The Satya of Satya's Layoff Memo

“The tournament of today – a set-to between labor and monopoly.

To paraphrase Sigmund Freud, sometimes a memo is not just a memo. That’s why we have to read between the lines of Satya Nadella’s 1,150-word memo. Microsoft’s chairman and CEO, in his message, tried to rationalize the 9,000-employee layoff. I was interested in how he was positioning the AI-based disruption in the software industry.

This memo is not just about Microsoft. In a way, it’s a weather forecast for the rest of the software industry, which mustconfront the reality of artificial intelligence. Just as rapid automation transformed the industrial economy, we’re poised to see the same with the digital economy. The software business, as it stands today, will bear the brunt of AI’s impact.

Here’s a breakdown of what Nadella’s memo—which may appear to be a pastiche of corporate doublespeak—is trying to convey. Let’s begin with the paragraph that has received the most attention.

By every objective measure, Microsoft is thriving: our market performance, strategic positioning, and growth all point up and to the right. We’re investing more in CapEx than ever before. This is the enigma of success in an industry that has no franchise value. Progress isn’t linear. It’s dynamic, sometimes dissonant, and always demanding. But it’s also a new opportunity for us to shape, lead through, and have greater impact than ever before.

In a more traditional industry, such as healthcare, it would be akin to saying: We are making a ton of money, but we’regoing to layoff nurses and replace them with machines. Or a CEO of a steel factory saying, “Sure, we’re making profits, but we’re going to layoff workers because we’re on the cusp of smart manufacturing.”

Nadella is trying to reconcile two seemingly contradictory realities: How can a company be “more successful than ever” while still eliminating jobs? His narrative framework attempts to make the brutal reality of our AI-driven future psychologically tolerable.

This narrative framework captures the harsh reality that AI, in theory, will make companies more profitable while employing fewer people. It’s great for shareholders but not so good for those who work for technology companies like Microsoft. Satya, and other corporate leaders can’t really say that, so they resort to verbal obfuscation.

The phrase “enigma of success in an industry that has no franchise value” is another bit of rationalization at work. At best,it’s a psychological sleight of hand, as much for himself as for his audience. Nadella’s comparison of the current shift with the 1990s PC revolution is very calculated. It stirs excitement and fear of missing out, while simultaneously normalizing the idea that major technological shifts require human casualties.

Sure, they do.

Having read the memo several times, I attempted to translate what the memo stated and what it actually meant.

• The “transformation is messy but exciting” narrative attempts to reframe the trauma of layoffs as an opportunity. It’s a way to make the current employee base feel less anxious while also feeling special for being part of something historic.
• When he says, “The success we want to achieve will be defined by our ability to go through this difficult process of unlearning and learning,” he’s attempting to shift attention from the immediate challenges to future possibilities. However, this approach glosses over the harsh reality: The pain of today and near future will be brutal.

Microsoft’s leader is essentially saying they laid off employees not due to financial struggles, but because those workers didn’t fit into the company’s AI-focused strategy. The repeated mentions of “unlearning” and “learning” suggest that someemployees’ skills have become outdated. Rather than invest in retraining, the company opted to hire fewer workers with more relevant expertise.

When Nadella uses the phrase “learning,” it isn’t inspirational. It’s a warning disguised as motivation. This harsh realitywill confront many employees.

Like I said at the start, this is not just about Microsoft, but pretty much every software company will be hit hard by this wave of transformation. If you’re an employee at Microsoft (or any other software company), the reality is that you’reonly valuable if you have perceived value in the company’s AI transformation. In other words, adapt, and adapt quickly. Because if you don’t, well, you’re on your own.

The Microsoft memo portends the new reality of the technology industry. For years, the sector has been generous to its employees, offering unheard-of perks and placing a premium on skills such as software development. AI, however,inverts that relationship. As a result, we now face a different set of parameters.

• Loyalty has become a one-way street: Employees must be committed, but technology companies owe only “opportunities,” as and if they deem necessary.
• Layoffs will be used for strategic positioning, regardless of a company’s financial health.
• Profit provides an opportunity to invest in transformation, which sometimes involves eliminating jobs.

Don’t be surprised if normalization of profitable layoffs becomes the next big Silicon Valley export to broader economy. 

That’s really the satya (truth) of Satya’s memo.

July 26, 2025. San Francisco.