Workday's Google Cloud Bet Sparks a 10% Bounce — But Can an AI Partnership Paper Over the Cracks in a Decelerating Growth Story?

Shares of Workday surged 10.4% to $143.58 on May 29, capping a dramatic 18% rebound from the $121.85 post-earnings low set just eight days earlier. The catalyst: an expanded partnership with Google Cloud announced May 28, layered on top of investors reassessing quarterly results that were better than the initial selloff suggested.

Earnings Beat the Forecasts, Yet the Stock Still Fell — Until Now. Workday reported fiscal Q1 2027 earnings per share of $2.66, topping the $2.52 consensus, on revenue of $2.54 billion versus expectations of $2.52 billion.

Despite the beat, shares dropped 3.55% in after-hours trading on May 21. The culprit: FY27 guidance signaling decelerating revenue growth alongside a 66% jump in capital spending , which spooked investors worried about how much Workday must spend to stay competitive in AI. The current rally suggests that fear was overdone — at least for now.

The Google Partnership Gives Workday an AI Distribution Channel It Lacked. On May 28, Workday and Google Cloud announced an expanded partnership making Google's Gemini the default AI model powering Workday's self-service assistant , embedding it directly inside Google's enterprise platform so employees can ask questions and get answers pulled from Workday with policies already applied. For shareholders, this means Workday can reach millions of Google Workspace users without building its own consumer-grade front end — a significant cost advantage.

Strong Underlying Numbers Deserve a Second Look. Management reported the best new contract value growth for a Q1 in five years.

More than 4,000 customers now use at least one Workday AI agent, and its recruiting tool processed 14 million hiring workflows in Q1, up 44% year-over-year.

The company also raised its full-year adjusted operating margin target to 30.5%.

The Bear Case Hasn't Disappeared. Workday faces structural questions about whether AI will ultimately undercut its per-employee pricing model by automating the very HR tasks its software manages.

Insiders have sold $145.4 million in shares over the past three months , and capital expenditures are rising sharply even as revenue growth settles into the low teens. A Google badge helps the narrative, but the stock still needs consecutive quarters of accelerating bookings to sustain this bounce.