Canva layoffs are the strangest story in tech this week. The design company cut 1,271 roles, about 22 percent of its workforce. These were the first company-wide cuts of its 13-year history. And the internet applauded.

Co-founder and chief executive Melanie Perkins announced the restructure in a staff note on November 3. She called it “without doubt the hardest moment in our thirteen-year history” and “our hardest year yet.” She told staff that “small changes won’t be enough” and that “to set ourselves up for the next decade, we need to refound Canva, getting back to our roots of small, empowered teams.”

Read the number carefully, because it is doing a lot of work in the headlines. Not all 1,271 people are leaving. Some will change roles, some will be asked to relocate to central hubs, mainly Sydney, and some will leave. Canva has not said how many of the 1,271 will ultimately go. That gap matters, and it is the first thing a founder should notice. Even the number everyone is quoting is a range, not a headcount.

The Canva layoffs package, in full

This is why the reaction was praise instead of anger. Everyone leaving gets at least six months of pay, including statutory entitlements, in every location. Healthcare continues for 12 months where Canva provides it. Canva waived the one-year equity vesting cliff for people who joined in the past year. Departing staff keep their MacBooks. There is career coaching and a year of LinkedIn Premium. And there is a US$10,000 grant from a new Canva Collective Fund for anyone who wants to start a business or a community project. The fund takes no equity, and registration is open until December 14.

The small details matter as much as the money. People leaving keep access to Slack and Gmail until the end of the week, so they can say goodbye on their own terms. Everyone affected gets an individual meeting with a senior leader. Canva cancelled non-critical meetings for the rest of the week. It told staff to take time off if they needed it, with no need to log it as leave.

How the package was received

Social media noticed. Jasveer Singh, co-founder and chief executive of KnotDating, called the package “a master-class in how to handle layoffs.” Mark Di Stefano, who edits the Australian Financial Review’s Rear Window column, called it very generous. On LinkedIn, content creator Vinod Sandhu wrote that while companies may not always be able to save jobs, they can ensure employees “don’t lose their dignity while leaving.” The staff note spread fast after a post on X, where one thread sharing it drew more than 65,000 likes. The jokes came too. “Makes me wanna join Canva just to get laid off,” one user wrote. Another asked, “How do I apply to be fired by Canva?”

Call it a masterclass if you like, but remember whose words those are. “Most humane layoff in tech history” and “masterclass” are the internet’s praise, not a verdict. The praise is real, and it is earned. It is also not the whole story.

Why it happened: the AI bill came due

Perkins said growth has slowed for the first time in a decade. That is a relative statement, and the numbers behind it are worth seeing. Sales grew 38 percent in 2025 and 45 percent the year before. This is not a company in freefall. It is a company whose engine slowed just as its costs jumped.

In August, Canva cut its 2026 revenue growth forecast from 30 percent to 20 percent. TechCrunch tied the cut to rising AI costs. Co-founder Cliff Obrecht explained the shift the same month. Creating a design used to cost Canva almost nothing. The cost of serving each user has climbed from cents per month to many more cents. For a freemium business built on giving most of its product away, that change goes to the heart of the model. Canva has been building its own AI models to depend less on outside providers. It says it has cut AI serving costs by about 90 percent since the crunch began. It was not enough to hold the forecast.

The competition and the valuation

Competition is doing the rest. ChatGPT and Google image tools now do for free what Canva charges for. Google launched Pics, a Workspace-native AI image editor, on September 1. Early investors noticed before the layoffs did. Blackbird and Airtree, two early backers, marked their internal valuations down about 17 percent to roughly $35 billion in August. That is according to Australian Financial Review reporting. An employee share sale in August 2025 set the last priced valuation at $42 billion.

Canva closed 2025 at about US$4 billion in annualised revenue. It has more than 250 million monthly users and around 5,800 people across 37 countries. The restructure merges the Product, Growth and Platform teams into a single Product Org. It removes management layers and makes Sydney the main base for more product teams. Hybrid staff will spend two to three days a week in the office from January.

What the staff note did not say

Here is the honest tension in the story. Perkins did not name AI in the staff note. The note talks about organisation, location and ownership, not artificial intelligence. A Canva spokesperson told the Australian Associated Press that the changes are “about setting Canva up to build those products, not using AI to do the work of people who are leaving.” The economics behind the cut are AI economics. The letter avoids the word. Both facts belong in the same paragraph, because the gap between them is the story.

The praise is earned. The problem is not solved.

How you fire people is now part of your employer brand, and Perkins set the bar. People will measure every founder who cuts staff in 2026 against this package. The package is six months pay, a laptop to keep, and money to start something new. That is what treating people like adults looks like, and it is why the reaction was applause instead of anger. Founders should copy the package without hesitation.

But a generous exit does not fix an AI strategy problem. Six months pay is also great PR. It arrived in the same week Canva’s investors were marking the company down. Blackbird, which owns about 10 percent of Canva, has said it backs the changes. That is a vote of confidence from an owner. It is also a reminder that the people who pay for the package are the ones who approved the cut.

Keep the history straight too. This is the first company-wide redundancy round in Canva’s history, but it is not the first cut. Canva let go 32 roles in March 2025, including a significant part of its technical content writing team. It cut 10 of its 12 technical writers earlier. The pattern was already there. It just got much bigger, much faster.

Canva is not alone in this. Adweek noted that Netflix, Dropbox and Uber have all announced significant job cuts in the last two months. The difference is that Canva won praise for how it did it, and the praise is the reason the story travelled.

What founders should copy, and what they should fear

Copy the package. Plan the exit the way you plan the hire. Cut once instead of in drips, so people stop waiting for the next round. Say plainly why it is happening, in words your own staff would recognise. Fund people’s next chapter instead of handing them a cardboard box. Give them time to say goodbye. None of that is expensive next to the trust it buys. The trust is the point: the people who stay are watching how you treat the people who leave.

Fear the cause. The company that sells AI design tools is restructuring because AI changed its economics. Chatbots now do for free what Canva charges for. Serving AI features costs more than the freemium model was built to carry. Perkins called this the hardest year yet and said the company needs to refound itself around small, empowered teams. That is the right language. The question is whether small teams and a lower cost base are enough. General-purpose AI is commoditising the product itself.

What happens next

The next beat arrives fast. Canva holds a company all-hands on November 10, with organisation-level meetings from November 11. Watch whether Perkins names the AI strategy behind the “refound” she promised. The package bought goodwill, and the strategy has to earn it back. Six months pay, a MacBook and $10,000 will carry a departing employee into next year. They will not carry a company through a platform shift. That is the part nobody is talking about. It is the part that decides whether this was a masterclass or just a very well written goodbye.

More leadership stories are in the Leadership archive. Nike’s layoffs under Elliott Hill show the same hard trade between a turnaround and the people who pay for it. Nikesh Arora’s warning that AI has made engineers fair game is the other side of the same argument. Proton chief executive Andy Yen faced a similar backlash when he pushed AI into his own product.