Workday, the California-based enterprise software giant, is laying off approximately 400 employees, representing about 2% of its total workforce of over 20,400 employees. The company announced the cuts in a securities filing Wednesday, stating the need to realign resources to meet top priorities. The layoffs will primarily affect non-revenue-generating roles within its global customer service team, though Workday emphasized it plans to continue hiring in strategic areas and locations.
While Workday didn’t explicitly cite artificial intelligence as a reason for the workforce reduction in its filing, the announcement comes amid significant AI-driven market turbulence affecting major software companies. Recent AI developments have dramatically impacted investor sentiment, with several marquee tech stocks experiencing sharp declines this week, including Workday, Intuit, and Salesforce. The catalyst appears to be Anthropic’s debut of its industry-specific Claude Cowork plugin, which has raised concerns about AI’s potential to disrupt traditional software business models.
Workday’s stock has plummeted approximately 34% from a year ago, reflecting broader market anxiety about AI competition in the enterprise software space. This marks the company’s second significant round of layoffs in recent years. Last year, Workday announced a larger workforce reduction, explicitly citing the need to invest more heavily in strategic areas such as AI development.
Adding to the company’s challenges, Workday is currently facing a class-action lawsuit alleging its AI systems discriminate against job candidates based on race, age, and disability. The company has firmly denied these allegations, stating the case is without merit and maintaining its commitment to fair hiring practices.
The layoffs highlight the complex position many traditional software companies find themselves in: needing to cut costs while simultaneously investing heavily in AI capabilities to remain competitive. Workday, which provides critical enterprise solutions for payroll, talent management, and expense processing, must balance operational efficiency with the imperative to innovate in an increasingly AI-driven market. A company spokesperson declined to provide additional comment beyond the securities filing.
Key Quotes
The cuts represent about 2% of its overall workforce and will primarily affect non-revenue-generating roles within its global customer service team.
From Workday’s securities filing, this statement reveals the company is targeting support functions rather than sales or product development roles, suggesting a strategic focus on protecting revenue-generating capabilities while reducing operational costs.
Recent AI developments have, however, soured investors’ outlook for many software companies.
This observation from the article connects Workday’s challenges to broader market dynamics, where new AI capabilities from companies like Anthropic are causing investors to reassess the competitive positioning of traditional software providers.
Our Take
Workday’s situation exemplifies the existential challenge facing enterprise software companies in the AI era. While the company didn’t explicitly blame AI for these layoffs, the context is unmistakable: AI is fundamentally reshaping the competitive landscape, forcing even industry leaders to restructure rapidly. The irony is striking—Workday, a company that provides HR and talent management software, is simultaneously cutting jobs, facing discrimination lawsuits over its AI hiring tools, and racing to integrate AI into its products. This reflects the chaotic transition period the industry is experiencing. The market’s harsh reaction to Anthropic’s Claude Cowork plugin suggests investors believe AI-native solutions could significantly undercut traditional software pricing models and functionality. For Workday and its peers, the path forward requires not just incremental AI features, but potentially reimagining their entire product architecture for an AI-first world—all while managing workforce transitions and regulatory scrutiny.
Why This Matters
This story illuminates the profound disruption AI is causing across the enterprise software industry, even for established market leaders like Workday. The timing of these layoffs—coinciding with Anthropic’s Claude Cowork launch and a broader software stock sell-off—demonstrates how quickly AI innovation can reshape competitive dynamics and investor confidence.
The situation reveals a critical tension facing legacy software companies: they must simultaneously reduce costs to maintain profitability while investing heavily in AI to avoid obsolescence. Workday’s 34% stock decline over the past year reflects investor concerns that traditional software business models may be vulnerable to AI-native competitors offering more efficient, automated solutions.
The class-action lawsuit alleging AI-based discrimination adds another dimension, highlighting the regulatory and ethical risks companies face as they deploy AI systems. This case could set important precedents for how AI tools are used in hiring and HR processes—ironically, Workday’s core business area. For the broader workforce, this story underscores AI’s dual impact: eliminating certain roles while creating demand for AI-specialized positions, accelerating the need for workforce adaptation and reskilling initiatives.
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Source: https://www.businessinsider.com/workday-layoffs-amid-software-stock-sell-off-2026-2