Microsoft Shifts to AI-Focused Hiring Strategy After Major Layoffs: Satya Nadella Explains New "Targeted Scaling" Approach

Satya Nadella has revealed that Microsoft is entering a new phase called "targeted scaling" following major workforce reductions.

Microsoft is now ready to expand its workforce after a year of significant layoffs, with artificial intelligence (AI) becoming the central focus of its hiring strategy.

During his appearance on the BG2 podcast with investor Brad Gerstner, Microsoft CEO Satya Nadella confirmed that the company will increase its employee numbers in a "smarter and more leveraged" approach, primarily driven by AI innovations.

"We will grow our headcount," Nadella stated, explaining that future recruitment decisions will be influenced by how AI enhances productivity throughout the organization.

As of June 2025, Microsoft employed approximately 228,000 people, with this number remaining relatively stable following several rounds of workforce reductions that affected over 15,000 employees.

This contrasts sharply with the pre-AI boom period of 2022, when Microsoft expanded its workforce by 22 percent.

The slowdown in hiring coincided with Microsoft's strategic shift toward investing in AI infrastructure, partnerships, and tools such as Microsoft 365 Copilot and GitHub Copilot.

Nadella clarified that the company has transitioned to a phase focused not on mass hiring but on "targeted scaling," where AI capabilities allow smaller teams to accomplish significantly more.

He described this transition as an "unlearning and learning process" requiring employees to integrate AI into every aspect of their work, from research and planning to implementation.

Nadella shared an example of a Microsoft executive who deployed AI agents to manage the company's fiber-network operations when traditional hiring couldn't meet growing demands.

"That's an example of a smaller team achieving more because of AI," Nadella explained.

Meanwhile, earlier this year, multiple reports indicated that Microsoft laid off approximately 4 percent of its workforce, around 9,000 employees, in another round of job cuts.

According to The Seattle Times reporting in July this year, employees in Microsoft's Xbox division, known as Microsoft Gaming, were significantly impacted by these layoffs.

"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," Xbox leader Phil Spencer stated in a message to the team.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)