Workday surges 30%, software stocks rally, report: Silver Lake plans to acquire Workday

Workday's stock price surged sharply on Thursday after media reports that private equity giant Silver Lake is in talks to acquire the enterprise software company, boosting sentiment across the entire SaaS sector and triggering a rally in AI application software stocks.

According to Reuters, citing sources familiar with the matter, Silver Lake has been in acquisition talks with Workday for several months, but there is no guarantee that a deal will ultimately be reached. Workday primarily provides software for human resources and other business process management for enterprises.

As of press time, Workday's share price had risen by 18%, with intraday gains at one point expanding to 30%.

The news led to a broad-based rally in AI application software stocks. Cloudflare and MongoDB both rose more than 6%, Palantir and Salesforce both gained over 4%, Applovin and ServiceNow each climbed more than 3%, while the iShares Expanded Tech-Software Sector ETF increased over 2%.

Workday had previously become a typical target for market concerns about AI disrupting the SaaS business model.

Investors are generally worried that AI-assisted programming will pave the way for low-cost competitors to emerge, or even enable enterprise clients to bypass software vendors and build solutions themselves.

By Wednesday's close, Workday shares had fallen by 18% year-to-date, marking it as one of the victims of the so-called "software doomsday" shock.

Silver Lake has long shown interest in the software sector. In June this year, Christian Lucas, managing partner at Silver Lake, stated that about 25% of Silver Lake's portfolio is allocated to software companies.

On the governance front, Workday announced in February this year that co-founder Aneel Bhusri would return to the company, succeeding Carl Eschenbach as Chief Executive Officer.

Bhusri co-founded Workday in 2005, served as CEO from 2014 to 2020, and continued to lead the company as co-CEO until 2024. Eschenbach shared the co-CEO role with Bhusri from the end of 2022.

In response to competitive pressure from AI, Bhusri has taken a firm stance. Earlier this year, he cited examples of AI labs using Workday software, stating bluntly:

"No amount of 'Vibe Coding' can produce an HR or ERP system."

This directly addressed market concerns about AI potentially replacing enterprise software at its core.

In May this year, Workday's latest quarterly results somewhat alleviated investors’ concerns—the company's revenue grew 13% year-on-year, exceeding market expectations, and issued higher-than-expected guidance for the next quarter. Bhusri commented at the time:

"Our core business is strong, our AI strategy is working, and we are moving forward with the necessary speed and focus."

Like many of its peers, Workday has also launched its own AI tools and continues to demonstrate how it benefits from this emerging technology.