Infra Play 135: Atlassian
What is the value of "system of work" for humans in the age of AI?
I’m sharing some important news today. I have made the incredibly difficult decision to reduce the size of our team by ~10% (or ~1,600 employees). Every Atlassian will receive an email within the next 20 minutes letting you know if you are impacted, or if we’re starting consultation in your region.
I believe this is the right decision for Atlassian. But that doesn’t mean it’s easy. Far from it. I know this has a huge impact on each of you, and it weighs heavily on me and Atlassian today.
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.
If most of the layoffs during ‘23 and ‘24 were driven by reduced workloads and overhiring across tech, things looks quite different today. Most cloud infrastructure software companies are doing well, if still needing to rethink stock based compensation and their product roadmaps. Most of the pain has been in valuations on the stock market, rather than practical challenges in the day-to-day operation of the business. The future is a bit murkier for SaaS products with no inherent moat or products that mostly rely on several features that can be recreated in a more focused product. Right in the middle between cloud infrastructure software and pure SaaS plays, sit the “system of record” players. I’ve previously covered Salesforce and ServiceNow, two companies that mirror each other in their attempts to shift towards cloud infrastructure software.
It’s time to talk about Atlassian, and their viewpoint of being the default “system of work”.
The key takeaway
For tech sales and industry operators: The Atlassian leadership team mostly delivered on the big transition from on-premise to cloud, while trying to build out an Enterprise motion that could actually compete with ServiceNow. Unfortunately for them, they did that while being deeply unprofitable and then the AI wave arrived before the enterprise motion had time to prove itself profitable. At this stage even if Atlassian the company makes a strong pivot, for the majority of employees it will be a very unpleasant experience, as layoffs, PIPs and compensation cuts keep reshaping the organization over the next years. Avoid, unless the alternative is food stamps. For those selling into Atlassian accounts, the organizational instability is a displacement opportunity, as every internal restructuring creates a window where the incumbent relationship weakens and a focused competitor with a cleaner story can move fast.
For investors and founders: The fundamental question is not whether Atlassian can grow its existing business but whether Jira can survive in a world where AI agents file their own tickets, track their own sprint progress, and close their own issues without a human in the loop, and the honest answer is that nobody including Atlassian knows yet. The primary moat of the company is based around the reality that developers will use a tool they hate rather than migrate to something new, and that insight is being tested for the first time by AI agents that have no preference, no inertia, and no switching cost. The choice to try and bloat the portfolio toward the "system of work" play pushed them into hiring a massive team to drive distribution and this appears to have backfired, as growth has not outpaced the cost of acquisition. The core investment thesis reduces to two scenarios: a valuation re-rating as SaaS multiples recover and institutional sellers stop dumping the stock, or a genuine structural shift toward GAAP profitability driven by sustained stock-based compensation reduction and headcount discipline. Neither of these will solve the AI displacement question.
The layoff company of Harbour City
We have momentum. We are executing incredibly well across our AI, Enterprise and System of Work transformations. You can see this in our results. Last quarter, cloud revenue growth accelerated to 25%+, RPO growth 40%+, 600+ $1m ARR customers and Rovo has passed 5 million MAU.
But, things have changed. The bar for what “great” looks like for software companies – on growth, on profitability, on speed, on value creation – has gone up.
We are choosing to adapt. Thoughtfully, decisively and quickly. To drive durable, profitable growth.
This means we are:
Restructuring to self-fund further investment in AI and Enterprise Sales – two areas we have high momentum and are accelerating.
Accelerating our path to sustained GAAP profitability – fuelling disciplined, durable growth.
Reorganising ourselves to move faster – building dedicated, accountable leadership teams across our Collections portfolio and other revenue-generating areas.
Is AI replacing these roles?
We fundamentally believe people and AI create the best outcomes. Our approach is not “AI replaces people”.
But it would be disingenuous to pretend AI doesn’t change the mix of skills we need or the number of roles required in certain areas. It does.
This is primarily about adaptation. We are reshaping our skill mix and changing how we work to build for the future.
Atlassian is a bit unusual compared to companies of its size because still headquartered in Australia and Mike still lives there. In order to manage at their scale, there is a strong distributed culture which includes the occasional announcement video. What's also unusual is still having a founder leading the company, which in these times can be seen as a perk due to "founder mode", the opportunity for the original visionaries behind a company to drive change.