For much of 2026, software investors have been grappling with a terrifying question: What if artificial intelligence makes many of the apps that firms have spent decades buying considerably less valuable? If Workday (WDAY) is acquired, that argument could lead Wall Street to reconsider how far it has gone. Shares of Workday jumped about 18% after it emerged that Silver Lake, a technology-focused private-equity group, was considering an acquisition of the human-resources and financial-management software company.
The development helped raise Workday's market capitalization to more than $51 billion. But talks could still break down, and no deal has been announced. The valuation is way bigger than Workday.
Software stocks have spent much of the year under pressure from worries that generative AI and autonomous agents will allow companies to build applications more cheaply, automate jobs previously performed by enterprise software, and ultimately lower what businesses are willing to pay for traditional software subscriptions. But the real business of Workday doesn't look like one that's being rapidly displaced. The company generated$9.55 billion of revenue in fiscal 2026, up 13.1%, while subscription revenue increased 14.5% to $8.83 billion.
In the first quarter of fiscal 2027, revenue climbed another 13.5% to $2.54 billion, with subscription revenue rising 14.3%. That makes the prospective Silver Lake interest even more interesting. Private equity may be eyeing the same software businesses that public investors have been discounting out of concern of AI disruption and finding resilient recurring revenue, deeply ingrained customers, and assets that have just gotten cheaper.
AI is a genuine threat to segments of the software business. If firms are able to employ AI agents to write code, automate operations, and quickly build internal applications, some traditional software solutions could be under pressure on pricing or see reduced demand. But seeing every business software company as similarly vulnerable misses a fundamental distinction.
Workday lies at the intersection of human resources, payroll-related operations, and corporate finance systems that can hold years of company data, connectors, permissions, and business rules. Taking one away can be hugely disruptive. That introduces switching costs that a new AI application doesn't automatically eliminate.
Extract — continue reading at the source.
