09:34 AM EDT, 05/24/2024 (MT Newswires) -- Workday's (WDAY) lower subscription-revenue guidance for fiscal year 2025 was driven "relatively evenly" by slower customer headcount growth commitments and increased scrutiny of large deals, Morgan Stanley said Friday in a note.

"While Q1 is a seasonally slow quarter and notoriously volatile, the weaker performance is likely to stoke investor concerns on two fronts, the levels of saturation within the Large Enterprise Human Capital Management market and the ability for back-office digital transformation projects to sustain priority when the intent around [generative artificial intelligence] projects tends to focus more on the front office," the firm said.

Morgan Stanley cut its price target on Workday to $325 from $330 and maintained the company's overweight rating.

The firm said it kept the rating because Workday "is doing the right thing and de-risking the forward guide" and management increased its fiscal year 2025 operating margin target by 50 basis points.

Morgan Stanley added that the company continues to be "one of the highest-quality" software as a service-franchises in software.

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