Following significant layoffs at Microsoft, impacting approximately 9,000 employees, including substantial reductions within the Xbox division, CEO Satya Nadella shared an internal memo with staff, which was later published on the company`s blog. In this message, Nadella detailed the “why, what, and how” behind the decision to implement such widespread job cuts.
Nadella described these decisions as “among the most difficult we have to make.” He extended his sincere gratitude to those who departed, acknowledging their contributions in shaping Microsoft and laying its foundational groundwork.
The Microsoft chief also addressed the “seeming incongruence” between the company`s thriving business and the mass layoffs. Nadella affirmed that Microsoft is “thriving by every objective measure” but attributed the reductions to the “enigma of success.” He emphasized that progress is not linear but dynamic and challenging, yet it simultaneously presents new opportunities for growth and broader impact.
In his memo, Nadella also noted that Bill Gates` original vision of Microsoft as a “software factory” unconstrained by a single product is no longer sufficient. According to Nadella, Microsoft must “reimagine” its mission, now heavily investing in artificial intelligence. The company is committing $80 billion to AI development, planning to integrate AI into all its products, including Xbox.
Nadella articulated his vision for AI: “Imagine if all 8 billion people could instantly summon a researcher, an analyst, or a coding agent, not just for information, but to accomplish tasks that benefit them. And consider how organizations, empowered by AI, could unlock entirely new levels of agility and innovation by transforming decision-making, streamlining operations, and enabling every team to achieve more together than ever before.”
Moving forward, Microsoft will concentrate on three core areas: security, quality, and “AI transformation.” Regarding AI, Nadella stated that the company will “reimagine every layer of the tech stack,” encompassing infrastructure, application platforms, applications themselves, and AI “agents.” He explained that Microsoft`s differentiation will stem from how these layers are integrated to deliver comprehensive products and solutions, with the primary goal of being a platform that fosters broad ecosystem opportunities. “Getting both the product and platform right for the AI wave is our North Star,” Nadella asserted.
Concerning corporate culture, Nadella warned that team structures are evolving, and the process might be complex. “It might feel messy at times, but transformation always is. Teams are reorganizing. Scopes are expanding. New opportunities are everywhere,” he said.
The cuts at Xbox involved not only layoffs but also game cancellations and the closure of at least one studio. It was later reported that developers at Microsoft-owned King studio (creators of Candy Crush) might be replaced by the very AI tools they helped build. Microsoft, for its part, acknowledges that the rise of AI is expected to lead to short-term job losses but believes that the opportunities presented by AI far outweigh the associated challenges.