Canva’s AI transformation comes with a cost
There is a lot more going on in Surry Hills than Droptober.
October goes by another name in Surry Hills. To Canva, and anyone in its orbit, it’s known as Droptober because it’s when the design software business releases new products. This year has proved to be no exception after co-founder Cliff Obrecht on Friday announced Canva Craft, the company’s first proper AI image generation tool which he described on LinkedIn as a "milestone" and "incredible", followed by two heart emojis.
But that’s not the only thing happening below the surface at Australia’s largest unlisted technology company at the moment.
Canva started 2026 with a plan to launch new features to capitalise on the artificial intelligence boom. Within days of the launch of Canva AI 2.0 in April, it was clear it had made a mistake by rolling out these features before the economics stacked up. It was burning through cash as a result and told staff the company had made a mistake, as revealed by Rampart at the time.
Canva is proud of notching up nine years of positive cash flow and has more than $US1 billion cash on its balance sheet. But since the release of its expensive AI features, revenue growth has dropped from above 30 per cent to less than 20 per cent, which forced its investors to cut back Canva’s valuation by 17 per cent to $US32 billion.
Management has managed to kickstart revenue growth in the months since by deploying teams of researchers to tinker with the AI models it uses, alongside a savage cost-cutting drive. Yet new figures circulated within the business and seen by Rampart show the company’s operating profit margin remains compressed. As a result Canva is considering a major restructure in a bid to rectify, for good, its cost base. And that’s unlikely to come with heart emojis.
