Key Facts

• Canva's valuation was cut by $7.1 billion (US) or A$10 billion by backers Blackbird and Airtree, dropping from $42 billion to $34.9 billion, a 17% decline.
• Canva's own internal valuation fell more sharply, from $38.9 billion to $31 billion over the past year — a $7.9 billion reduction.
• The company cut its expected growth rate by a third to 20% after second-quarter revenue missed internal guidance, reaching $921.9 million.
• CEO Melanie Perkins said demand for AI features exceeded expectations, but the cost of completing each AI task was too high, prompting a slowdown in rollout.
• Cost per AI task has fallen nearly 90% since April, while users now create three times as many designs.

The $7.1bn markdown

Canva's longest-standing backers have reduced the design platform's valuation by $7.1 billion in US dollar terms, a cut that reflects the mounting cost of artificial intelligence. The Australian Financial Review first reported the markdown on 14 August, noting that the figure is also A$10 billion, the number used in most headlines. Blackbird and Airtree, two of Canva's earliest investors, now value the company at $34.9 billion, down 17% from $42 billion.

But the more consequential number came from inside the company. Canva's own independent valuation, used to determine the price at which employees can sell their shares, has fallen from $38.9 billion to $31 billion over the past year. That is a $7.9 billion decline, larger than the investors' cut. Two separate valuers, moving in the same direction, paint a consistent picture: the era of easy zero-marginal-cost software is over.

AI bill shock

The markdown arrived a week after Canva's revenue troubles became public. On 3 August, the company admitted it had cut its expected growth rate by a third, to 20%, after discovering that its AI tools were far more expensive to run than anticipated. Second-quarter revenue rose 25.2% to $921.9 million, but that still missed internal guidance. The headline from that earlier report said it directly: Canva had an AI bill shock.

Melanie Perkins, Canva's co-founder and CEO, explained the problem candidly. In an email to Fortune, she said the launch of the company's AI features had “validated the demand, but also showed us we needed to reduce the cost of completing an AI task to support a broad rollout.” The decision followed: “Rather than broadly rolling out a product before the underlying economics were ready, we decided to slow the rollout while we rebuilt the architecture, reduced unit costs and strengthened the business model.”

Since Canva AI 2.0 launched in April, the cost per task has fallen by nearly 90%, according to Perkins. Yet users are creating three times as many designs, so the savings are not as large as the percentage suggests. Net compute spending still rises, but the company is buying itself time to fix the underlying economics before scaling up.

Software's broken secret sauce

The structural issue goes beyond Canva. Derek Hernandez, a senior research analyst at Pitchbook covering SaaS and AI, told Fortune that AI is dismantling a core assumption of the software industry: zero marginal cost. “AI is making SaaS no longer a zero marginal cost solution, which has really been what I would call a lot of software's secret sauce up until now,” he said.

His analogy is instructive. Building a Ford F-150 is the equivalent of training a model; the petrol and the mechanic are inference, “because that's the point of using the product.” In the old software model, serving one more user of a design tool cost almost nothing. Every AI-assisted image now carries a compute bill attached. That changes the unit economics of every transaction, and companies must either raise prices, cut costs, or slow growth.

Five days apart: Canva and Figma

Hernandez also connected Canva's problem to a broader market event. “Canva and Figma both hit the same wall about five days apart, but they cited it in different places,” he said. Figma, which went public earlier this year, grew 48% and raised its outlook, yet its stock fell 16% on margin concerns.

Figma's free cash flow margin dropped to 14% in the second quarter from 27% in the first quarter, and the company guided third-quarter growth to 36%, down from 48%. One company is public and got repriced in a day. The other is private and got repriced by its shareholders. Same wall, same collision.

The same bill is arriving everywhere

It is not just design software. Large cloud buyers are hitting the same cost wall. Amazon reportedly ran a Claude job that went 860% over budget before failing. Microsoft has placed spending limits on internal AI use. EY built an AI router that sends tasks to cheaper models rather than defaulting to the frontier ones, a solution close to what Perkins describes rebuilding at Canva.

Rory O'Driscoll of Scale Venture Partners framed the timing on the 20VC podcast: “There's going to be a lot of people paying the bill in 26 and 27 for a certain amount of hesitancy in 23 and 24.” The hesitancy refers to the period when companies raced to adopt AI without understanding the economics. The bill is now arriving.

Why Canva can't sit it out

For Canva, AI is not a side feature; it is the expansion plan. The company has been pushing beyond its core design tool into enterprise workflows, adding products like Canva Code and aiming to become a one-stop platform for business creativity. Perkins told Fortune in 2023 that the AI market was too fragmented, and the strategy since has been to bring those pieces inside one platform.

That creates a dilemma shared across the sector. Companies cannot afford to skip the AI boom, but embracing it can undermine the margins they are trying to protect. Europe has a new entrant on the same premise — Lovable, which reached $500 million of revenue with just 146 employees, though it has no comparable margin history. The pressure applies equally to newcomers and incumbents.

The listing is the reason for the brakes

Canva was valued at $42 billion in an employee share sale earlier this year and was expected to list in 2026. Hernandez now suggests the listing could come as early as next year. He reads the slowdown as investor-facing: “I'm sure they're trying to protect their profitability, especially if they want to go to public investors.”

Growth of 20% with repaired margins is a very different pitch to growth of 30% with a cost problem. Figma's experience suggests public markets punish the second one immediately. Canva's private shareholders are effectively making the same judgment before the IPO.

What would settle it

Three things will determine whether Canva's correction is a temporary setback or a new normal. The first is the next revenue print. Canva has guided to roughly 20% growth, and whether that holds will show if the cost problem is fixed or merely deferred. The second is the 90% cost reduction claim. A cost per task falling that far while usage triples is testable over a couple of quarters — if the margins improve, the architecture rebuild worked. The third is who else gets marked down for this reason. Hernandez calls Canva and Figma the biggest signals so far, which implies more are coming.

For now, Canva's backers have accepted a lower valuation, the company has accepted a slower growth rate, and the entire software industry is waking up to a new reality: artificial intelligence is powerful, but it is not cheap.

Source: TNW | Business News