Microsoft’s AI future has fewer jobs

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

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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.

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 massive restructuring of Xbox. Both Playground Games and Turn 10 Studios have merged into just Playground Games. The studio now has two locations: Playground Games Leamington Spa and Playground Games Redmond.

With Greenawalt retiring and Turn 10 merged into Playground Games, it’s not clear if we’ll ever see Microsoft return to Forza Motorsport. More than 70 people at Turn 10 Studios were laid off last year, in a move that hit the vast majority of the studio. Over the past year, Turn 10 Studios has essentially been maintaining Forza Motorsport, and now the remaining employees have moved to Playground Games to work on Forza Horizon and Fable.

It’s been more than eight years since Bethesda officially announced the existence of the sixth game in its Elder Scrolls series. While there have been some debates around platform exclusivity for The Elder Scrolls VI, we’ve heard very little detail about the game that Bethesda has been working on all this time.

Sources familiar with Bethesda’s plans tell me that the Xbox-owned publisher is about to announce that the next Elder Scrolls game will officially be called The Elder Scrolls VI: Sentinel. The announcement could come as soon as next month, during a period that will mark 15 years since The Elder Scrolls V: Skyrim was released.

Bethesda has been showing off Sentinel gameplay in recent months, I’m told. Xbox CEO Asha Sharma got a live playthrough of Sentinel in August, and she praised the scale of the game and said “the story is even greater.”

While I’m only expecting a name reveal next month and nothing more, I’ve been hearing some additional details about the game. If you want to totally avoid spoilers about the game, then don’t read the next paragraph.

I understand that Sentinel will be set in Hammerfell, a province in the Elder Scrolls universe that’s appeared in The Elder Scrolls Adventures: Redguard and The Elder Scrolls Online. Sentinel will be the first game about the history of the Elder Scrolls, and help uncover the secrets of these mysterious ancient artifacts.

I’m always keen to hear from readers, so please drop a comment here, or you can reach me at notepad@theverge.com if you want to discuss anything else. If you’ve heard about any of Microsoft’s secret projects, you can reach me via email at notepad@theverge.com or speak to me confidentially on the Signal messaging app, where I’m tomwarren.01. I’m also tomwarren on Telegram, if you’d prefer to chat there.

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