Is Workday (WDAY) Mispriced With 30%+ Margin Potential Ahead?

Eagle Capital Management published its second quarter 2026 investor letter, discussing enthusiasm for AI capital spending driving strong S&P 500 earnings growth and increased risks from elevated valuations and concentrated demand. The firm remains bullish on AI but prefers constructing a diversified portfolio. Eagle believes current earnings may overstate underlying economics, as semiconductor equipment is depreciated over several years, while free cash flow growth remains weak.

The company expects competition and additional capacity to create winners and losers in the AI sector.

Eagle Capital Management highlighted Workday, Inc. (NASDAQ:WDAY), a leading enterprise software company, in its Q2 2026 investor letter. The company earns mid-teen margins but has the potential for long-term margins of 30% or higher. Workday's founder returning as CEO is expected to drive product innovation, with AI likely to be a net positive for the business through geographic expansion, adjacent-product extensions, and natural-language querying for business results.

The company is expected to have high teens EPS growth driven by revenue growth, operating leverage, and share buybacks.

Workday, Inc. (NASDAQ:WDAY) closed at $190.64 per share on August 18, 2026, with a one-month return of 43.96% and a 52-week gain of -16.20%. The market capitalization of the company is $47.09 billion. Eagle Capital Management stated that Workday, Inc. (NASDAQ:WDAY) is not in the list of the 40 Most Popular Stocks Among Hedge Funds, with 63 hedge fund portfolios holding the stock at the end of the first quarter, down from 70 the previous quarter.

Eagle believes certain AI stocks offer greater upside potential and carry less downside risk, and recommends checking out a free report on the best short-term AI stock.