Workday Inc (NASDAQ:WDAY) has held discussions with private equity firm Silver Lake in recent months about a potential acquisition, Reuters reported, with the enterprise software company carrying a market value of about $43 billion.
While talks are ongoing and there is no guarantee a deal will be reached, Jefferies analysts said they see several reasons why Silver Lake might be interested.
Following the stock’s move on the news, Workday’s valuation of 4 times calendar year 2027 revenue and 14 times free cash flow sits near the bottom of an already beaten-down large-cap software group.
The analysts also pointed to Workday’s sticky ERP business, its trove of data valuable for AI, room to lift operating margins closer to peer levels, and a maturing AI vision under CEO Aneel Bhusri.
“While we question where Workday’s next leg of growth will come from, being private might enable more aggressive AI transition and revenue reacceleration,” analysts wrote.
Jefferies said Workday’s status as a system of record helps insulate it from AI disruption, citing 97% retention, a strong mix of recurring revenue, 80 million active users and an attractive data moat. On margins, fiscal 2027 guidance of 30.5% implies only 90 basis points of expansion, but the analysts see room to move closer to peers’ 40% level via AI and go-to-market efficiency.
Growth remains a key question. Financial Management segment growth slowed to 20% in fiscal 2026 from 28% in fiscal 2023, while core HCM slowed to 15% from 21%. International growth also trails the US despite representing half of Workday’s $160 billion addressable market. Jefferies pegged sustainable growth at low double digits, in line with the end market.
Competition from SAP and Oracle remains intense, with Workday gaining less than 2 percentage points of share from the two rivals over the past five years. Without a “killer app,” Jefferies said it is hard to see the company taking meaningfully more share.
The stock was up more than 40% since Workday’s last earnings report even before Friday’s jump, with its free cash flow multiple up more than 60% since June lows.