Workday Inc. announced on Tuesday that it will cut approximately 1,750 jobs as part of a strategic shift towards integrating artificial intelligence (AI) within its operations. The decision represents about 8.5% of the company’s workforce and is aimed at improving efficiency and spurring innovation through the adoption of AI technologies.
CEO Aneel Bhusri stated, “This decision, though difficult, is essential for us to align our resources and focus on key areas that will drive long-term growth and build a sustainable business model. Embracing AI technologies will allow Workday to enhance its product offerings and improve customer experience.”
Workday, known for its cloud-based software for human capital management and financial management, plans to reinvest the resources saved from the layoffs into developing new AI functionalities and improving existing products. The company anticipates incurring charges in the range of $230 million to $270 million due to the cost reduction plan, which will be reflected in the fourth quarter financials.
The announcement resulted in a more than 4% rise in Workday’s shares during premarket trading. CEO Carl Eschenbach emphasized that the layoffs are a crucial step to maintain competitiveness and adjust to high interest rates affecting tech budgets.
Strategic shift towards AI integration
“We believe that the shift to AI will require every company in the software sector to critically assess its cost structure,” said Eschenbach. The industry faces increasing challenges as enterprise clients reduce spending, adding pressure on tech budgets. Despite this, Workday expects its financial results for the fourth quarter and the full year to meet or exceed previous forecasts.
Workday also confronts intense competition as rivals consolidate their positions through strategic acquisitions. For instance, Paychex recently announced its plan to acquire Paycor for $4.1 billion, and Automatic Data Processing acquired WorkForce Software for $1.2 billion. Looking ahead, Workday forecasts its annual subscription revenue to reach $7.70 billion in November, with fourth-quarter subscription revenue expected to be $2.03 billion, aligning with analyst expectations.
Additionally, the company plans to shut down some office spaces to further optimize costs. The cost reduction measures are expected to be completed by the second quarter of fiscal 2026. The cuts at Workday follow similar moves by other major technology companies, including Salesforce, Amazon, and Microsoft, who have also recently reduced their personnel, reflecting broader trends in the tech industry as companies adapt to changing market conditions and prioritize financial sustainability.
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