The memo was blunt. “The entire industry is getting reimagined from the ground up,” Hayete Gallot told Microsoft’s security staff in an internal message reported this week. “A few months ago, we made those choices. Now we must execute.” The choices she was referring to have already cost hundreds of people their jobs.
Gallot, who took charge of Microsoft’s security business in February, has been overhauling the unit around AI products, according to people familiar with the changes. The restructuring, first reported by The Information, has eliminated several hundred roles in the security group, part of a broader round of layoffs at the company this month. Microsoft declined to comment on the staffing figures.
The turnover at the top has been just as steep. Gallot has replaced at least eight executives who previously reported to Charlie Bell, the former head of security, according to people familiar with the matter. Bell, who joined Microsoft from Amazon Web Services in 2021 to build the company’s dedicated security organization, was moved in February into an individual-contributor role focused on engineering quality.
Gallot is a returnee. She spent about 15 years at Microsoft before leaving for Google Cloud, where she ran customer experience, and came back in February reporting directly to chief executive Satya Nadella. Her mandate, in Nadella’s words at the time, was to combine “product building with value realization for customers,” a description that now reads like a preview of the cuts.
The reshaped business has clear priorities. Gallot is directing engineering resources toward Security Copilot, Microsoft’s AI security assistant; code scanners that hunt for vulnerabilities in software; and tools that let companies monitor their own AI agents in production. Lower-revenue legacy products, including parts of Sentinel, the cloud security monitoring service, are being dialed back, according to people familiar with the plans.
The logic is commercial as much as technical. Microsoft is the largest seller of cybersecurity software in the world, and its customers are increasingly worried about AI-powered attacks, from automated phishing to AI-assisted intrusion. Gallot’s message to staff was that companies which see this shift early and make hard choices will be rewarded. The product lineup is being rebuilt to answer that fear directly.
The overhaul also aims at a competitive problem. Corporate customers have been funneling AI and security spending to OpenAI and Anthropic, whose models many security tools now rely on. Microsoft wants to position its own stack, from Copilot to its cloud security services, as the cheaper, more integrated alternative, one that keeps the customer inside Microsoft’s own ecosystem.
The direction has been building for years. Microsoft has been reshaping its security organization since 2022, when it hired Bell from AWS to build a dedicated group and made security a priority after a series of high-profile attacks exposed gaps in its products. Last year, the company moved its chief information security officer, Igor Tsyganskiy, out of the security organization and under the Cloud and AI group, a sign of how tightly the two functions are now bound together.
Gallot has been filling the leadership gaps with familiar names. She brought back Naseem Tuffaha, a Microsoft veteran, as a corporate vice president, and hired Rajesh Sundaram, who previously held leadership roles at NetApp and Hewlett Packard Enterprise, according to people familiar with the moves. The pattern, a mix of returning insiders and outside hires, mirrors the approach Nadella has used across Microsoft.
The risk is that cutting while rebuilding leaves gaps in defense. Microsoft’s security products protect some of the largest enterprises and government agencies in the world, and engineers removed from legacy products still have to keep those services running while the new AI-first tools are built. People familiar with the changes said Gallot has acknowledged the strain and is consolidating engineering teams to keep coverage in place.
The company is betting that the AI transition is a moment to gain share rather than defend it. Microsoft’s security revenue has grown for years, but growth has slowed as competitors from CrowdStrike to Palo Alto Networks have piled into the market. Gallot’s bet is that a security business built around AI, with products that scan code, monitor agents and automate response, can grow faster than the rest of the market.
Investors are watching the same way customers are. Microsoft’s stock has risen this year on the strength of its cloud and AI businesses, and the security unit, while smaller, is seen as a bellwether for how well the company can convert its AI investments into enterprise revenue. The layoffs, by trimming cost while concentrating spending on growth products, fit the pattern Nadella has applied across the company since 2023.
For the employees who remain, Gallot’s message leaves little room for ambiguity. The industry is being rebuilt, and Microsoft intends to be on the winning side. The execution phase, by her own account, has begun.
