Collaborative software giant Atlassian (TEAM.US) plans to lay off 1600 people, AI transformation pains affecting the technology industry.

Atlassian Corp. (TEAM.US) plans to cut 1,600 jobs, accounting for one-tenth of its global workforce. This move puts them in line with competitors, as they aim to address the arrival of the era of artificial intelligence and broader industry slowdown following the pandemic by reducing manpower. Australian billionaire founder Mike Cannon-Brookes explained the decision to lay off employees in an internal memo, while also announcing that their chief technology officer will be leaving the Sydney-based company. This is the latest wave of AI-related layoffs in the software industry and beyond. As global enterprises adapt to a new era where technology can handle many tasks previously done by humans, such layoffs are becoming increasingly common. However, companies also face scrutiny over whether they are using fears of AI to package traditional cost-cutting measures as technological futurism. "Pretending that AI has not changed the skills we need or the number of positions required in certain areas is dishonest," Cannon-Brookes stated. "It has indeed changed." The topic of "AI whitewashing" has been troubling Silicon Valley companies in recent months, with layoffs at companies like Jack Dorsey's Block Inc. and Oracle Corporation. During the pandemic, many tech companies were hiring heavily as online and digital activities flourished, leading to difficulties in keeping up with demand. At the same time, there is growing concern that AI will reduce the reliance on external software tools, eroding the profitable enterprise IT services industry. While AI has not yet resulted in clear and visible productivity improvements, many companies are seeking ways to do more with less resources. Analyst Sunil Rajgopal stated: "Atlassian's 10% job cuts reinforce our warning that AI-dominated disruption will pressure traditional seat growth and force SaaS companies to defend profit margins amid revenue structure transformation. With AI-driven revenue growth, we expect incremental sales gross margins to decline. The departure of the CTO during the leadership transition in the past year has increased executive risk." Cannon-Brookes' reasons for the layoffs are reminiscent of Block's reasoning for laying off about 40% of employees last month. Oracle also stated that AI has allowed them to reduce the size of certain software development teams. In Australia, WiseTech Global Ltd. announced plans to cut nearly 30% of its workforce over the next two years, citing savings from AI that will eventually permeate the entire company. The Commonwealth Bank of Australia stated that they are rethinking how to develop their workforce in the age of AI, leading to around 300 job cuts. Since Cannon-Brookes took full control of the company in 2024, the stock price of Atlassian, the designer of tools like Trello, has plummeted by over 60%. The billionaire openly discussed his efforts to transition to AI, calling it one of the best things that has ever happened to Atlassiandespite global investors punishing the stock of software companies vulnerable to AI advancements. Atlassian expects the layoffs to result in approximately $230 million in expenses, including severance pay. Following the announcement of the layoffs, the company's stock price rose by approximately 1.5% in after-hours trading. "For software companies, the 'excellence' standardsin terms of growth, profitability, speed, and value creationhave been raised," Cannon-Brookes stated in the memo.