Workday to cut 1,750 jobs, shift focus to AI and global expansion

Workday said Wednesday it will lay off 1,750 employees, roughly 8.5% of its workforce, as part of a restructuring plan to invest more heavily in artificial intelligence (AI) and accelerate international growth.

The California-based company disclosed the layoffs in a filing with the US Securities and Exchange Commission, attributing the decision to its focus on what its leaders call “durable growth.” While details on specific departments affected were not provided in the filing, executives emphasized that artificial intelligence initiatives and overseas markets represent key areas where the company will continue hiring.

“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,” Carl Eschenbach, CEO of Workday, said in a memo to employees included with the filing.

Concern about customer support

Some industry observers are concerned about how Workday’s layoffs affect customer support. John Yensen, who leads the managed IT services firm Revotech Networks, said he believes customers will likely face disruptions to their support and service soon.

“AI could help offset this by automating routine inquires and streamlining the customer service process, but the largest concern, as in all similar cases, is whether AI support will able to handle and improve the level of service that enterprise clients expect and have become accustomed to,” he said.

Timothy DeStefano, associate professor of research at Georgetown University’s McDonough School of Business, suggested that the outcome will largely depend on the company’s approach to the restructuring.

“One way to try to prevent layoffs from affecting the level and quality of customer support is to avoid eliminating positions that are customer-facing or critical to customer engagement,” DeStefano said. “It may also be helpful for the business to cross-train employees so that the remaining workers can handle multiple roles during the transition.”

Workday did not immediately respond to a request for comment.

Strategy suggests a ‘careful realignment of resources’

Workday’s leadership has pointed to artificial intelligence as a central reason for the reallocation of resources. While the AI transition presents challenges, DeStefano noted that the investment could pay off: “Making investments in technology, particularly AI, is not cheap, but an accumulation of empirical evidence suggests that, if done correctly, performance improvements and efficiency gains can be achieved. However, it takes time and restructuring to implement new technologies, and thus, there may be some hiccups along the way.”

International expansion is another priority for Workday, which plans to seize the growing demand for cloud-based HR solutions outside the United States. DeStefano noted that the company is taking a three-pronged approach to ensure financial stability: “cost reductions, market expansion overseas, and investing in tools designed to enhance decision-making and improve efficiency. This is particularly relevant given the increasing competition within the market, increased consolidation through firm acquisitions, and the potential for slower demand due to higher interest rates.”

While specific regional targets weren’t disclosed, DeStefano observed that the company’s strategy suggests a careful realignment of resources. “Based on their statements, they have decided to close certain locations while opening new ones. This suggests that the geographical reorganization is designed to restructure their regional footprint to keep pace with evolving consumer demand across their markets,” he said. “Additionally, while the company is laying off employees, they are not enacting a hiring freeze. Instead, they have stated that they will add workers to critical locations and roles within the company, along with making AI investments, to maintain and enhance its applications for consumers throughout the transition and in the long run.”

Workday faces intense competition in HR software from both established firms and startups, according to Janice Quek, an analyst at investment research firm CFRA.

“However, the AI opportunity is clear, and the company will need to innovate in order to remain competitive in the enterprise software space,” Quek said. “On that front, it has released several AI products, including AI agents, that will unlock capacity for its users, with more solutions in the pipeline. We expect [Workday] to also leverage AI internally to alleviate talent gaps, streamline workflows, and automate their operational processes and services to smooth its transition and enhance its own execution.”