Microsoft CEO Satya Nadella departs following a meeting of the White House Task Force on AI Education in the East Room of the White House in Washington on Sept. 4, 2025.
Eric Lee | Bloomberg | Getty Images
Microsoft (MSFT) CEO Satya Nadella addressed employee concerns regarding recent layoffs and the company’s return-to-office mandate during an internal meeting this Thursday, acknowledging the need to rebuild trust within the workforce.
The virtual meeting saw employees voicing concerns over a perceived decline in empathy within Microsoft’s corporate culture, prompting questions about the company’s strategy for restoring confidence among its employees.
“I deeply appreciate that, the question and the sentiment behind it,” Nadella stated, according to audio obtained by CNBC. “I take it as feedback for me and everyone in the leadership team, because at the end of the day, I think we can do better, and we will do better.”
Nadella’s remarks come in the wake of significant workforce reductions, with Microsoft cutting 9,000 jobs in July, following earlier, smaller rounds of layoffs. Compounding employee anxieties, the company announced on Tuesday that employees near its Redmond, Washington headquarters would be required to return to the office three days per week, beginning in February, with a broader implementation planned subsequently. The mandatory return to office policy reflects a broader industry trend, as companies grapple with balancing remote flexibility with the perceived benefits of in-person collaboration.
Microsoft’s human resources chief, Amy Coleman, acknowledged the mixed reception to the return-to-office policy during the meeting, citing concerns among some employees about a perceived loss of autonomy. However, she noted that employees in the Seattle area were already averaging 2.4 days in the office each week. This suggests a gradual shift towards a hybrid work model, rather than a sudden departure from remote work.
Like much of the tech sector, Microsoft had transitioned to a fully remote model during the pandemic, leveraging its Teams platform for video conferencing and collaboration. While the adoption of Teams surged during this period, Microsoft has been comparatively slower than competitors like Amazon, which mandated a five-day return to office in January, in implementing a comprehensive return-to-office policy. This more cautious approach reflects a nuanced understanding of employee preferences and the potential impact on productivity and morale.
Despite internal criticism regarding company culture and work policies, Microsoft’s financial performance continues to impress Wall Street. The company’s stock has risen nearly 20% this year, surpassing the broader market’s performance and pushing its market capitalization to $3.7 trillion, second only to Nvidia in terms of global market value. This divergence between internal sentiment and external performance underscores the complex challenges facing large tech companies as they navigate evolving market dynamics and employee expectations.
Microsoft’s recent Q4 earnings report revealed a 24% increase in net income, reaching $27 billion. While impressive, the company’s gross margin declined slightly, from 71% in late 2023 to under 69%, signaling increased pressure on profitability. A key driver of Microsoft’s growth is its aggressive investment in data center infrastructure to meet burgeoning demand for AI services. This capital-intensive strategy reflects the company’s commitment to positioning itself as a leader in the rapidly expanding AI market.
Nadella also addressed concerns about the impact of remote work on mentorship and professional development, particularly for new and early-career employees. He emphasized the importance of fostering a sense of community and apprenticeship, which can be compromised in a fully remote environment. This acknowledgement highlights the challenges of replicating the informal learning and networking opportunities that traditionally occur in physical office spaces.
Beyond internal matters, Nadella acknowledged the growing pressure and anxieties within the software industry regarding the potential of AI to automate jobs and disrupt traditional business models. He stressed the need for intellectual honesty and a commitment to continuous renewal in the face of these challenges.
“Capital markets have one simple truth,” he added. “There is no permission for any company to exist forever.”
The company’s Azure cloud business saw substantial growth, increasing by 39% in the latest quarter, while the Windows and devices business experienced more moderate growth of 2.5%. This differential growth rate underscores the strategic importance of cloud computing to Microsoft’s future, as it diversifies away from its traditional reliance on Windows licensing.
In addition to workforce-related issues, the meeting also addressed ongoing concerns related to a third-party investigation into allegations that Israel’s military utilized Microsoft’s Azure cloud infrastructure to store Palestinians’ phone calls. This investigation stems from a report by The Guardian in August alleging this usage during Israel’s invasion of Gaza. Microsoft has also faced internal protests, leading to the termination of five employees, related to the company’s work with the Israeli military. These external controversies highlight the ethical and geopolitical complexities facing tech companies as their technologies become increasingly intertwined with sensitive national security and human rights issues. Microsoft President Brad Smith addressed the protests and their aftermath, noting that some Microsoft employees have been the victim of online threats and antisemitism.
“There is no room for antisemitism at Microsoft, and as a company and as a community, we will protect this group and defend them from that,” Smith said.
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