Fear and Loathing in Seattle (Premium)

Build 2025 was a Microsoft event like no other, with the heady, optimistic AI announcements at the show overshadowed by a drumbeat of relentlessly bad news.

This isn’t an exaggeration. I’ve been covering Microsoft professionally for over 30 years. I first visited the software giant’s corporate campus in 1996 for the first Visual Studio “Boston” reviewer’s workshop, and my experience at the Windows NT 5.0 Beta 2 reviewer’s workshop in August 1998 inspired me to start the site that went on to become the SuperSite for Windows, the predecessor to this site. I have been to countless Microsoft events in the years since then, and I’ve spoken at two Windows launch events. But Build 2025 was unique. I have never experienced anything like this past week. Ever.

The juxtaposition of Microsoft’s success and the problems it’s now experiencing–mostly of its own making, oddly–couldn’t be more stark.

On April 30, Microsoft announced quarterly revenues of over $70 billion, a gain of 13 percent year-over-year (YOY) and its best fiscal third quarter in history. Its net income of almost $26 billion (up 18 percent YOY) was likewise a record. The only record it didn’t set in the quarter was its AI spending: Though it threw $21.4 billion down what many would uncharitably call a black hole of AI infrastructure (capex) spending, that figure was down $1 billion from the same quarter one year early. But no worries, Microsoft investors: In the post-earnings conference call, CEO Satya Nadella and CFO Amy Hood described that drop as a blip that will not be repeated in coming quarters. It’s not just on track to hit the promised $80 billion in annual AI spending by the time its fiscal year ends June 30, it should exceed that figure handily. As I write this, Microsoft’s market capitalization is $3.39 trillion, making it the biggest company in the world.

Despite this, Microsoft announced two weeks later that it was laying off 3 percent of its workforce. Its public statement about this incongruous change was as vague as it was terse, with the company admitting only that it was making “organizational changes” to address a “dynamic marketplace.” This led to all kinds of speculation, and reports quickly emerged suggesting that this round of layoffs, unlike those earlier in the year, were not in any way related to performance. Indeed, they appeared to be entirely random, with cuts coming everywhere in the company across product groups, geographies, and organizational levels. That these layoffs occurred less than one week before Build 2025, one of only two major conferences that Microsoft will host this year, made the news all the more perplexing.

Generally speaking, when it comes to corporate financial matters, I can explain various activities easily enough if Microsoft or whatever company isn’t particularly forthcoming. At the very least, we learn about the rationale behind “organizational changes” like this after the fact, by employees impacted by the change or from insiders willing to speak off the record with journalists and bloggers. But this round of layoffs felt off, wrong, and I didn’t see anything conclusive before I flew to Seattle on Sunday. And so I headed west with a more expansive agenda. Yes, I was curious to learn more about Microsoft’s announcements–we were pre-briefed late last week–but I also wanted to speak with friends inside the company and learn more about the heck was going on.

What I found out, and what happened, this past week during Build was unprecedented, almost entirely negative, and much worse than I expected. That this was sandwiched between two horrific flight experiences with razor-thin connections and a missed flight on the way home was absolutely perfect. But that was just my experience. What’s happening at Microsoft is much more concerning. If I didn’t know that Microsoft has just earned literal mountains of profits and revenues in the most recent quarter, that it can achieve that while spending over $20 billion a quarter on AI infrastructure, and that it is the single most successful company on the planet, I would have assumed that this business was in trouble, was perhaps in danger of imploding and disappearing forever. But it’s not. What the hell is going on?

Day zero

For me, Build got off on the wrong foot when I headed to its Redmond campus Sunday afternoon for a pre-show briefing that Microsoft called The Agentic Web session with Kevin Scott, the software giant’s CTO and the person routinely credited with linking up Nadella and OpenAI’s Sam Altman. The Microsoft campus is emblematic of the paradox between success and failure I note above. It’s a weird combination of futurist, brand-new facilities that replaced its original two-story offices and a surprising number of half-constructed shells of buildings that might never be completed now because the post-COVID work-from-home push means they’re no longer needed.

This is a bit out of order, but a friend who worked at Microsoft for about 20 years drove me around the campus after the briefing, and we were both struck by two things. The new construction, which is impressively modern and nothing at all like the college-like experience the campus originally offered, often made it impossible for either of us to know where we were even more; both of use were quite familiar with the Microsoft Campus of old, but now both of use barely know the place anymore because it’s so different. And the new construction that Microsoft started but then halted because of the pandemic is just sitting there like multiple ugly open wounds. The company refuses to pay to finish the construction for understandable reasons, but it also refuses to tear down these unwanted shells and perhaps replace them with, I don’t know, trees or open spaces that would solve the ugliness problem nicely. Maybe more strategically important spending is taking precedence here.

There is also a bizarre geo-thermal energy facility in the middle of the original campus space, south of the 520. It’s called the Microsoft Thermal Energy Center–or the “machine in the woods”–and the stated aim is to use clean energy to power the heating and cooling needs of that part of the campus. My friend told me that this thing has geothermal wells that extend to the center of the earth, which I found fanciful. It’s actually 550 feet deep, which I suppose makes it the tallest structure on campus if you’re OK with negative numbers. But the weirdness of this facility can’t be overstated. It looks like the Hawkins National Laboratory depicted in the Netflix series Stranger Things, a gateway between Earth and the Upside Down.

This oddness was previewed in mind earlier when I was standing outside of the new Building 7 on campus ahead of the event. I was doing whatever on my phone when Rafael walked up with his wife, surprising me. I had gotten off a bus full of journalists and analysts, and sitting in the front row, I was surprised to discover that I didn’t know any of them–not one–as I watched them all fill up the bus back at the hotel. As we were chatting, a second enormous bus pulled up on the street outside the Building–it was too big to navigate its tight circular driveway–and when its door opened, I thought I’d surely recognize some of the people who got off that bus. But only a single person got off, and he walked from there into Building 7 as the bus pulled away. What the…

Distracted by this, I started looking around. The campus was empty. There were no people, and no cars driving by. Granted, it was Sunday night, but I commented on this to Rafael, who literally lives across the street from this part of campus. And he told me this was normal: The campus was always empty these days, in keeping with the work from home problems that doomed all the unfinished construction. His wife told me that she will sometimes job on the campus but finds it creepy. And as she said this, on the horizon, I could see a person appearing in the distance. They were far enough away that I couldn’t make them out clearly, but it was clear they were moving quickly. Towards us.

“Look at that,” I said, pointing. Rafael and his wife did so, but I said nothing. What had come into my mind, instantly, and what I said to them was that this was like the start of a zombie horror movie. The world is mostly empty and quiet, but suddenly you see a figure running towards you. In time, you realize that the figure is dead, a zombie. And he’s coming right at you.

They laughed, and of course the figure was not a zombie, this is the real world, and I was standing on property owned by the richest company on earth. But it just felt off.

In time, I went inside. It was a standard Microsoft briefing, maybe a bit small, but modern and nice. I finally saw someone I recognized, Microsoft corporate vice president of communications Frank Shaw, the source of what will always be the single greatest off-the-cuff Microsoft-related quote I’ll ever hear. (“I just hope that whatever Steven [Sinofsky] does next is just as successful as Windows 8.”) He hasn’t lost a step.

“Why are you still here, Frank?” I asked. I assume he loves me for my directness.

“Why are you still here?” he responded after arching an eyebrow. Nice. He had a good answer, as it turns out–the AI push is exciting and happened suddenly and unexpectedly, changing everything–and fair enough. So I turned to the initial weirdness I had experienced on the bus. “Who are all these people?” I asked. He had no idea either, for the most part. Well, he probably did, he was being polite. But the point was agreed on. Everything was changing.

I had had a similar experience with Frank at the September 2023 AI special event in New York. In that case, a similar bus had pulled up to the event venue. The door opened and instead of the expected cavalcade of middle-aged journalists and analysts slowing exiting, a series of attractive, young, blond woman came bounding out, giggling and making a commotion. Among them was iJustine, who interviewed Satya Nadella later that day. I guess things have been changing for a while.

Anyway, the briefing was curious and almost pointless. A year ago, also in the modern new part of the Microsoft Campus, the software giant had made a big splash by announcing Copilot+ PC and its Snapdragon X-based Surface Laptop and Surface Pro. But this was subdued, a light skimming over just some of the news Microsoft would elaborate on further the next day during the Build keynote. I later found out that CTO Kevin Scott, who seems like an affable everyman–he said this past week that he was an introvert who only showed up publicly once a year—is, in fact, a cagey political infighter. And that he demanded to be included in the keynote. Perhaps the Sunday briefing was part of some concession, and we would normally have simply not done anything until Monday. That I don’t know.

And that was that. I skipped the bus ride home, my friend picked me up in his car, and we toured this strange new campus before having dinner.

Day one

Monday came early, as I woke up around 4:30 am thanks to the three-hour time change. That was fine. I covered the keynote live for TWiT with Leo and Richard after getting some writing done, and I had written my initial Build posts–and my This is What Matters Most editorial–on the flights to Seattle. During the livestream of the keynote, we could hear that a protester had interrupted Satya Nadella, just as a few had done back in April during Microsoft’s 50th anniversary and consumer AI event.

Without taking a stance on this issue, employees who sympathize with Palestine in its conflict with Israel accuse Microsoft of being complicit in the genocide that Israel is committing in Gaza, and they are calling on it to prevent the Israeli government and military from using Azure and its other online services. Tipped off that protesters would engage in similar protests during Build, Microsoft issued a statement claiming that an internal review had found “no evidence that Microsoft’s Azure and AI technologies have been used to target or harm people in the conflict in Gaza.” This was met with scorn in some quarters, with one human rights groups claiming in return that “Microsoft perpetuates a climate of fear and repression by silencing, intimidating, and retaliating against Palestinian, Arab, Muslim, and pro-Palestinian employees who are speaking up about Microsoft’s role in genocide.” Suffice to say, this is a terrible and controversial problem. And like the actual conflict in the Middle East, it doesn’t appear to be going away anytime soon.

I later learned that the scene inside the keynote hall was a lot more dramatic than just the person we had heard yelling over Nadella during his opening remarks in the livestream. That person, it turns out, was just a diversion, and his goal was to attract the attention of enough security guards so that two accomplices could jump up from their seats on either side of the hall and rush the stage. Their goal was to voice their objections live and on camera, on stage, in a way that would embarrass Microsoft.

That did not happen.

Microsoft executives and others speaking at Build were briefed about the protesters by Microsoft Security ahead of time and were told that they were to continue speaking, no matter what happened in front of them. If you watched the keynote, you would likely have noted Nadella’s minor pause mid-sentence as the protester started yelling, but it less than a second and he just kept going as trained. That was pretty impressive, but what we didn’t see on camera was even more impressive: Microsoft had placed multiple security guards throughout the hall, some obvious, some not, and they expected this action. So when those two accomplices jumped up for the real attack, so to speak, they were taken down immediately and harshly. They never saw it coming.

The training the Build speakers received went a bit further, too. If everything went south, if the Teleprompter or AV equipment failed, no matter what happened, the most important thing was to just keep talking. If you could remember the talk well enough to continue, great, but if not, you could talk about anything at all, breakfast, what you did on vacation, whatever. The goal was to not give voice to the protesters at all costs, to not give them the moment they so badly wanted. During the opening keynote–and during the developer keynote I get to later—it worked. No protesters ever made it to a keynote stage.

I didn’t know any of that at the time. My plan was to head over to the press working room, which my calendar told me was on the third floor of the conference in a meeting room named Issaquah. I stayed in the Sheraton Grand hotel this past week, which is notable to me for two reasons: This was where Microsoft held the fateful NT 5.0 Workshop 27 years ago, and it’s right around the corner from the Convention Center, which is ideal.

About that.

There are two convention centers in downtown Seattle now. The original (read: old) Washington State Convention Center is where I had gone to several WinHECs and other conferences back in the day, and it’s been rebranded as Seattle Convention Center | Arch. But there’s also the new Seattle Convention Center | Summit that’s a block away. They couldn’t be more different, but where the previous few Build and Ignite conferences were held at the new Summit, this year’s Build was in the old Arch.

That’s weird, so it’s also natural to wonder why. Some speculated that some other organization must have booked the new convention center, but that doesn’t make sense to me. For starters, I know that Microsoft had paid at least one company to move out of Summit so it could have the facility to itself during one of those shows. But more importantly, Build is held at the same time every year. This would have been booked in advance. Perhaps most importantly of all, Microsoft had trouble selling tickets to Build 2025. For this reason, it lowered prices and ended up barely exceeding its internal target attendance of 3,000. That would sound like a victory if I didn’t know any better, but I do, and I wasn’t the only person to raise questions about the future of this show this past week. Many I spoke with wondered aloud if there weren’t changes–and perhaps further downsizing–coming. Before the pandemic, Build routinely attracted over 5,000 attendees.

Whatever, Arch is right around the corner from the hotel I stayed in, so I got cleaned up, packed up my laptop and whatever else, and headed downstairs and out the front door. As I turned onto Pike Street, one block down from the Arch convention center and the iconic arch that spans the street between the main building on my right and the secondary building to its north, I could tell something was wrong.

Up the street, on the corner of Pike and 7th street, I could see a mob. There were perhaps 50 to 100 people outside the main entrance to Arch. They had signs and effigies and flags, all the usual unruly mob accoutrements, and they were chanting pro-Palestinian and anti-Microsoft slogans. It didn’t seem dangerous–I’ve seen several protests in Europe that looked and seemed more problematic–but it was loud, and there were police in tactical gear everywhere. And the entrance to the convention center was blockaded. They wouldn’t let me in.

More soon. I’m en route to Pennsylvania.