Satya Nadella explains Microsoft layoffs: Not a performance issue

Microsoft CEO Satya Nadella has shed light on the company's recent decision to lay off around 6,000 employees—roughly 3% of its global workforce—stressing that the move was not a reflection of employee performance but rather a strategic realignment to prepare for a rapidly shifting tech landscape.

Addressing employees at a company-wide town hall, Nadella clarified that the layoffs stem from a broader organisational restructuring aimed at positioning Microsoft as a leader in artificial intelligence. “This was about reorganisation rather than performance,” he said, signalling that the company’s workforce reshuffle is designed to support its long-term AI ambitions.

A AI Bet At the heart of this pivot is a staggering $80 billion investment in AI infrastructure planned for this year alone. Microsoft is aggressively scaling its AI capabilities, including expanding data centers, hiring AI specialists, and integrating AI tools like Copilot across its suite of software products, from Office to Azure.

As AI becomes central to Microsoft’s growth narrative, the company is redefining roles across its departments. Many jobs, especially in traditional product development and engineering teams, are being restructured or phased out to make room for new positions focused on machine learning, AI product development, and related services.

Joining the town hall, Microsoft Chief Product Officer Aparna Chennapragada tackled rising concerns that the surge in AI tools might devalue coding and computer science skills. “I fundamentally disagree with the notion that people should not study computer science or that coding is dead,” she said, addressing growing anxieties sparked by AI models that can now write and debug code.

Her reassurance underscores Microsoft’s stance that while AI may change how developers work, it won't replace the need for strong technical foundations—especially as human oversight, creativity, and logic remain critical in AI-driven systems.

Although the layoffs mark a painful moment for affected employees, Microsoft’s leadership maintains that these are proactive decisions intended to future-proof the organisation. Nadella acknowledged the human cost of such restructuring but emphasised that these changes are necessary for Microsoft to lead the next wave of innovation.

“We have to align ourselves with where the world is going,” Nadella reportedly told employees, reiterating his belief that AI will be as transformative as the internet or the smartphone.

With this AI-first vision, Microsoft is not only revamping its internal teams but also signaling to the broader tech industry that the age of general-purpose software development is giving way to an era of intelligent, adaptive systems—and the company intends to be at the forefront of that shift.

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