Atlassian Corp.—controlled by Australian billionaire Mike Cannon-Brookes—is cutting 1,600 jobs, or about 10% of its workforce, as the software company steps up investments in AI amid an industry slowdown.

“We are doing this to self-fund further investment in AI and enterprise sales, while strengthening our financial profile,” Cannon-Brookes, cofounded and CEO of Sydney-based Atlassian, said in a memo to staff.

The retrenchment exercise will cost the company between $225 million to $236 million, Atlassian said in a separate regulatory filing. The company’s shares closed 3.3% lower in New York trading on Wednesday.

Atlassian shares had lost more than half of its value this year amid a broader slump in software stocks, triggered by increasing concerns over the competitive threat from emerging AI tools. The stock is down 84% from its peak in 2021 when the company’s cloud-based collaboration tool saw increased demand from workers stuck at home during Covid.

While the company’s revenue continues to grow, Cannon-Brookes said 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,” he said. “We are choosing to adapt. Thoughtfully, decisively and quickly. To drive durable, profitable growth.”

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As part of a reorganization and restructuring exercise, Rajeev Rajan, which has been with the company for almost four years, will step down as chief technology officer effective March 31, Atlassian said.

“We fundamentally believe people and AI create the best outcomes,” Cannon-Brookes said. “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.”

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The jobs cuts were announced as Atlassian has been stepping up its acquisitions. Last September, it agreed to buy software developer productivity platform DX for $1 billion, within weeks after announcing the $937 million acquisition of The Browser Company, a move that places the company in direct competition with Apple, Google and Microsoft, which dominate the global Internet search engines.

“This is primarily about adaptation,” Cannon-Brookes said of the job cuts. “We are reshaping our skill mix and changing how we work to build for the future.”

Cannon-Brookes and cofounded Scott Farquhar (also a billionaire) started Atlassian in 2002 soon after graduating from college, funding the company with credit cards. With a real-time net worth of $7.3 billion based on Forbes’ data, Cannon-Brookes is among the wealthiest in Australia. He holds stakes in solar power company Sun Cable and Australian energy company AGL Energy.

© Forbes