(Reuters) -Workday forecast second-quarter subscription revenue in line with Wall Street expectations on Thursday, anticipating weakening client spending on its human capital management software due to economic uncertainty, sending its shares down 5% in extended trading.

The human capital management industry is grappling with softening spending by enterprise clients due to economic uncertainty that has pressured tech budgets. 

"We remain focused on executing in this uncertain environment and are reiterating our fiscal 2026 subscription revenue guidance of $8.8 billion," said Chief Financial Officer Zane Rowe.

Workday expects subscription revenue of $2.16 billion for the second quarter.

It also announced a new buyback program to acquire an additional $1 billion worth of shares.

The company competes against Oracle and SAP in the large enterprise space, both of which have larger overall back-office application businesses.

Competition in the human capital and financial management software market is increasing, which could lead to pricing pressure, analysts have said.

The U.S. Office of Personnel Management, the federal human resources agency at the heart of billionaire Elon Musk's DOGE efforts to slash the federal workforce, earlier this month canceled a contract it had awarded to Workday.

The contract for a new cloud-based HR platform was awarded without seeking bids from rivals.

Workday's total revenue for the first quarter, ended April 30, came in at $2.24 billion, compared to estimates of $2.22 billion, according to data compiled by LSEG.

It reported subscription revenue of $2.06 billion, while analysts were expecting $2.05 billion.

On an adjusted basis, Workday earned $2.23 per share in the quarter, compared with estimates of $2.01 apiece.