Microsoft CEO Satya Nadella addressed the growing internal unease inside the tech giant Thursday morning, laying out the company’s priorities and urging employees to maintain its core values, while conceding that its rapid transition into the artificial intelligence era “might feel messy at times.”
In a company-wide memo, Nadella acknowledged what he called the “uncertainty and seeming incongruence” of Microsoft’s current situation. While it’s thriving by “every objective measure” — with strong market performance, record capital investments, and relatively unchanged overall headcount — it has made thousands of job cuts.
Nadella said the layoffs have been “weighing heavily” on him, calling these decisions “among the most difficult we have to make.” He expressed “sincere gratitude to those who have left,” noting that “their contributions have shaped who we are as a company.”
“[S]ome of the talent and expertise in our industry and at Microsoft is being recognized and rewarded at levels never seen before. And yet, at the same time, we’ve undergone layoffs,” he wrote in the memo, which was also published Microsoft’s corporate blog.
“This is the enigma of success in an industry that has no franchise value,” Nadella wrote. “Progress isn’t linear. It’s dynamic, sometimes dissonant, and always demanding. But it’s also a new opportunity for us to shape, lead through, and have greater impact than ever before.”
Nadella’s memo comes as the company grapples with internal discontent and questions from employees after cutting thousands of jobs, while reporting strong financial results and investing billions in AI infrastructure. The company’s next earnings report is next week.
The company has laid off more than 15,000 employees so far in 2025, including 9,000 in early July alone, marking one of the most aggressive periods of job cuts in its history.
Company leaders have cited shifting business priorities and the need to operate more efficiently as the rationale behind the layoffs, rejecting suggestions that AI is directly eliminating jobs.
However, Microsoft President Brad Smith acknowledged in a recent interview with GeekWire that record capital expenditures — an estimated $80 billion over the past year — have put pressure on the company to reduce operating costs, which in tech typically means reducing headcount. Microsoft is racing to expand its data center footprint and acquire AI chips and infrastructure to maintain a competitive edge in the emerging AI economy.
The cutbacks have fueled broader concerns about Microsoft’s workplace culture, with some employees and former staffers saying the company’s handling of the layoffs has eroded the more compassionate environment fostered under CEO Satya Nadella.
“No company is perfect, but according to my friends, Microsoft has transformed from a good company into a shameful company with little-to-no internal integrity,” wrote James McCaffrey, a former longtime Microsoft senior research development engineer, detailing the issues in a July 18 blog post that has circulated widely among current and former employees.
He added, “Microsoft has gone through rough stretches before. I hope the company can rebound and become an admirable company again.”
Multiple reports have described employees being blindsided by abrupt terminations, while others say they are now operating in a culture of fear and heightened performance pressure.
Some longtime employees have expressed concern that they may be witnessing a return to the “old Microsoft” — marked by internal rivalries, poor communication, and job insecurity — after a decade of more inclusive and empathetic leadership under Nadella as CEO.
At the same time, Microsoft is positioning itself as a global leader in AI-driven economic development, launching a $4 billion “Elevate” initiative to help millions of people worldwide gain new skills for the AI era. Company executives argue that these parallel efforts are necessary to adapt to technological change.
In his memo Thursday morning, Nadella described Microsoft’s long-term evolution from a “software factory” to an “intelligence engine” that empowers everyone to create their own AI-powered tools.
He laid out three business priorities — security, quality, and AI transformation — calling the first two “non-negotiable” given that Microsoft’s infrastructure is now “mission critical for the world.”
Nadella described this paradox as part of a broader transformation requiring Microsoft to go through a difficult process of “unlearning” and “learning” — maintaining its current successful businesses while simultaneously creating new categories and business models.
He called this dual mandate “inherently hard” and said “few companies can do both.”
At the same time, he wrote, “I have full confidence that we can, and we will once again find the resolve, courage, and clarity to deliver on our mission in this new paradigm.”
Nadella compared the current moment to the PC revolution of the early 1990s, telling employees: “Years from now, when you look back at your time here, I hope you’ll say: ‘That’s when I learned the most. That’s when I made my biggest impact. That’s when I was part of something transformational.”
Nadella said he would share more details at the company’s earnings report next week and address employee questions at an upcoming town hall meeting.
Read the full memo here.
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