Key Takeaways Microsoft will resume hiring after cutting over 15,000 jobs, but new employees will have "a lot more leverage" through AI tools. The company maintained a flat workforce of 228,000 employ...
After a year marked by significant workforce reductions, Microsoft is preparing to expand its employee base once again, but with a fundamentally different approach centered on artificial intelligence integration.
CEO Satya Nadella announced during an interview on investor Brad Gerstner's BG2 podcast that the company plans to grow headcount following layoffs that eliminated more than 15,000 positions across various divisions throughout 2025.
"I will say we will grow our headcount, but the way I look at it is that headcount we grow will grow with a lot more leverage than the headcount we had pre-AI," Nadella said during the podcast conversation.
Microsoft ended its 2025 fiscal year in June with approximately 228,000 employees, essentially unchanged from the previous year despite multiple rounds of job cuts.
The layoffs included roughly 9,000 positions eliminated in July alone, with Microsoft's Xbox gaming division experiencing particularly heavy reductions.
Xbox leader Phil Spencer addressed the gaming division cuts in a message to employees, stating: "To position Gaming for enduring success and allow us to focus on strategic growth areas, we will end or decrease work in certain areas of the business and follow Microsoft's lead in removing layers of management to increase agility and effectiveness."
The workforce reductions stand in stark contrast to Microsoft's pre-AI expansion period. Before 2022, the company's workforce had expanded by 22 percent annually as it pursued aggressive growth strategies.
Nadella explained that the layoffs were part of a strategic pivot as Microsoft redirected substantial resources toward AI infrastructure, partnerships, and products, including Microsoft 365 Copilot and GitHub Copilot, which utilize technology from OpenAI and Anthropic.
The CEO described how artificial intelligence has already begun transforming daily operations within the company. "Right now, any planning, any execution, starts with AI. You research with AI, you think with AI, you share with your colleagues, and what have you," Nadella said.
He provided a concrete example of this transformation, citing a Microsoft executive responsible for managing the company's fiber network infrastructure. Faced with expanding data center demands that outpaced hiring capabilities, the executive deployed AI agents to automate maintenance tasks.
"That is an example of you, to your point, a team with AI tools being able to get more productivity," Nadella told Gerstner, who heads technology investment firm Altimeter Capital.
Nadella acknowledged that the transition to AI-enhanced workflows will require time for employees to adapt. "It's the unlearning and learning process that I think will take the next year or so, then the headcount growth will come with max leverage," he said.
Drawing historical parallels, Nadella compared the current AI transformation to previous workplace revolutions. "Decades ago, teams would send inter-office memos by fax before email and Excel changed everything," he said. "Now we're at that same kind of inflection point, only faster."
The company's strategy emphasizes training every employee to work alongside AI systems and use them to amplify their output, rather than simply returning to traditional staffing models.
Microsoft's AI-focused strategy appears to be yielding financial results.
The company reported $281.7 billion in revenue and $101.8 billion in profit for the fiscal year ending June 30, 2025. Its cloud division, Azure, grew 34 percent year-over-year to surpass $75 billion in revenue.
The company now operates more than 400 data centers across 70 regions worldwide.
Additionally, approximately 230,000 organizations currently use Copilot Studio, while more than 14,000 customers are connected to Azure AI Foundry.
Microsoft also reported 12 percent year-over-year revenue growth in its most recent quarterly results and posted its widest operating margin since 2002.
Microsoft's approach reflects broader changes sweeping through the technology sector. Amazon recently eliminated 14,000 corporate positions as part of its own AI-driven reorganization.
Beth Galetti, Amazon's senior vice president of people experience and technology, described AI in an internal memo as "the most transformative technology we've seen since the Internet."
According to job tracking platform layoffs.fyi, more than 100,000 technology jobs have been eliminated globally in 2025 as major firms pivot from expansion-focused strategies to AI-driven productivity models.
Nadella's comments indicate Microsoft has entered what he describes as a new phase of development, characterized not by mass hiring campaigns but by targeted scaling where artificial intelligence enables smaller teams to accomplish more ambitious goals.
Anthropic has released Claude Opus 4.7, its most capable publicly available model to date, delivering significant improvements in advanced software engineering, high-resolution vision, and long-horizon agentic tasks.
Microsoft is reportedly exploring OpenClaw-style AI features for Copilot that could make the assistant more proactive inside Microsoft 365.
Meta launches Muse Spark, a closed proprietary AI model with tiered reasoning and 3B+ user reach across WhatsApp, Instagram, and Quest VR.
