Atlassian to cut roughly 10% jobs in pivot to AI

Atlassian said on Wednesday it ​would lay off around 10% of its workforce, or 1,600 employees, ‌to push into artificial intelligence and enterprise sales.

Shares of ​the enterprise software company rose nearly 2% ⁠in extended trading after Atlassian said it plans to “rebalance” its resources to focus on the “future of teamwork in the AI era.”

The company expects to ‌incur about $225 million to $236 million in charges related to the layoffs and office space reductions, according to ‌a regulatory filing. The majority of these charges will ‌be ⁠incurred in the third quarter.

“We are doing this ⁠to self-fund further investment in AI and enterprise sales, while strengthening our financial profile. We’re also changing the way we work and reorganising around ​our System of Work to ‌move faster,” CEO Mike Cannon-Brookes said in a memo to employees.

The move comes as investors increasingly scrutinise software firms amid fears that advances in artificial intelligence could disrupt traditional ‌software business models, though some analysts say the sector-wide ​selloff may be an overreaction.

Top executives at the World Economic Forum’s annual meeting in January had ⁠said that while jobs would disappear, new ones would spring up, with two telling Reuters that AI would be used as ‌an excuse by companies that were already planning layoffs.

Atlassian, whose shares were down around 33% last year, derives a majority of its revenue from its collaboration tools, including Jira software for planning and project management and Confluence for content creation.

“Software companies such as Atlassian have an opportunity ‌to make their business more efficient by adopting AI tools, especially within their ​product development. By reorganizing that way they can reduce the resources necessary to deliver their current business ⁠and grow more profitably,” said D.A. Davidson analyst Gil Luria.

The company ⁠said that Rajeev Rajan will step down from the role of chief technology officer, effective March 31, ‌after almost four years with the company.

Atlassian expects the restructuring plan to be substantially complete by the end of ​the fourth quarter.