Workday cuts jobs again; its stock tops CEO’s first pay hurdle

Boardroom Alpha · Executive Brief

Workday (WDAY) will cut about 2.5% of its workforce, mainly in its Product and Technology team, and take $65 million to $80 million in charges, the company said in an 8-K filed after the close on September 29. It kept its fiscal 2027 guidance for subscription revenue and non-GAAP margin. The 8-K gives no head count; based on the 20,896 employees Workday reported at July 31, we estimate the cut at about 520 people.

Separately, by our calculation, Workday’s stock has cleared the first price hurdle on CEO Aneel Bhusri’s $75 million performance award, a first tranche worth about $26 million. The award tests the stock’s 45-day average each month; it reached $179.86 at the September test, above the $171.39 hurdle, in a window that closed September 18, before the cut was announced, and that includes a 17.8% jump on an August report of buyout talks. Workday has not disclosed whether the hurdle was met.

It is Workday’s fourth announced job cut in less than four years. The first, about 3% of staff in January 2023, came with a note to employees from then co-CEOs Bhusri and Carl Eschenbach: “Based on what we know today, we have no plans to take similar actions of this size in the foreseeable future.” The next, in February 2025, was announced at nearly three times that size. The stock’s total return over the past year is −20.9%, against +15.7% for the S&P 500. The founders’ Class B shares carry about 69% of the vote, enough to control the outcome of shareholder votes.

After the February 2025 cut, announced at 8.5% of staff, Workday hired again: it had 21,070 employees at the end of January 2026, up from 20,482 a year earlier, a year in which it also bought Paradox and Sana. Bhusri, a co-founder, returned as CEO in February 2026, and by May he described a different goal. “If I could just say, this is more aspirational than anything else. I’d love to see us continue the growth that we had in Q1, but keep headcount as close to flat for the year as possible because we are getting the benefits of using our own products and other AI tools,” he said on the May 21 earnings call. The new 8-K again says Workday “plans to continue to hire in key strategic areas and locations.”

Five questions shareholders will be asking:

1. What is the plan for the size of the workforce? The two 2026 cuts came with less explanation than the earlier ones.
2. Does executive pay count the cost of the cuts? The bonus and performance shares are measured partly on a margin that leaves out restructuring charges.
3. How will the board report on the CEO’s price-hurdle award? By our calculation the stock has cleared the first hurdle.
4. How will the board hear Class A holders? Assuming the founders voted with the board, Class A support for pay was about 24%, 46% and 54% in the last three years, and a proposal to report votes by share class failed in June.
5. How would the board weigh an offer for the company? Workday has not disclosed anything about August reports of buyout talks, and any deal needs the founders’ votes.

Questions for the board

1. What is the plan for the size of the workforce?

The 8-K says only that the reorganizations are “designed to better align team structures with Workday’s strategic growth priorities,” with no expected savings or other reason. The February 2026 cut, about 2% of staff “primarily in non-revenue generating roles within Workday’s Global Customer Operations team,” was described in similar terms. The 2023 and 2025 cuts each came with a note to employees setting out the reasons and the severance terms; the two 2026 8-Ks have none.

Product development, where most of this cut falls, is also where spending is growing: it rose 13% from a year earlier in the July quarter, including “increases of $71 million in employee-related expenses,” the 10-Q says. The 2025 cut ended smaller than announced: Since its May 2025 10-Q, Workday has described it as “approximately 7.5%” of the workforce, against 8.5% announced, without saying why. Shareholders may ask the board for a head-count plan and the savings it expects from each cut.

2. Does executive pay count the cost of the cuts?

Workday’s bonus plan and its new performance shares are measured partly on adjusted non-GAAP operating margin, a profit measure the company added in fiscal 2026 after shareholders asked for one; it leaves out stock pay and restructuring charges. The margin was 29.9% in fiscal 2026 against a 28% target, and the bonus pool paid 101.8% “largely due to the outperformance of our adjusted non-GAAP operating margin achievement against the target,” the 2026 proxy says. The first year of the performance shares scored 128.3%. The 2025 and February 2026 plans cost $368 million in charges, and this one adds $65 million to $80 million. Any savings from the cuts would raise the margin the pay plans measure; the charges would not lower it. Shareholders may ask the pay committee to show the metrics with the charges included.

3. How will the board report on the CEO’s price-hurdle award?

Bhusri’s appointment awards were $60 million in restricted stock vesting over four years and $75 million in performance shares in four tranches, each earned only if the stock’s 45-day average clears a price hurdle, according to the 8-K announcing his appointment and the grant 8-K. The first hurdle, $171.39, is 25% above the $137.11 baseline set at the March grant, when the stock closed at $147.18.

By our calculation the 45-day average reached $179.86 at the September 20 test, up from $151.25 in August. If the pay committee confirms the hurdle was met, the first tranche of 136,751 shares, worth about $26 million at the September 30 close, vests in quarterly installments over five years from the grant. Since the grant, the stock first closed above the hurdle on August 7, before the takeover report, but the window includes August 13, when it rose 17.8% on a Reuters report that Silver Lake was in talks to buy the company. Shareholders may ask the pay committee whether the first hurdle has been met, and whether gains on takeover reports should count toward a pay hurdle.

4. How will the board hear Class A holders?

Say-on-pay passed with 87.6% of votes cast at the June 16 meeting, according to the 8-K, but that count gives each Class B share 10 votes. If every Class B vote went with the board, Class A support for pay was about 54% in 2026, up from about 46% in 2025 and 24% in 2024, by our estimate. On the same basis, about 44% of Class A votes backed director Wayne Frederick, who attended 74% of board and committee meetings in fiscal 2026; he and Jerry Yang, at 73%, were the two directors below 75%.

Those figures are estimates because Workday reports only the combined count, and at the same meeting a proposal to change that failed. The proposal, from New York City pension funds, asked Workday to report results by share class. It drew 14.6% of votes cast, the 8-K shows, though about 54% of Class A votes if every Class B vote went against it, by our estimate. The board opposed it, saying holders “can already closely estimate” the results and that class-by-class reporting “remains a rare practice among dual class issuers.”

Some investors that published their votes cited the share structure. Explaining its vote against lead independent director Mark Hawkins, Legal & General wrote: “We expect companies to move to a one-share-one-vote structure or provide shareholders a regular vote on the continuation of an unequal capital structure.”

The two classes merge by October 17, 2032 at the latest, or sooner if Class B falls below 9% of all shares. Directors serve staggered three-year terms. Co-founder David Duffield, who left the board in 2022, has sold about $868 million of stock in two years through his trust, and his family foundation about $111 million more, under Rule 10b5-1 plans (trading plans adopted in advance). He converts Class B shares as he sells, which shrinks the class. Bhusri has made no sales in the past two years; his only dispositions were shares withheld for taxes. Shareholders may ask how the pay committee will gauge Class A holders’ views on pay, and respond to them, when the vote count does not show them.

5. How would the board weigh an offer for the company?

Reuters reported on August 13 that Silver Lake was in talks to buy Workday, citing people familiar with the matter, and said there was “no guarantee a deal will materialize.” No Workday filing through September 30 mentions the reports. Workday’s 10-K says the founders can “control the outcome” of matters including any merger or sale. Shareholders may ask how the independent directors would assess an offer when the founders’ votes decide the result.

Our view

A 2.5% cut is small, and the business is more profitable than it was three years ago. The concern is the pattern. Workday has made three more cuts since its 2023 note said that, based on what it knew then, it had no plans for another of that size; one of them, in 2025, was larger, and both 2026 cuts were smaller. It added staff after the 2025 cut, its CEO now says the goal is roughly flat head count, and the 2026 8-Ks have explained less than the 2025 one. Any savings from the cuts would count toward the margin its fiscal 2026 bonus and its performance shares are measured on; the charges would not.

Workday’s total return is negative over one, three and five years, −20.9%, −11.4% and −23.8%. Since Bhusri returned, the stock is up 16.9%, ahead of the S&P 500 though behind the iShares software ETF, and 69% from its April low. That recovery is what the CEO and the board now have to build on. Whether or not it lasts, pay and vote transparency will remain issues for Class A holders.

A board whose founders control the vote owes Class A holders more disclosure, not less. In our view it should set out a head-count plan, show its pay metrics with restructuring charges included, and report vote results by share class, a proposal that failed in June although, if the founders voted against it, a majority of Class A votes supported it, by our estimate. The say-on-pay and director votes at the 2027 meeting are the main way Class A holders can register a view; their support for pay, though higher each year, was about 54% in 2026, by our estimate, assuming the founders voted with the board.

Counterpoints

• The cuts are small next to Workday’s growth, and the charges matched the estimates: $233 million for the 2025 plan against $230 million to $270 million estimated, and exactly the $135 million estimated for February 2026.
• Non-GAAP operating margin has risen from 19.5% in fiscal 2023 to 31.1% in the July quarter. Workday raised its fiscal 2027 margin guidance twice and beat its quarterly guidance in both quarters this year.
• The 8-Ks for the last three cuts say the charges are excluded from non-GAAP results, and the margin measure was added to pay at shareholders’ request.
• The board says Bhusri’s package reflects “the significant opportunity costs associated with his alternative professional and personal ventures,” and $75 million of it pays only if the stock rises at least 25% from the baseline.
• Buybacks have cut the share count 9.5% since January 2025, more than offsetting new shares issued as stock pay.
• After the 2025 meeting Workday contacted holders of about 60% of its Class A shares, and Class A support for pay has risen each year by our estimate.
• The executive severance policy pays cash only on a termination, not on a sale alone, and has no tax gross-ups.

What to watch

• Oct. 13
  Financial Analyst Day: multi-year targets, and anything on head count or the savings from the cuts.
• Late November
  Third-quarter results and 10-Q: the charges recorded, head count, buybacks under the new $4 billion authorization and any word on the first price hurdle.
• Ongoing
  Any Workday statement or filing on the buyout reports.
• Spring 2027
  The 2027 proxy: fiscal 2027 bonus metrics, Bhusri’s first full year of pay as CEO and the board’s response to the share-class proposal.
• June 2027
  Annual meeting: say-on-pay, and Bhusri, Thomas Bogan, Elizabeth Centoni and Lynne Doughtie up for election.

Sources: Workday’s SEC filings as linked, earnings-call transcripts, press reports, investors’ published votes and Boardroom Alpha data, as of September 30, 2026. Returns are total returns compared with the S&P 500. Class A vote figures are our estimates; Workday does not report votes by class. Boardroom Alpha is an independent research and analytics company and does not invest. This brief is for information only and is not investment advice or a proxy solicitation.