In a significant move, Workday has announced it will cut approximately 1,750 layoffs, or 8.5% of its workforce, as part of a strategic shift towards artificial intelligence (AI) investments.
The news comes as the company looks to streamline operations and allocate resources towards emerging technologies amid a challenging economic landscape.
Why Is Workday Laying Off Employees?
According to Workday CEO Carl Eschenbach, the layoffs are necessary for ongoing growth efforts, particularly focusing on AI and automation. “As we start our new fiscal year, we’re at a pivotal moment,” Eschenbach stated in a memo to employees. He emphasized that the increasing demand for AI is reshaping the industry, and Workday is making strategic decisions to remain at the forefront of innovation.
Financial Impact and Stock Market Reaction
Following the announcement, Workday’s stock saw a 4% surge in premarket trading, reflecting investor confidence in the company’s restructuring strategy. However, Workday expects to incur $230 million to $270 million in costs related to the layoffs, mainly for severance payments, employee benefits, and office space reductions. The company projects recognizing $60 million to $70 million of these costs in the fourth quarter.
Employee Support and Severance Packages
Workday has assured affected employees that they will receive financial support during the transition. In the U.S., all laid-off employees will be offered a minimum of 12 weeks of pay, with additional weeks based on tenure. Employees in other countries will receive severance packages in accordance with local labor laws. The company is also providing career transition support to help workers find new employment opportunities.
Workday’s Future Strategy
Despite the layoffs, Workday plans to continue hiring in strategic areas, particularly in AI and data analytics. The company also intends to expand its global reach by investing in new markets and strengthening its workforce in key locations. Additionally, Workday will close certain office spaces as part of cost-cutting measures, though specific locations have not been disclosed.
How Workday Compares to Competitors
Workday’s layoffs come amid increasing competition in the human capital management (HCM) sector. Rival firms such as Paychex and Automatic Data Processing (ADP) have pursued mergers and acquisitions to strengthen their positions. Last month, Paychex announced a $4.1 billion acquisition of Paycor, while ADP completed a $1.2 billion purchase of WorkForce Software in October 2024.
Workday’s Financial Performance
Workday remains financially strong despite restructuring. In Q3 of its fiscal year 2025, the company posted a net income of $193 million and revenue of $2.16 billion, reflecting growth from the previous year’s $132 million net income and $2.09 billion revenue. Workday’s full-year earnings report is expected later this month.
Tech Industry Layoff Trends
The job cuts at Workday align with a broader trend in the tech sector, where companies are restructuring to stay competitive while increasing AI investments. Other major tech firms like Intel, Cisco, and Apple have also conducted layoffs in response to evolving consumer spending and industry consolidation.
Workday’s layoffs mark a strategic shift rather than financial distress, emphasizing AI innovation and global expansion. While affected employees face challenges, the company’s outlook remains strong, with continued hiring in select fields and investor confidence supporting its long-term vision.
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