(Reuters) - Workday beat Wall Street expectations for fourth-quarter revenue on Tuesday, benefiting from strong demand for its human capital management software as clients increased spending in an easing economy.

Shares of the California-based company rose 6.7% in extended trading.

Cooling inflation and a stable job market are encouraging businesses to hire, boosting demand for workforce management solutions such as those offered by Workday.

The company's incorporation of generative artificial intelligence (GenAI) and machine learning into its product offerings has further improved investor confidence.

"Our fourth quarter results were driven by solid performance across key growth areas of the business, including continued momentum with our full suite and financials products, growing demand for our AI SKUs, and strong execution across industry verticals," said CFO Zane Rowe.

The company recently launched the Workday Agent System of Record to help organizations manage all their AI agents, from Workday and third-party sources alike.

Earlier in February, Workday said it would cut around 1,750 jobs, or 8.5% of its current workforce, as the human capital management firm invests heavily in artificial intelligence to counter a softer macroeconomic environment.

Total revenue for the fourth quarter ended January 31 came in at $2.21 billion, beating analysts' estimates of $2.18 billion, according to data compiled by LSEG.

The company reported subscription revenue of $2.04 billion, while analysts were expecting $2.03 billion.

Workday forecast subscription revenue for the first quarter to be $2.05 billion, compared with expectations of $2.06 billion.

The company's fiscal 2026 subscription revenue forecast of $8.80 billion is in line with estimates.