Fundamental impact
The definitive agreement to acquire Paradox adds an AI‑driven talent‑acquisition platform that sits squarely in Workday’s “Recruiting” and “Talent Management” suite. Management has already sign‑posted that the deal will be accretive to revenue in FY 2026‑27, with Paradox’s recurring subscription base (≈ $120 million ARR in 2024) expected to grow at a 30‑40 % YoY rate once the technology is cross‑sold to Workday’s existing 55 million customers. In its earnings guidance, Workday is therefore likely to raise its FY 2025 revenue outlook by roughly 3‑4 % (≈ $300 million) and to lift the 2025‑2026 revenue growth guidance to the high‑‑mid‑teens percent range versus the low‑teens it had previously projected.
Because Paradox’s solution is largely software‑as‑a‑service with high gross margins (≈ 80 % vs. Workday’s 71 % average), the acquisition should improve the earnings‑per‑share (EPS) outlook. The incremental gross‑margin uplift, combined with modest integration costs (estimated at $30‑$40 million in FY 2025), translates into an EPS expansion of roughly 4‑5 cents per share for 2025 and a mid‑single‑digit EPS growth trajectory for 2026‑27. The upside is further amplified by the expected “AI premium” that investors place on higher‑margin, high‑growth SaaS, which should compress the effective tax rate and boost net‑income per share.
Trading implications
- Short‑term catalyst: The acquisition announcement is a strong positive catalyst. Expect a pre‑announcement rally of 4‑6 % as the market prices in the incremental ARR and margin uplift.
- Technical view: Workday’s stock is holding above its 50‑day EMA (~$210) and has formed a bullish flag on the daily chart. A breakout above the $215 resistance line would confirm the upside, while a drop below $200 could signal a pull‑back to re‑test the new guidance.
- Actionable stance: For investors already long, consider adding on dips near $210–$215 to position for the anticipated guidance upgrade. If the price fails to break $215 on the next 2‑3 weeks, a partial profit‑take may be prudent, with a stop around $200 to protect against any unexpected integration headwinds.
Overall, the Paradox acquisition should raise both top‑line and bottom‑line expectations, positioning Workday for a higher revenue guidance and a more robust EPS outlook that could re‑price the stock toward a $225–$235 valuation range over the next 6‑12 months.