Losses growing, staff cut: Atlassian’s billionaire boss faces his AI test

Billionaire Atlassian chief executive Mike Cannon-Brookes has staked the future of his company on AI, slashing 1600 jobs via email in a move to position the software giant for the wave of disruption tearing through Australia’s white-collar workforce.

A sombre Cannon-Brookes issued a video message to staff 20 minutes before the company axed 10 per cent of staff globally, including 480 roles in Australia, on Thursday, prompting major questions for Atlassian and fear in the wider economy already dealing with rising inflation and surging oil prices.

Afterpay’s parent company Block this month slashed more than 4000 jobs in the name of artificial intelligence, joining the likes of Australian logistics software company WiseTech, Amazon, Pinterest and Crowdstrike.

That trend has piled pressure on Atlassian, reducing demand for its products that are largely used by IT workers and creating an expectation that large software companies will cut labour costs when they adopt AI tools that could flow through to other Australian firms.

Cannon-Brookes announced the largest restructure in the company’s history on Thursday, saying AI had changed the skills and number of people the company needed in some areas.

“Days like these are among the toughest that we have as a company, and certainly the toughest that I have as a leader,” he said. “I am deeply sorry for the disruption this creates in your life.”

Atlassian had employed about 16,000 workers globally and about 3500 in Australia before the cuts, which cap a bad year for its stock price, down 66 per cent over the past 12 months to $US75.45 ($105). Its share price was up 1.5 per cent in after-hours trading at 6pm AEDT.

Cannon-Brookes said more than 100 Atlassian staff worked to determine which roles would be cut with priority given to retaining staff with AI-relevant skills. Affected staff will receive a minimum 16-week separation package plus one additional week per year of service, among other benefits.

Cannon-Brookes, whose co-CEO Scott Farquhar resigned in April 2024, framed the cuts that will cost up to $US236 million ($331 million) as offensive rather than defensive.

“We fundamentally believe people and AI create the best outcomes,” he wrote. “Our approach is not ‘AI replaces people’.”

But internally, the manner in which roles were selected prompted confusion and frustration. One employee, who asked not to be identified, said there was “zero visibility on who is specifically cut aside from searching individual people’s names”.

“A senior [colleague] in my team who had exceeded expectations in the last performance review… has been let go, whereas there are newly joined team members with less than three months tenure who have not been affected,” the employee said.

“I personally think we overhired,” the employee said, “and [Cannon-Brookes is] hoping the stock price goes up as a result”.

Another affected employee, who had been in their role for just four months, said the move felt “sterile” for a company celebrated for its warm culture.

“I thought I was making an impact,” the employee said. “I just didn’t think they gave me enough chance to really prove myself.”

The laid-off worker, who asked to remain anonymous to protect their severance entitlements, said Cannon-Brookes had done his best to put “corporate spin” on proceedings, but that the reality of being cut off after 120 days on the job was brutal.

Atlassian makes collaboration software products including Jira, Confluence and Trello, which are used by hundreds of thousands of organisations worldwide.

The restructure comes against a backdrop of persistent financial underperformance that has long troubled investors. Despite generating substantial revenue – and reporting 23 per cent revenue growth in its most recent quarter – Atlassian has not recorded a net profit in a decade and hands out large amounts of stock to employees each year. The company’s net loss widened from $US38.2 million to $US42.6 million in its most recent quarter.

The company also announced on Thursday that chief technology officer Rajeev Rajan, a former Meta executive, would step down after nearly four years.

Rajan, a former Meta and Microsoft executive appointed in 2022, had introduced a controversial performance management regime that employees said had transformed Atlassian’s once-irreverent culture into a more corporate model they dubbed “Metasoft”.

He will be replaced by two internal promotions: Taroon Mandhana as chief technology officer of teamwork, and Vikram Rao as chief technology officer of enterprise and chief trust officer. The company described both as “next-generation AI talent”.

The Australian reported on Thursday that Rajan departed the company weeks after a “secret lunchtime crisis meeting” with Atlassian co-founder Scott Farquhar at his Sydney mansion that reportedly led to the cuts.

Atlassian denied that the lunch was pivotal in Rajan’s departure or the cuts.

“Scott is the co-founder and board member of Atlassian, who meets execs regularly,” a company spokeswoman said.

“He also eats lunch, regularly. Regardless of questionable reporting in The Australian – it was simply a lunch.”

Beyond Thursday’s job cuts, Atlassian had been attempting to get on the front foot as AI capabilities have advanced, building its own AI tool, Rovo, and spending $US1 billion on developer intelligence platform DX and $US610 million on AI-based The Browser Company, both acquired last year.

Adam Barty, chief executive of Melbourne-based digital and AI consultancy Revium, rejected Cannon-Brookes’ framing of the lay-offs.

“It’s hard to see Atlassian’s move as ‘offensive’,” Barty said. “The company has never turned a profit and AI represents an existential threat to its business model, so this looks much more like a defensive posture.”

Cannon-Brookes told staff that a company-wide town hall would be held next week to address further questions. “Please be kind to yourselves and to each other,” he said. “Check in on your teammates and friends and give people everywhere the space to process.”

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