Shares of Workday rose nearly 10 per cent before the bell on Wednesday, after activist investor Elliott Management unveiled a stake of more than $2 billion in the company and backed its leadership.

Workday has been pushing to stay competitive in a consolidating human resources software market, where integrating AI has become key to meeting shifting client needs.

The company said on Wednesday it planned to buyback $5 billion worth of its stock through fiscal 2027, signaling confidence in the company's long-term growth trajectory.

Elliott on Tuesday lauded Workday's chief executive officer and finance chief, citing strong progress in recent years and describing the company's management team as proven and effective.

The investor said it was encouraged by its ongoing engagement with Workday and expressed confidence that the company's multi-year strategy is well-positioned to deliver meaningful long-term value for shareholders.

Separately, the California-based firm on Tuesday announced a deal to buy AI firm Sana for about $1.1 billion, adding to its recent spree of AI deals that included the acquisition of Paradox and Flowise.

"Workday is evolving its core platform and making acquisitions that should help the company deliver durable growth in an AI world," said Evercore ISI analysts in a note.

Workday's customers rely on the company's single cloud-based platform, which provides applications to manage services including recruitment, payroll, accounting and audit.

The Sana purchase adds to a flurry of deal-making activities in the HR software sector, after private equity firm Thoma Bravo agreed to buy Workday rival Dayforce for $12.3 billion last month.

Workday's 12-month forward price-to-earnings multiple was 22.38, compared with Dayforce's 26.04. The stock has fallen about 15 per cent this year.

Workday rises after Elliott reveals $2 billion stake, endorses leadership