Microsoft CEO Satya Nadella tells employees that pay increases are on the way

Microsoft CEO Satya Nadella speaks during the Microsoft Annual Shareholders Meeting at the Meydenbauer Center on November 28, 2018 in Bellevue, Washington. Microsoft recently surpassed Apple, Inc. to become the world’s most valuable publicly traded company.

As the labor market tightens and employees contend with increasing inflation, Microsoft is raising compensation, according to the company's CEO.

The pay increase was confirmed by a company spokesman.

People come and stay at Microsoft because of their mission and culture, the meaning they find in the work they do, the people they work with, and how they are rewarded, a Microsoft spokesman told CNBC in an email.

Inflation was close to a 40-year high in April. Unemployment in the U.S. fell to 3.6% last month, as the economy continued to add jobs. Tech companies are increasing their salaries.

Amazon committed to more than doubling maximum base pay for corporate employees, while parent company Alphabet is adjusting its performance system in a way that will bring higher pay to workers.

The company is nearly doubling the global merit budget and allocating more money to people early and in the middle of their careers. He said that the company is raising stock ranges by 25% for employees under the age of 67. The company has a hierarchy of software-engineering roles.

In the first quarter, Microsoft increased research and development costs by 21%. Microsoft is trying to keep up with Amazon Web Services. The growth of research and development has accelerated.

Smaller companies have been laying off workers as the war in Ukraine and supply shortages strain their businesses, while the biggest tech companies have been lifting pay to try and retain talent. Some companies are cutting staff.

The analyst says he's positive on cloud stocks long-term.