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Workday said on Wednesday it will cut around 1,750 jobs, or 8.5% of its current workforce, as the human capital management firm invests heavily in artificial intelligence to counter a softer macroeconomic environment.
Shares of the California-based company jumped over 4% in premarket trading.
Workday CEO Carl Eschenbach said the layoffs are necessary to prioritize investments such as artificial intelligence, while also freeing up resources to expand the company’s presence in different countries.
The layoffs come at a time when the human capital management industry has grappled with slower spending by enterprise clients as high interest rates have pressured tech budgets.
Workday expects to incur around $230 million to $270 million in charges connected to the cost reduction plan, of which, around $60 million to $70 million is expected to be recognized in the fourth quarter.
As of Jan. 31 last year, the company had around 18,800 employees.
Workday faces stiff competition from other players in a crowded industry as firms consolidate their position through acquisitions to take market share.
Last month, Paychex said it will acquire Paycor for $4.1 billion in cash, while Automatic Data Processing acquired management services provider WorkForce Software for around $1.2 billion in cash in October.
Workday also said it expects its fiscal fourth quarter and full-year financial results to be in line with or above its prior forecast.
The company forecast annual subscription revenue of $7.70 billion in November while it expects fourth-quarter subscription revenue to be $2.03 billion – in line with analysts expectations, as per data compiled by LSEG.
Workday also said it expects to close certain office spaces that it owns and the actions associated with the cost reduction plans should be completed by the second quarter of fiscal 2026.