Canva battles to persuade investors it’s an AI winner ahead of a potential share market listing

Canva faces the mother of all public relations battles to persuade investors it’s an AI winner ahead of a potential share market listing eagerly sought by investors and employees.

The Sydney-based juggernaut insists its $60 billion valuation is unaffected by AI-led competition in the race to dominate online graphic design or lower valuations for software companies.

Canva’s staff and founders will have watched a savage sell-off in software in 2026 that sent valuations plunging 30 to 90 per cent. That includes its Sydney-based neighbour and enterprise software rival, Atlassian which crashed 80 per cent on the Nasdaq Stock Market between February 2025 and this week.

Atlassian’s implosion was almost entirely confidence based, as sentiment swung from peak optimism to extreme pessimism. Operating performance at Atlassian didn’t decline. The company grew customers and sales over the 15-month horror run its valuation cratered.

A publicity blitz by Canva, which flew journalists to Los Angeles to cover its Canva Create conference, suggests the company believes perception is reality when it comes to share market valuations distorted by central bank money printing.

“Canva are very smart operators and are trying to be the AI platform for prompt-based design,” said Adir Shiffman, the chairman of Catapult Sports and founder of business podcast The Contrarians with Adir and Adam.

“If they nail that the business will be worth multiples more. But it’ll be very hard because both Microsoft and Google-owner Alphabet have made it clear they want to own that space. And unlike Canva, each has their own frontier model, vastly more users of their platform, and virtually unlimited daily funds.”

Divided investors

Part of the year-long software sell-off in software-as-a-service (SaaS) companies is arguably structural.

This is because the cost of creating software has fallen as AI tools such as Anthropic’s Claude Code write code almost instantly for free.

Before AI, creating online products took large teams months, giving software companies such as Canva great value in their intellectual property.

“The release of Claude Code has intensified a key negative argument,” said Citi analysts. “Cheaper, faster AI-native competitors and internal builds could displace incumbent SaaS [software-as-a-service] vendors.

“We acknowledge the risk and agree incumbents must accelerate AI feature roll‑out or acquire it. But the bear case underrates the structural advantages of established players, particularly go‑to‑market scale and distribution.”

Canva arguably faces competition from Google’s NotebookLM and Meta’s push to let advertisers or creatives use AI to tailor ad campaigns.

Canva’s pitch is that it will not be disrupted by free competition from AI native start-ups or mega-cap tech because small and medium-sized businesses will pay for its AI-enhanced platform. Anyone can cut their own hair to save money, but that does mean it’s a good idea.

Unknown financials

While it is fairly straightforward to forecast what a business like Canva or Atlassian may earn in profits or sales in 2027 and 2028, the rapid pace of AI’s development means investors are now much more uncertain about profits between 2029 and 2035. It could be anything from strong growth to total disruption as customers flock to free alternatives.

This means professional investors simply won’t pay high multiples linked to forecasts for strong long-term profit growth anymore in the era of AI disruption.

As such it’s difficult to see how Canva is different to other software companies in avoiding a valuation hit given its long-term future is more uncertain in a world where AI has already rapidly transformed graphic design tools. Like every other software business, Canva will have to prove it can deliver long-term growth if it wants to build itself into the $200 billion star some say it can still be.

Canva reported a significant accounting loss in 2024, although has argued it spins off cash when excluding significant costs such as share-based payments to staff.

For the past decade, almost every successful tech and software company has made share-based compensation a key part of their operating model. It allows them to offer high total compensation packages to staff without lowering reported free cashflow.

The approach works as long as the share price or valuation is rising, but reverses if the share price falls and almost every employee watches the value of their stock options sink.

Issuing more shares lowers free cashflow per share if not total free cashflow. A basic example is a company that generates free cashflow of $100 million with 100 million shares, or $1 a share free cashflow.

If the same company makes $100 million profit but issues 10 million shares to employees its free cashflow per share falls to 90.9 cents. Ultimately, investors will value businesses on free cashflow per share, not total free cashflow. That means share-based compensation is a real cost even if companies like Canva back it out of results.

So far, Canva’s $60 billion private valuation has only been tested in private markets.

Still its founders will be under pressure from its institutional investors and 2500 employees to deliver the big pay day of an initial public offer.

What valuation it can command and sustain after the huge AI-linked sell-off in public markets is yet to be seen.