Microsoft CEO Satya Nadella Breaks Silence On Layoffs Ahead Of Earnings Next Week: ‘This Is The Enigma Of Success’

Microsoft Corp. (MSFT), which is the world’s second-largest company, is scheduled to report its quarterly results after the market closes on Wednesday. Ahead of the earnings release, CEO Satya Nadella shared his thoughts on the latest job cuts at the company, as well as his priorities and the culture he aims to foster.

Microsoft stock has gained nearly 22% this year, outperforming the broader market and the tech sector. It is also the third-best performer among the Magnificent Seven group, after Nvidia and Meta.

In a blog post published on Thursday as the company started a new fiscal year, Nadella said, “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.”

Calling these decisions the “most difficult,” he expressed his gratitude to those who were laid off.

After slashing 10,000 jobs in 2023 when the company had to contend with a demand slowdown amid an inflationary spike, the company has eliminated more personnel this year.

In May, the company laid off 6,000 employees, citing the organizational changes necessary to best position itself for success in a dynamic marketplace. The company cut 305 permanent positions in early June.

The Windows software maker followed up with another round of layoffs in early July, this time eliminating 9,000 employees, marking the second-largest in its history. Employees across teams were impacted, including its sales division and Xbox video game business.

Following the May layoffs, Barclays analysts said they saw the elimination as a “commitment to profitable growth," especially as artificial intelligence (AI) infrastructure costs continue to ramp up in the medium term.”

Microsoft has been among the frontrunners in the AI race, having forged an expanded partnership with Sam Altman-led startup OpenAI in early 2023.

While acknowledging the current uncertain times, Nadella said, “By every objective measure, Microsoft is thriving — our market performance, strategic positioning, and growth all point up and to the right.”

He noted that Redmond was investing more in capital expenditure, maintaining its headcount steady despite the eliminations, and also recognized and rewarded talents and expertise at levels never seen before.

“And yet, at the same time, we’ve undergone layoffs,” Nadella said. “This is the enigma of success in an industry that has no franchise value.”

The success Microsoft wants to achieve, Nadella said, requires meeting “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.”

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