In a statement on Wednesday, the world's largest planemaker said the purchase of a 29.9% stake in Evidian "does not meet the company's objectives in the current context and under the current structure."
A person familiar with the talks said Airbus reckoned that financial conditions had not been met for the deal originally being discussed but that it still believed in some form of partnership with Atos.
Evidian regroups Atos' most coveted assets such as cybersecurity division BDS and supercomputers, and Airbus CEO Guillaume Faury had said last month a deal would have made sense because aerospace was increasingly driven by big data, connectivity and high-power computing.
Atos, whose clients include France's administration and army, would have in return secured much-needed investment as it strives to carry out its split-up plan after a troubled period marked by a governance crisis, heavy losses and sharp stock price swings.
Its shares fell 17% by 1107 GMT.
"Atos takes note of Airbus' decision to no longer pursue the discussions it initiated in February 2023," it said in a separate statement.
"Atos confirms it will, with Airbus, explore other options and pursue the work on the long-term strategic and technological partnership between Airbus and Evidian which has the potential to create significant value for both companies."
A deal would have made Airbus the No. 1 investor Evidian.
Atos values the unit at about 7 billion euros ($7.60 billion), including a 3- billion-euro debt, a source familiar with the matter had told Reuters in February.
At that valuation, a 29.9% share stake in Evidian would have a price tag of 1.2 billion euros.
($1 = 0.9213 euros)
(Reporting by Benoit Van Overstraeten and Tim Hepher; Editing by Silvia Aloisi)
