Collaboration software giant Atlassian(TEAM.US) plans to lay off 1,600 employees as AI transformation pains ripple through the tech industry

Atlassian Corp. (TEAM.US) plans to cut 1,600 jobs, accounting for one-tenth of its total global workforce. The move puts it in the same camp as its rivals, as it trims headcount to cope with the arrival of the AI era and a broader post-pandemic slowdown in industries.

Australian billionaire founder Mike Cannon-Brookes explained the layoff decision in an internal staff memo, also announcing that its chief technology officer will leave the company headquartered in Sydney.

This is the latest AI-related round of layoffs in the software industry, and even in a broader sense. As companies worldwide adjust to a new era in which technology can handle many tasks that have so far been done by humans, such retrenchments keep coming. Even so, companies face questions about whether they are leveraging fear of AI to package traditional cost cutting as tech futurism.

“Pretending that AI hasn’t changed the skill set we need, or the number of jobs required in certain areas, is dishonest,” Cannon-Brookes said, “it has changed things.”

The topic of “AI washing” has been troubling Silicon Valley companies in recent months. Previously, Jack Dorsey’s Block Inc. and Oracle also carried out layoffs. During the pandemic, many tech companies hired aggressively as online and digital events boomed, and many struggled to keep pace with demand. At the same time, people became increasingly concerned that AI would reduce reliance on external software tools, eroding the lucrative enterprise IT services business. While AI has not yet translated into clearly visible productivity gains, many companies are looking for ways to do more with fewer resources.

Analyst Sunil Rajgopal said: “Atlassian’s 10% layoff reinforces our warning that AI-led disruption will put pressure on traditional seat growth, and will force SaaS companies to defend profit margins as their revenue mix shifts. As AI inference-driven revenue grows, we expect gross margins on incremental sales to decline. During leadership transitions over the past year, the increase in CTO departures has heightened executive risk.”

The reasons Cannon-Brookes gave bring to mind the rationale used by Dorsey’s Block company last month when it let go of about 40% of employees, citing AI. Oracle has also said that AI allows it to scale down certain software development teams.

In Australia, WiseTech Global Ltd. last month announced plans to cut nearly 30% of its employees over two years and said the savings brought by AI will ultimately flow throughout the company. Commonwealth Bank of Australia said it is rethinking how to develop its workforce in the AI era, with layoffs of about 300 roles.

Since Cannon-Brookes took full control of the company in 2024, Atlassian’s stock price—maker of workplace tools such as Trello—has plunged by more than 60%. The billionaire has spoken publicly about his efforts to transition to AI, calling the technology one of the “best things that has ever happened to Atlassian”—even as global investors have battered the shares of software companies that are vulnerable to AI advances.

Atlassian expects the layoffs to generate costs of about $230 million, including severance pay. After the layoff news was announced, the company’s stock rose by about 1.5% in after-hours trading.

“For software companies, the bar for ‘great’—in growth, profitability, speed, and value creation—has been raised,” Cannon-Brookes said in the memo.