Satya Nadella marks his 10th year as Microsoft CEO on Sunday, capping a decade of stunning growth as he brought the slow-moving software giant into a laser focus on cloud computing and artificial intelligence.
Microsoft shares have risen more than 1,000% since Nadella took over in 2014, compared with the broader S&P 500’s more gradual 185% growth. Microsoft now has a market value of $3 trillion – more than any US publicly traded company, including its old rival Apple.
“Nadella may have undergone the biggest transformation of a technology company ever,” said Wedbush Securities analyst Daniel Ives. “The only one who could compete with it was (Steve) Jobs who came back to Apple and changed course with the iPhone.”
Microsoft has created $2.8 trillion in shareholder wealth over the past decade, meaning an investor who bought a $10,000 stake in Microsoft when Nadella took over and did nothing with those shares would now have a stake of about $113,000.
HOW IT HAPPENED
“Our industry does not respect tradition, it only respects innovation,” Nadella told employees in an opening memo a decade ago, an opening salvo that hinted at bigger shifts to come. Microsoft declined requests for an interview.
Now a hero to Wall Street, some were initially skeptical that such a transformation could come from an insider who had worked at the Redmond, Washington-based company for 22 years. He is only Microsoft’s third CEO, after Steve Ballmer, who lasted fourteen years, and Bill Gates, who co-founded the company in 1975 and took it public in 1986.
Big changes came quickly under Nadella. He gathered resources to build the Azure cloud computing platform, a shift in priorities from the company’s long-standing dependence on its flagship Windows operating system and the royalties it gets for every PC sold with it. And he largely put the brakes on Microsoft’s ill-fated attempts to catch up in the smartphone market, marked by his predecessor Ballmer’s acquisition of Nokia’s phone business for $7.3 billion.
But some of the biggest changes occurred in the company’s culture: a shift from Microsoft’s brash external reputation and internal bickering to a more collaborative approach that Nadella modeled in his own collegial personality and engineer’s mindset .
“Microsoft is known for rallying the troops with competitive fire,” Nadella said in his 2017 autobiography. “The press loves that, but it’s not me.”
A big part of Nadella’s strength is that he stands out from the typical “very strong ego CEO,” said Raimo Lenschow, an equity analyst at Barclays who covers 36 technology companies. Rather than making bold statements, Lenschow said Nadella is taking a more measured approach in explaining “where he thinks the future is going.”
And “whether it’s the person preparing the food in the cafeteria, an engineer, a chief financial officer or a customer, he treats everyone the same and with respect,” Ives said. It’s not just Wall Street analysts who think this way.
A small startup from Zeeland, Michigan, which had a booth at January’s CES gadget show in Las Vegas, caught a glimpse of Nadella’s curiosity when he showed up, shook founder Tim Murphy’s hand and asked for a demo. The product, Audio Radar, visualizes the sounds in video games for deaf and hard of hearing players.
“He’s very down to earth,” said Murphy, who was there with a small crew that included his teenage son. “I gave him the pitch, played a few games and he said, ‘It’s great what you’re doing.’ To be honest, I don’t remember much of what he said because I was just a little shocked.
Nadella has long made technology accessibility a priority, based in part on his experience raising a son who was visually impaired, paralyzed and cerebral palsy. Zain Nadella died in 2022.
What has propelled Microsoft to its latest heights is its rise as a leader in artificial intelligence, which is setting the agenda for how AI tools can be used in work and society. While Nadella has emphasized AI for most of his tenure, its role was not guaranteed and came after years of careful planning that led to a close partnership with ChatGPT maker OpenAI. (OpenAI pays The Associated Press an undisclosed fee to license its archive of news stories).
“Historically, if you’re a cool startup doing something great, Microsoft hasn’t really been your first choice,” Lenschow said. “So the fact that he got OpenAI to commit to Azure was a great masterstroke… it gives him a huge competitive advantage over Google and Amazon.”
That position was jeopardized late last year when OpenAI’s board of directors suddenly fired CEO Sam Altman. A weekend of behind-the-scenes maneuvering and a threatened mass exodus of employees, championed by Nadella, helped bring back Altman and stabilize the startup, reassuring customers and shareholders. “He treated that like he was playing against little kids in the World Series of Poker,” Ives said.
Nadella’s tenure has not been without its challenges, especially considering that much of the world is so dependent on Microsoft products, sometimes to the frustration of people who use them.
Cybersecurity experts say there is a tendency to sacrifice security for convenience, including with the rapid rollout of AI-sized language models. The company’s signature suite of work tools, Microsoft Office 365, has also been successfully penetrated in recent years in embarrassing high-profile compromises that have given elite Russian and Chinese cyber operators access to the email accounts of senior US officials and members of Microsoft’s senior leadership team . .
It stepped in to provide cloud hosting to Ukraine just ahead of Russia’s 2022 invasion, but the networks serving NATO allies have been continually plagued by intrusion attempts. That, and the worsening scourge of ransomware, has prompted Nadella to call for a Geneva cyber convention with Russia and China.
And despite Nadella’s stated distaste for “competitive fire,” Microsoft is once again facing the kind of antitrust scrutiny that dogged Gates and Ballmer in earlier years. Nadella’s confident testimony at a federal court hearing last summer helped convince a judge not to block Microsoft’s purchase of video game giant Activision Blizzard, but the company now faces a new set of questions about its partnership with OpenAI.
None of these challenges are likely to push the 56-year-old Nadella, who earned $48.5 million in total compensation last year and has also served as chairman of Microsoft’s board of directors since 2021, from his leadership roles anytime soon.
“From what I can tell, he’s having a great time,” Lenschow said. “We are in very, very, very interesting times. I expected him to stay for a while.”
AP technology reporters Michael Liedtke and Frank Bajak contributed to this report.