Satya Nadella Admits Microsoft Needs to Show More Empathy During Layoffs

Microsoft CEO Satya Nadella admitted his company needs to rebuild employee trust during a tense internal meeting Thursday, as workers voiced frustration over massive layoffs and new return-to-office mandates.

"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 said, according to audio obtained by CNBC.

The admission came after a particularly brutal year for Microsoft employees. The company eliminated 6,000 jobs in July alone, following earlier rounds of cuts. Meanwhile, workers near the Redmond headquarters must now return to the office three days per week starting in February.

Microsoft Grows but Layoffs Continue

While employees face job cuts and lost flexibility, Microsoft's financial performance has been stellar. The company's stock jumped nearly 20% this year, pushing its market cap to $3.7 trillion - second only to Nvidia among the world's most valuable companies.

July earnings showed Microsoft's profit surge 24% to $27 billion. The Azure cloud business drove growth with 39% revenue increases, while the traditional Windows and devices division managed just 2.5% growth.

But success comes with costs. Microsoft's gross margins have narrowed as the company pours money into AI infrastructure buildouts, and Nadella warned that some of the company's "most profitable businesses may fade."

"Some of the margin that we love today may not be there tomorrow," he told employees. "That means you have to be way ahead of all of those going away."

Return to Office Mandate

Amy Coleman, Microsoft's HR chief, acknowledged the return-to-office policy received "mixed" responses during Thursday's meeting. Many employees feel their autonomy is "slipping away," she admitted.

The data shows workers were already coming back voluntarily. Employees around Seattle averaged 2.4 office visits per week even before the mandate.

Nadella defended the policy, arguing physical presence is crucial for mentorship, especially for interns and early-career staff working in largely remote environments.

"Those are things that just will break a social contract," he said.