the addition of several major full-suite clients in the Q3 report, among them the UK’s Department for Science, Innovation and Technology.

An impressive and committed customer base could reassure potential investors of the security of future revenues.

Inclusion in the S&P 500 is more than just an accolade linked to a company’s market capitalization. Funds and ETFs tracking the index will buy up stock following its inclusion, likely pushing the price up further.

However, this boost has proven to be a fleeting phenomenon for some other stocks in the S&P 500.

Investors could be comforted by Workday’s enthusiasm for integration with a whole suite of other management and productivity tools used by many corporations. Upcoming integration announcements include Slack AI and Microsoft 365 in early 2025.

These announcements could signal that Workday is committed to seamless collaboration across platforms, and might encourage investors worried by the fierce competition in the HR software space.

The Bear Case for WDAY

As ever, there are potential risks for Workday down the line. In addition to the diminishing effect of S&P 500 inclusion, what else might investors want to consider?

HCM software is a notoriously competitive market within the tech space, and already looks saturated.

While shiny AI features could spark some interest and continue to bring in big clients like those announced in Q3 earnings, this might not be enough for WDAY to outperform.

Workday uses a per-employee, per-month pricing structure, and on a macro level many organizations are reducing headcount. As Workday’s AI features continue to streamline processes and allow for reduced team sizes, revenue growth could begin to falter.

It is also worth noting that Workday’s Q3 earnings saw guidance for the full year lowered. If revenue growth cannot continue to outperform, investors might lose faith in the stock.

In September, Workday announced that they are actively looking for acquisitions to continue driving growth and relevance.

While some investors might see this as a statement of ambition to dominate the space, it is worth bearing in mind that this model tends to offer lower organic growth.

Conclusion

Does Workday’s inclusion in the S&P 500 spell success?

The company’s Q3 earnings were solid but not overly inspiring, and the broader market has been saturated for some time. Investors might want to consider whether increased AI integrations and a handful of big-name clients are enough to push WDAY stock higher.