The Workday workforce reduction will affect approximately 2.5% of employees as the enterprise-software company reorganizes teams around its strategic growth priorities.
Workday (NASDAQ: WDAY) said the reductions will fall mainly within its Product and Technology organization. The company also plans to reduce selected leased office space while continuing to hire in priority roles and locations during fiscal 2027.
Workday Workforce Reduction Brings Up to $80 Million of Charges
Workday expects total charges of $65 million to $80 million, according to its official SEC filing. It anticipates recognizing $55 million to $70 million in the fiscal third quarter and another $10 million in the fourth quarter.
The estimate includes $40 million to $55 million of cash spending on severance, benefits and related costs. Workday also expects approximately $10 million of non-cash stock-compensation charges and $15 million of non-cash impairment charges tied to leased offices.
Employee actions are expected to be substantially completed by the first quarter of fiscal 2028, subject to local consultation and labor rules. The office-space changes are scheduled to be largely finished by the fourth quarter of fiscal 2027.
Underlying Fiscal 2027 Guidance Is Unchanged
Workday reiterated the fiscal third-quarter and full-year guidance issued with its August results, except for GAAP operating margin. It plans to exclude the reorganization charges from its non-GAAP measures.
The company now expects third-quarter GAAP operating margin to be about 20 to 21 percentage points below non-GAAP margin. For the full year, the gap is forecast at approximately 19 percentage points.
That difference reflects expenses excluded from Workday’s adjusted presentation and does not represent a comparable decline in cash profitability. The planned hiring also means the action is a reallocation of resources rather than a companywide halt to recruitment.
Workday said final costs could change as it completes consultations across jurisdictions. The next earnings release should provide the first recorded restructuring charge and more detail on whether the reorganization alters research-and-development spending or product delivery schedules.
