On Feb 5, Workday announced its plan to reduce its workforce by approximately 1,750 jobs, representing 8.5% of its current employees. This move comes as the human capital management company focuses on investing in artificial intelligence to adapt to a challenging economic climate. Workday's CEO, Carl Eschenbach, emphasized that the layoffs are essential to prioritize AI investments and to facilitate the company's expansion into new markets. The company's decision coincides with a broader trend in the industry of decreased spending by enterprise clients, partly due to high-interest rates affecting tech budgets.
Workday's stock surged over 4% in premarket trading following the announcement. The company anticipates incurring charges between $230 million to $270 million related to this restructuring, with a significant portion expected to reflect in the fourth quarter results. As of Jan. 31 last year, Workday employed approximately 18,800 individuals.
Amidst fierce competition and industry consolidation, Workday aims to sustain its financial performance. Recent acquisitions by competitors like Paychex and Automatic Data Processing highlight the competitive landscape. Workday remains optimistic about its fiscal fourth quarter and full-year financial outlook, aligning with or potentially exceeding prior estimates. The company foresees annual subscription revenue of $7.70 billion, with fourth-quarter revenue projected at $2.03 billion, mirroring analyst expectations.
Furthermore, Workday plans to close certain company-owned office spaces as part of its cost reduction strategy, with actions expected to conclude by the second quarter of fiscal 2026.