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The ongoing wave of tech layoffs throughout the Bay Area has now come to Pleasanton-based Workday, which announced plans this week to cut its workforce by 8.5% — or 1,750 jobs — amid an increasing focus on artificial intelligence.
The plan was announced in a filing with the Securities Exchange Commission and an email to employees from CEO Carl Eschenbach Wednesday, in which he called the decision “difficult, but necessary” and encouraged employees to work from home or leave the office for the day.
“Our journey at Workday has always been about challenging the status quo, embracing change, and putting our customers at the heart of everything we do,” Eschenbach said in the email to employees. “As we start our new fiscal year, we’re at a pivotal moment. Companies everywhere are reimagining how work gets done, and the increasing demand for AI has the potential to drive a new era of growth for Workday.”
“This creates a massive opportunity for us, but we need to make some changes to better align our resources with our customers’ evolving needs,” he continued. “This means investing strategically, helping teams work better together, bringing innovations to market faster, and making it easier for our customers and partners to work with us.”
The company’s recent growth has been steady, with the most recent publicly available numbers in its third-quarter financial results seeing a 15.8% increase from the previous year to $2.16 billion, and with a total value of $7.16 billion as of Oct. 31, 2024.
While its fourth quarter and full-year financial results are expected to be “in-line with or above” the guidance provided in the third-quarter results, its Generally Accepted Accounting Principles (GAAP) margin is estimated to be more than 20% lower than originally expected in its fourth-quarter and full-year results due to the costs associated with the layoffs.
The layoffs are estimated to cost approximately $230 million to $270 million in the short term, including $145 million to $175 million in estimated spending on severance payments, employee benefits and other costs and $50 million to $60 million in stock compensation, as well as “approximately $35 million in non-cash charges related to the impairment of office space,” by the first quarter of the next fiscal year, according to the SEC filing.
“Affected employees in the U.S. will be offered a minimum of 12 weeks of pay, with additional weeks based on tenure,” Eschenbach said in his email to employees. “In addition, they will be offered additional vesting of restricted stock unit grants, career services, benefits support, and immigration support. Outside the U.S., affected employees will be offered packages based on local standards, which will be aligned with U.S. packages, where possible.”
In addition to the layoffs, the plan announced this week includes intentions to “exit” some of its existing office spaces, but not its Pleasanton headquarters. A spokesperson told the Weekly that although they were unable to share additional details, “Pleasanton remains home to Workday’s headquarters and our largest employee base.”
Without additional details from the company, it remains unclear how many workers based in Pleasanton are impacted by the cuts, what the nature of their jobs is, and what jobs the company intends to continue hiring for – also a part of its current plan through the first quarter of the 2026 fiscal year.
Although the decision to make significant cuts to its workforce amid increasing focus and investment in AI technology is a recent one, officials at Workday have been considering AI and the future of the workforce for some time, with the 2023 Workday Rising conference in San Francisco centering discussions on that topic.
“There’s work that most humans just don’t necessarily enjoy, and if we can give that to a technology, something that’s highly repetitive that doesn’t stimulate, then great — let’s direct the stimulating things that call for our judgment, our ability to synthesize to pass through life’s filter,” Workday’s Chief People Officer Ashley Goldsmith told the Weekly in 2023. “Let’s let the humans do that great work, and hopefully let the technology help them do it better and enjoy it more.”
Workday is expected to release its fourth quarter and full-year financial results on Feb. 25, weeks after Eschenbach’s one-year anniversary as sole CEO of the company, with co-founder and former CEO Aneel Bhusri shifting away from the helm and into an advisory role as of Feb. 1, 2024.
“We have so much opportunity ahead of us, especially with the potential of AI, and we have a strong foundation to build upon,” Eschenbach told employees Wednesday. “While we have work ahead to realize our vision and full potential, today is about focusing on taking care of each other. I am proud and grateful for how you support one another, our customers and partners —particularly in moments like these.”