Workday Cuts 8.5% of Workforce in AI-Focused Restructuring

Workday, a leading human capital management company, is cutting around 1,750 jobs, representing 8.5% of its current workforce, as part of a strategic shift towards artificial intelligence (AI) and global expansion. The move, as reported by Reuters, is designed to streamline operations and prioritize key growth areas.

The news sent Workday's shares soaring by over 4% in pre-market trading.

Workday CEO Carl Eschenbach framed the layoffs as necessary to "prioritize investments such as artificial intelligence" and bolster the company's international presence. The decision comes amidst a challenging economic climate that has seen enterprise clients curb spending on technology, impacting the broader human capital management industry.

The cost-cutting measures are expected to result in charges of $230 million to $270 million, with $60 million to $70 million anticipated in the fourth quarter. As of January 31, 2023, Workday employed approximately 18,800 employees globally.

Workday's move highlights the intense competition within the human capital management sector, where companies are aggressively pursuing acquisitions to gain market share. Recent examples include Paychex's $4.1 billion acquisition of Paycor and ADP's $1.2 billion acquisition of WorkForce Software.

Despite the job cuts, Workday remains optimistic about its financial performance. The company expects its fiscal fourth-quarter and full-year financial results to meet or exceed prior forecasts. It forecasts annual subscription revenue of $7.70 billion and fourth-quarter subscription revenue of $2.03 billion, aligning with analysts' expectations, according to data compiled by LSEG.

Workday also announced plans to close certain office spaces it owns, and expects the cost reduction plan to be fully implemented by the second quarter of fiscal 2026.