The estimates for Workday Inc’s (NASDAQ:WDAY) cRPO (current remaining performance obligation) seem to be "overly optimistic," while the consensus for subscription revenue growth in fiscal 2027 appears "too aggressive," according to BTIG.

The Workday Analyst: analyst Allan Verkhovski downgraded the rating from Buy to Neutral.

The Workday Thesis: The company is likely to generate cRPO growth of 12% in the third quarter and 11% in the fourth quarter, compared to consensus estimates of 13.3% and 13%, respectively, Verkhovski said in the downgrade note.

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The consensus estimate for Workday’s subscription revenue growth in fiscal 2027 stands at 12%, which seems too high as it implies 40 basis points (bps) of organic acceleration, the analyst stated. "In contrast, our model projects 10.9% growth in FY28, representing 70 bps of deceleration," he wrote.

Channel checks continue to indicate that Workday is still in the initial stages of rolling out and monetizing Flex Credits, Verkhovski noted. There seems to be "limited adoption" of Flex Credit and Platform Entitlement Policies, with larger customers "taking a cautious stance amid uncertainty regarding production costs for the usage-based fee structure of Flex Credits," he wrote.

While Workday reported its second-quarter results broadly in line with expectations, this was driven by early renewal activity, the analyst stated.

The company is unlikely to pursue any meaningful margin expansion while its low-double-digit organic subscription revenue growth continues to slow, he added.

While private markets provide "a much better environment for executing the transition to an AI-centric model, especially when undertaking major pricing overhauls like the current shift toward Flex Credits," last week’s Reuters report indicating that Workday is in buyout talks with a private equity firm was "surprising," as this comes just six months after Aneel Bhusri returned as CEO, Verkhovski further said.

WDAY Price Action: Shares of Workday had declined by 4.10% to $190.51 at the time of publication on Monday.

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