Workday (NASDAQ: WDAY) is cutting about 2.5% of its workforce, primarily in Product and Technology, and expects total charges of about $65m to $80m. The software group set out the reorganisation in a Form 8-K filing today, which covers costs associated with exit or disposal activities.
It also reiterated the fiscal 2027 third-quarter and full-year guidance it originally gave on its second-quarter earnings call on the 27th of August. The one exception is GAAP operating margin, the measure that includes these charges.
Workday said certain functions within Workday announced the reorganisations today to better align team structures with strategic growth priorities, alongside select reductions in leased office space. It plans to keep hiring in key strategic areas and locations throughout fiscal 2027.
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The total charge of about $65m to $80m is split, with about $55m to $70m recognised in fiscal third-quarter 2027 and about $10m in the fourth quarter. Roughly $40m to $55m is future cash spending on severance, benefits and related costs.
The rest is non-cash: about $10m of stock-based compensation and about $15m of impairment on leased office space.
Workday intends to exclude the charges from its non-GAAP measures, which is why only the GAAP margin guidance moves. It now expects third-quarter GAAP operating margin to be about 20 to 21 percentage points lower than the non-GAAP figure, and full-year GAAP margin about 19 points lower.
Workday expects employee-related actions to be substantially complete by the first quarter of fiscal 2028, subject to local law and consultation requirements. The office space actions should finish by the fourth quarter of fiscal 2027.
The company cautioned that its estimates rest on assumptions, including local law in various jurisdictions, and actual amounts may differ materially. Benefits may not be realised as quickly as expected or at all, costs could exceed estimates, and the reorganisations could hurt operations.
