Microsoft CEO Satya Nadella asks leaders to rethink the company’s economics for the AI era in an internal memo

Satya Nadella – Microsoft

Microsoft CEO Satya Nadella has asked senior leaders across the company to rethink Microsoft’s overall business model for the artificial intelligence era, according to an internal memo circulated this month.  The message outlines a push to reassess how Microsoft builds, prices, and distributes AI products as the company enters a phase of large-scale investment and rapid platform shifts.

In the memo, Nadella said Microsoft must “rapidly rethink the new economics of AI,” drawing parallels to a similar turning point more than a decade ago when the company redesigned its strategy for the cloud. At that time, Microsoft’s shift was partly shaped by a white paper called Economics of the Cloud, coauthored by Rolf Harms, then a director of corporate strategy. Nadella has now tapped Harms again, assigning him an expanded advisory role focused on AI economics.

Harms’ earlier work influenced a major cultural and operational reboot inside Microsoft during the rise of cloud computing. Nadella indicated that the same level of internal re-evaluation is needed today as AI infrastructure, platforms, and applications reshape revenue models and long-term spending plans. The new role will require Harms to work closely with Nadella and the company’s top executives as they evaluate how existing product categories will evolve and what new ones may emerge.

The memo acknowledges that the AI industry is facing questions about the sustainability of massive infrastructure investment. While Microsoft briefly reduced its AI-related capital spending earlier this year, it has since recommitted through major deals with OpenAI and Anthropic. Nadella noted that such cycles resemble the early days of the cloud, when companies built data centres aggressively despite uncertainty about adoption.

Nadella wrote that Harms will help leadership understand how Microsoft should structure its AI investments, pricing strategies, and platform development to match long-term industry economics. He added that Harms’ work would extend beyond infrastructure, covering the entire stack of AI technologies, including Copilots, agents, and core platform services.

The memo underscores Microsoft’s view that the AI shift requires foundational changes, not incremental tweaks. Microsoft did not comment publicly when asked about the internal message.