Design software giant Canva has announced a sweeping restructuring affecting more than a fifth of its global workforce, as slowing growth and mounting AI costs put pressure on the Australian tech company.

The shake-up will affect 1,271 employees, equivalent to 22 per cent of its workforce, through redundancies, relocations and changes to existing roles.

Co-founder and chief executive Melanie Perkins described the decision as “without doubt the hardest moment in our thirteen-year history”, warning that the company needed to overhaul its operations to remain competitive as AI transforms the creative software industry.

“It has been our hardest year yet, and as we shared earlier this year, our growth has slowed for the first time in a decade”, Perkins told staff on Wednesday. “Success in our first chapter doesn’t guarantee success in the next”.

The company has not disclosed how many employees will lose their jobs or which countries will be most affected.

The restructuring follows a sharp slowdown in growth and a decline in Canva’s valuation, as investors question how traditional software businesses will compete with increasingly powerful AI tools.

AI costs mount as growth slows

Canva, founded in 2013, has grown into one of Australia’s most valuable technology companies by offering accessible design tools for presentations, marketing materials and social media content.

But the rise of generative AI has created both opportunities and challenges for the business, allowing users to generate graphics and other creative content while increasing competition from rival platforms.

Canva has invested heavily in developing its own AI features, although the cost of running advanced models has reportedly forced it to slow the rollout of some products.

Second-quarter revenue rose 25.2 per cent to $921.9m, but fell short of internal expectations, while the company reportedly lowered its growth forecast to around 20 per cent.

Earlier this year, investors Blackbird Ventures and Airtree reportedly marked down Canva’s valuation from approximately A$60bn (£31.1bn) to A$49bn, reflecting concerns about slowing growth and the cost of AI investment.

Perkins said the company needed to return to smaller teams with greater responsibility, reducing management layers and simplifying its operations.

“New technology is transforming what people can create, how they create it, and what they expect from the products they use”, she said.

Affected employees will receive at least six months’ salary, alongside career support and continued healthcare benefits where available.

Canva is also offering $10,000 grants to departing staff who want to launch businesses or community projects.

The restructuring comes amid a wider wave of job cuts across the technology and professional services industries, as businesses seek to reduce costs while investing in AI.

On Tuesday, Virgin Media O2 confirmed plans to cut thousands of UK jobs as part of an £800m cost-saving programme, including greater use of AI in customer service and network operations.

Barclays also announced plans last month to cut around 5,000 jobs globally, with reductions concentrated in operational and support functions as the bank increases its investment in automation.

A recent City AM analysis found that Britain’s biggest businesses had announced at least 137,000 job losses over the past two years, although rising employment costs and weaker demand have also contributed to the reductions.