Microsoft‘s 50-year journey from a startup to tech giant isn’t complete, CEO Satya Nadella says the company must fundamentally reinvent itself once again. In a candid memo to employees, Nadella declared that even Bill Gates‘ revolutionary “software factory” vision, which built the world’s largest software company, is now obsolete in the age of artificial intelligence.The timing of Nadella’s message carries particular weight, coming as Microsoft celebrates record financial performance while simultaneously cutting jobs, a paradox the CEO called “the enigma of success in an industry that has no franchise value.”

Satya Nadella says Microsoft can no more be a software factory, must become an intelligence engine

“When Bill founded Microsoft, he envisioned not just a software company, but a software factory, unconstrained by any single product or category. That idea has guided us for decades. But today, it’s no longer enough,” Nadella wrote to employees. The CEO outlined Microsoft’s reimagined mission: empowering all 8 billion people worldwide to create their own tools through AI, rather than simply building tools for specific roles.Nadella described the paradox facing Microsoft—thriving by every objective measure while simultaneously undergoing workforce reductions. “This is the enigma of success in an industry that has no franchise value,” he explained, noting that progress in technology is “dynamic, sometimes dissonant, and always demanding.”

AI transformation becomes core priority for Microsoft

The company is restructuring around three business priorities: security, quality, and AI transformation. Nadella emphasized that Microsoft will “reimagine every layer of the tech stack for AI”—from infrastructure to applications and agents. He positioned the current moment as comparable to the PC revolution of the early 1990s, when personal computers became standard in homes and offices.“Just imagine if all 8 billion people could summon a researcher, an analyst, or a coding agent at their fingertips,” Nadella wrote, describing the transformative potential he envisions. The CEO stressed that Microsoft’s differentiation will come from integrating these technological layers to deliver comprehensive end-to-end experiences while maintaining the company’s platform-focused approach that creates ecosystem opportunities for partners and developers worldwide.