Microsoft’s AI future has fewer jobs

It’s also time to name the next Elder Scrolls game, and Xbox’s architect of Forza Motorsport is leaving.

It’s also time to name the next Elder Scrolls game, and Xbox’s architect of Forza Motorsport is leaving.

by Tom WarrenOct 29, 2026, 4:00 PM UTC Tom Warren is a senior correspondent and author of Notepad, who has been covering all things Microsoft, PC, and tech for over 20 years.

To anyone listening closely to what Microsoft CEO Satya Nadella has been saying over the past couple of years, this week felt like the clearest sign yet that AI is about to fundamentally change the size of Microsoft’s workforce. Microsoft is now offering voluntary buyouts to around 60,000 employees across the US, UK, Canada, and India.

It’s the first time the company has presented such an offer to so many employees, expanding greatly upon the retirement offer that was limited to around 9,000 employees earlier this year. It’s all part of an ongoing effort to avoid reducing investment in AI infrastructure by lowering Microsoft’s operating costs and headcount.

“Our total people costs will go down, our cost per head will go up, and my GPU per researcher will go up,” Nadella said on a podcast almost two years ago, responding to a question about AI’s impact on headcount. That’s a financial way of saying Microsoft will have fewer people, but it will offer higher salaries and more tools and AI power to those who remain.

It also helps explain the continued layoffs we’ve seen at Microsoft over the past couple of years. Microsoft has been performing layoffs regularly over the past decade, but over the past couple of years, the layoffs and executive departures have been significant.

These aren’t the annual layoffs of old; they’re now happening every few months. This week’s voluntary exit offer arrived just months after Microsoft laid off 4,800 employees, cuts that impacted its Xbox and commercial sales teams the most.

For the first time in a decade, Microsoft’s overall headcount has also gone down year over year. Microsoft now employs around 223,000 people as of June 30th, 5,000 fewer than the 228,000 people it employed in 2025. Microsoft laid off 4 percent of its workforce in July last year, and it’s now offering voluntary buyout offers to around a quarter of its employees.

More than 30 percent of the 9,000 eligible employees accepted a retirement offer earlier this year, but that number will likely be far less for the company’s latest Voluntary Exit Offer. That’s largely because, according to sources familiar, the offer is practically the same as regular severance terms at Microsoft — cash based on time at the company, accelerated stock vesting, some additional subsidized health coverage, and several months of career services.

But what makes this unusual is the scale of the amount of employees who have been offered this exit. Even if only 5 percent accept the offer, that’s still 3,000 employees. I understand eligible employees have until December to decide, so we won’t know the impact of this offer for a while yet. With rumors of more layoffs in November and January, the amount of employees who do accept will surely inform Microsoft’s numbers for its next round of cuts.

There are some, both inside and outside the company, who think Microsoft needs these cuts. “Microsoft needs fewer people,” says Merill Fernando, a former Microsoft Entra product manager. “I’ve been on the inside. I’ve seen how things get built. Lots of small orgs. Layers on layers. Silos everywhere.”

Fernando paints a picture of a Microsoft where every organization “had its own priorities and its own decision makers,” so it’s hard to get the company to do anything collectively. It sounds a little like the meme where each organization in Microsoft is pointing guns at each other, competing instead of collaborating.

Nadella even addressed that meme last year in a podcast with Stripe co-founder John Collison, acknowledging that the comic has defined Microsoft’s cultural narrative “more so than reality,” but that it had signaled some very real tensions inside the company. “In some sense, some of these divisional tensions are real issues that need to have tension. Social cohesion is not a goal, winning in the marketplace is a goal,” said Nadella.

The question now is whether Nadella can reshape Microsoft for the AI era without undoing the cultural transformation that helped define his leadership. A company that has shifted to be built around empathy is now asking its employees to reckon with an AI future that could make many of their jobs unnecessary. How Nadella handles that transition will define his legacy as much as the growth and success he’s achieved over the past decade.

Xbox’s architect of Forza Motorsport is leaving after nearly 27 years

A few weeks ago I started hearing from Xbox employees that Dan Greenawalt, the longtime creative force behind Forza Motorsport, is leaving after almost 27 years. Greenawalt is departing as the head of Turn 10 Studios, the Forza Motorsport creator that merged with Forza Horizon developer Playground Games.

Playground Games studio head Trevor Williams revealed the news in a recent internal memo, seen by Notepad. “Dan Greenawalt has decided that this is the right time for him to retire from Microsoft,” says Williams. Greenawalt will stay on as an adviser to Williams and the newly appointed Playground Games chief operating officer, Michel Bastien, “while he transitions to his next phase.” Here’s part of Williams’ memo about Greenawalt:

It’s hard to overstate Dan’s impact over the past 27 years. From shipping Project Gotham Racing on the original XBOX in 2001 to leading the creation of Forza, founding Turn 10 Studios and appearing so many times on our E3 stage, usually making a dramatic entrance with a supercar in tow – and so much more – we owe tremendous thanks and gratitude to Dan. On behalf of both teams, I would like to thank Dan for his leadership, his support, and his partnership. I wish him well for whatever comes next.

Microsoft revealed last month that it was merging its two Forza developers into a single studio as part of a <a href="https:

Source: www.theverge.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.