Microsoft delivered blockbuster, better-than-expected financial results on Wednesday, but a leaked internal memo from the company’s finance chief signals that employees should not exactly rest easy.
In an internal memo obtained by Business Insider, Microsoft CFO Amy Hood said that the company’s next fiscal year will “require intensity, clarity and bold execution.”
“We’re entering FY26 with clear priorities in security, quality and AI transformation, building on our momentum and grounded in our mission and growth-mindset culture,” Hood told employees, according to BI. “Both the pace of change and customer expectations are continuously accelerating.”
Her message comes as the Redmond, Washington-based tech giant on Wednesday reported fourth quarter net income of $27 billion and achieved a market cap value surpassing $4 trillion, joining only Nvidia as the only other publicly traded company to hit that mark.
Still, Microsoft execs maintain that the company’s remarkable financial performance will come with some growing pains. Earlier this month, the company said it plans to reduce about 4% of its workforce, or about 9,000 people, the Seattle Times reported. That came after several other rounds of cuts in 2025.
In a message to employees last week, Microsoft Chairman and CEO Satya Nadella described the moves as part of the “enigma of success in an industry that has no franchise value.”
“Our overall headcount is relatively unchanged, and some of the talent and expertise in our industry and at Microsoft is being recognized and rewarded at levels never seen before,” he wrote. “And yet, at the same time, we’ve undergone layoffs.”
The timing of the layoffs certainly may raise eyebrows. It also carries reputational risks of its own. Rita McGrath, executive director of executive education at Columbia University, said that such moves are a “symbolic disconnect of a massive degree.”
“That definitely could damage the culture,” she said in an interview with CFO.com.
The wider tech industry’s reported layoffs likely stem from a “real arms race in the AI world,” McGrath said. Tech businesses are also under pressure to show that their enormous investments in artificial intelligence tools are justified. Microsoft, for its part, plans to spend over $30 billion on total capex this quarter.
It’s incumbent on CFOs, McGrath said, to explain to analysts and the wider business community the clear reasoning behind any strategic shifts. As an example, she pointed back to Adobe’s switch from selling software on physical CDs to selling it through cloud subscriptions. Though the company’s revenue dipped at the time, its market valuation grew, McGrath said. She attributed that to efforts the company’s CFO made to explain the shift.
For now, though, analysts are still apparently betting high on Microsoft’s “AI transformation,” as CFO Hood put it in her memo. In a research note, Raymond James analysts said that Microsoft had an “unusually strong quarter with hardly anything to complain about.”
“While Azure stole the show, the strong performance was pervasive throughout the company’s print,” they wrote. “Segment results, expense trends, and guidance were all excellent.”
It’s worth noting that, despite job cuts, Microsoft’s total workforce has been ticking up within the last few fiscal years. According to annual securities filings, Microsoft employed 228,000 people worldwide as of June 30. The tech giant reported the exact same number in the prior year. As of June 2022, Microsoft said it employed 221,000 employees, up from 181,000 employees in the prior year.
