Microsoft will restart hiring after its 228,000 employees complete a year-long AI training program, CEO Satya Nadella announced, giving the first clear timeline for ending a hiring freeze that led to over 15,000 job cuts in 2025. The company laid off 9,000 workers in July, its largest single reduction this year, following additional cuts in January, May, and June. Nadella has emphasized that employees must “unlearn and relearn” their roles using AI tools before new hires are approved. This represents a sharp shift from fiscal 2022, when Microsoft grew its workforce by 22% before the AI-driven slowdown.
Nadella told investor Brad Gerstner on the BG2 podcast that future headcount growth will be more efficient, leveraging AI to boost productivity. The current hiring pause is a strategic transition, giving employees time to integrate AI tools like Microsoft 365 Copilot and GitHub Copilot into daily workflows. “It’s the unlearning and learning process that will take the next year, then headcount growth will come with maximum leverage,” he said, comparing the transformation to how email and Excel changed workplace productivity.
As an example, a Microsoft networking executive used AI agents to manage data center maintenance instead of hiring more staff, demonstrating how AI can increase productivity.
Despite the impact of layoffs on employees, Microsoft’s cost-cutting strategy has been well-received by investors. The stock climbed above $500 in July, and the company posted its highest operating margin since 2002, with 12% year-over-year revenue growth. Selective hiring freezes had been applied previously, including in the U.S. consulting division and during COVID-19, while key areas like Azure continued recruiting.
Going forward, Nadella expects all work to begin with AI integration. “Any planning, any execution, starts with AI. You research with AI, you think with AI, you share with colleagues,” he said, underscoring AI’s central role in Microsoft’s operations before expanding the workforce again.
