Microsoft CEO calls job cuts in the midst of big profits the 'enigma of success' in internal memo

CEO of Microsoft Satya Nadella at the Allen & Company conference in Sun ValleyBrendan McDermid/REUTERSSatya Nadella explains why Microsoft is cutting jobs amid financial success.Microsoft has eliminated thousands of jobs this year, and also shed nearly 2,000 underperformers.Some employees have criticized these moves while the company is so profitable.Microsoft CEO Satya Nadella sent a note to employees on Thursday explaining why the company has cut thousands of jobs while generating huge profits and spending billions on AI."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."Microsoft this year has said it would shed about 15,000 employees and cut nearly 2,000 additional staff deemed underperformers.Meanwhile, the company's net income has totaled roughly $75 billion over the latest three fiscal quarters. Microsoft is also spending $80 billion on AI infrastructure investments. The stock is up 21% this year, and hit a record earlier in July.Nadella acknowledged what he called the "uncertainty and seeming incongruence of the times we're in.""By every objective measure, Microsoft is thriving—our market performance, strategic positioning, and growth all point up and to the right," Nadella wrote. "We're investing more in CapEx than ever before. Our overall headcount is relatively unchanged, and 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."Nadella penned a similar note in 2023. That year, Microsoft announced its first massive layoff of the post-pandemic era and also paused raises. At the time, some employees blasted the CEO for praising the company's successes without acknowledging those tough moves.This time, the CEO took a more balanced approach.Read Nadella's full memo:As we begin a new fiscal year, I've been reflecting on the road we've traveled together and the path ahead.Before anything else, I want to speak to what's been weighing heavily on me, and what I know many of you are thinking about: the recent job eliminations. These decisions are among the most difficult we have to make. They affect people we've worked alongside, learned from, and shared countless moments with—our colleagues, teammates, and friends.I want to express my sincere gratitude to those who have left. Their contributions have shaped who we are as a company, helping build the foundation we stand on today. And for that, I am deeply grateful.I also want to acknowledge the uncertainty and seeming incongruence of the times we're in. By every objective measure, Microsoft is thriving—our market performance, strategic positioning, and growth all point up and to the right. We're investing more in CapEx than ever before. Our overall headcount is relatively unchanged, and 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. 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 success we want to achieve will be defined by our ability to go through this difficult process of "unlearning" and "learning." It requires us to meet changing customer needs, by continuing to maintain and scale our current business, while also creating new categories with new business models and a new production function. This is inherently hard, and few companies can do both.But 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.With that context, I want to re-ground ourselves in our why, what, and how: our mission, our priorities, and our culture.Our why: missionWhat does achieving our mission look like and feel like for us as a company? When Microsoft is succeeding, the world around us must succeed too. This is why each of us chose to be here, and as a company it's how we earn our social permission to operate. When Bill founded Microsoft, he envisioned not just a software company, but a software factory, unconstrained by any single product or category. That idea has guided us for decades. But today, it's no longer enough.We must reimagine our mission for a new era. What does empowerment look like in the era of AI? It's not just about building tools for specific roles or tasks. It's about building tools that empower everyone to create their own tools. That's the shift we are driving—from a software factory to an intelligence engine empowering every person and organization to build whatever they need to achieve.Just imagine if all 8 billion people could summon a researcher, an analyst, or a coding agent at their fingertips, not just to get information but use their expertise to get things done that benefit them. And consider how organizations, empowered with 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.That's the empowerment our mission enables, creating local surplus in every company, community, and country. And that's our opportunity ahead.Our what: prioritiesTo deliver on our mission, we need to stay focused on our three business priorities: security, quality, and AI transformation.We are doubling down on the fundamentals while continuing to define new frontiers in AI.Security and quality are non-negotiable. Our infrastructure and services are mission critical for the world, and without them we don't have permission to move forward.We've made substantial progress across SFI, QEI, and Engineering Thrive this year, and they remain top priorities to ensure that we continuously improve our innovation velocity and our operational metrics.We will reimagine every layer of the tech stack for AI—infrastructure, to the app platform, to apps and agents. The key is to get the platform primitives right for these new workloads and for the next order of magnitude of scale. Our differentiation will come from how we bring these layers together to deliver end-to-end experiences and products, with the core ethos of a platform company that fosters ecosystem opportunity broadly. Getting both the product and platform right for the AI wave is our North Star!Our performance this past year has positioned us well. And we must move forward with the intentionality and intensity that these industry shifts demand.Our how: cultureGrowth mindset has served us well over the last decade—the everyday practice of being a learn-it-all, not a know-it-all. It has reshaped our culture and helped us lead with greater humility and empathy. We need to keep that.It starts with each of us as individuals and our personal drive to learn, improve, and get better every day. Professional rewards, growth, and pride in our craft will always be the prime drivers. Beyond that, we each have the opportunity to connect our personal passion and philosophy of how we derive meaning from the work we do with Microsoft's mission to empower the world. This is what makes it all worthwhile.This platform shift is reshaping not only the products we build and the business models we operate under, but also how we are structured and how we work together every day. It might feel messy at times, but transformation always is. Teams are reorganizing. Scopes are expanding. New opportunities are everywhere. It reminds me of the early '90s, when PCs and productivity software became standard in every home and every desk! That's exactly where we are now with AI.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."What we've learned over the past five decades is that success is not about longevity. It's about relevance. Our future won't be defined by what we've built before, but by what we empower others to build now.And I know that with your dedication, drive, and hard work we can go win together, and change the world in the process.I look forward to sharing more at Earnings next week and addressing your questions at our next Town Hall.SatyaHave a tip? Contact this reporter via email at [email protected] or Signal at +1-425-344-8242. Use a personal email address and a nonwork device; here's our guide to sharing information securely.Read the original article on Business Insider

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