Sunita Somvanshi
In a company-wide memo sent July 24, 2025, Microsoft CEO Satya Nadella addressed what he called “the enigma of success” – why the tech giant is cutting thousands of jobs while simultaneously posting record profits and investing heavily in AI.
“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,” Nadella wrote in the memo, which was also published on Microsoft’s corporate blog.
The cuts have affected approximately 17,000 employees so far in 2025—about 15,000 general layoffs plus 2,000 underperformer exits—including roughly 9,000 in early July. This marks one of the most aggressive periods of job cuts in Microsoft’s history, despite extraordinary financial performance.
Microsoft has generated about $75 billion in net income over just three quarters in fiscal year 2025. Investors have rewarded the company, pushing its stock price above $500 for the first time on July 9, shortly after the July layoffs were announced.
Nadella explained this apparent contradiction: “By every objective measure, Microsoft is thriving—our market performance, strategic positioning, and growth all point up and to the right.” Despite the layoffs, he noted that the company’s overall headcount is “relatively unchanged” due to ongoing hiring in strategic areas.
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So why cut jobs during such prosperity? Nadella described Microsoft’s transformation “from software factory to intelligence engine” – a fundamental shift requiring different skills and organizational structures.
“We must reimagine our mission for a new era,” Nadella wrote. “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.”
This transformation is backed by massive investment. Microsoft is pouring $80 billion into AI infrastructure during fiscal year 2025 alone, according to Microsoft’s “On the Issues” blog.
The cuts at Microsoft reflect a broader trend across the tech industry, with roughly 80,000 positions eliminated so far in 2025, according to data from layoff tracker Layoffs.fyi.
Inside the company, the cutbacks have raised concerns about workplace culture, with employees expressing uncertainty amid the rapid changes.
Microsoft’s Q4 2025 earnings call is expected in the week following the July 24 memo, where analysts will likely press executives for more details on how these workforce changes align with the company’s AI strategy and financial outlook.
