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 for 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 situation. Even with its recent job cuts, he wrote, it’s thriving by “every objective measure” — with strong market performance, record capital investments, and relatively unchanged overall headcount due to ongoing hiring.
Nadella pointed out that “some 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.”
“This is the enigma of success in an industry that has no franchise value,” he 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.”
The memo represents Nadella’s most direct attempt yet to reconcile the fundamental contradictions facing Microsoft and many other tech companies as they adjust to the AI economy. Microsoft, in particular, has been grappling with employee discontent and internal questions about its culture following multiple rounds of layoffs.
In the memo, which was also published on Microsoft’s corporate blog, 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.”
Capital spending and job cuts
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 productivity gains are directly eliminating jobs at this point.
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 say that these parallel efforts are necessary to adapt to technological change.
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.
Microsoft has hired more than 24 employees from Google DeepMind in the past six months, according to a tally by the Financial Times. It’s part of a broader war for AI talent, fueled by Meta and others.
Inside the company, the cutbacks have fueled broader concerns about Microsoft’s workplace culture, with some employees and former staffers saying the handling of the layoffs has eroded the more compassionate environment Nadella fostered over the past decade.
“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.
Microsoft’s three business priorities
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.”
The Microsoft CEO said he would share more details during the company’s earnings report next week and address employee questions at an upcoming town hall meeting.
Read the full memo here.
