Microsoft layoffs driven by AI restructuring, not performance, says Nadella

The layoffs heavily impacted technical roles, with nearly 2,000 jobs cut in Washington state alone—over 40% in software engineering and around 30% in project management—highlighting a broader shift in roles driven by AI realignment

Microsoft CEO Satya Nadella has clarified that the company’s recent layoff of 6,000 employees—around 3% of its global workforce—was the result of internal reorganisation rather than employee underperformance. Speaking at a company-wide town hall, Nadella explained that the cuts were part of a strategic shift to align with Microsoft’s aggressive focus on artificial intelligence (AI).

“This was about reorganisation rather than performance,” Nadella said, emphasising the company’s long-term vision of expanding its AI capabilities. Microsoft has committed nearly $80 billion this fiscal year toward AI infrastructure and is accelerating the deployment of its Copilot AI assistants across enterprise and consumer platforms.

The layoffs disproportionately affected technical and engineering roles, particularly in product development. According to reports, nearly 2,000 jobs were cut in Washington state alone, with over 40% of those being software engineering roles. Project management positions made up close to 30% of the affected jobs, reflecting a broader realignment of traditional roles in the AI era.

Engineers to become software operators

Chief Product Officer Aparna Chennapragada also weighed in on the shifting tech landscape, strongly pushing back against the notion that AI is making coding or computer science education obsolete. “I fundamentally disagree with the idea that people shouldn’t study computer science or that coding is dead,” she said during a recent podcast discussion.

While acknowledging that AI is now writing up to 30% of the code in some Microsoft projects, Chennapragada described this as part of a natural progression in software development. “Just as we moved from assembly to higher-level languages, we are now shifting to higher layers of abstraction with AI,” she explained.

She predicted a future where software engineers evolve into “software operators,” who guide and refine AI-generated outputs. “There’ll be an order of magnitude more software operators. That doesn’t mean we abandon computer science—it means our role in shaping technology is changing,” she said.

For project managers, whose roles were also impacted, Chennapragada foresees a transformation in responsibilities. With AI generating more ideas and prototypes, their focus will shift toward curating, prioritising, and refining the creative possibilities enabled by AI.