Workday (WDAY) faces slowing core growth, while artificial intelligence monetization remains in pilot phase and too early to drive meaningful near-term revenue growth, Morgan Stanley said in a note Tuesday.

The investment firm said there is limited visibility into trends in Workday's Human Capital Management, or HCM, and Financial Management, or FINS, segments. HCM growth has slowed to 13% in fiscal 2026, and is expected to decelerate further to 9% in fiscal 2028, Morgan Stanley said.

While FINS remains stronger with around 20% growth, overall subscription revenue is projected to grow at a 12% to 13% compound annual growth rate through fiscal 2028, suggesting Workday's overall market share will remain largely unchanged, with HCM losing share as FINS gains, according to the note.

Management noted that fiscal Q1 results benefited from the previous quarter's deal slippage, making the sustainability of new annual contract value growth through H2 fiscal 2027 a key area to watch, the firm said.

"Until adoption moves beyond pilots and targeted deployments, it will be difficult for us and investors to underwrite AI as a near-term growth accelerator," the firm added.

Morgan Stanley downgraded Workday to underweight from equal-weight, and cut its price target to $145 from $185.

Shares of Workday were down more than 2% in Tuesday trading.

Price: 144.11, Change: -3.12, Percent Change: -2.12