Atlassian (TEAM)

Investment Review After Q3 FY2026 Earnings (stock price as of 2026.07.10)

TL;DR

Atlassian makes the software teams run on — Jira for tracking work, Confluence for docs, Jira Service Management for IT — now wrapped in an AI layer called Rovo. Just reported: Q3 FY2026 revenue jumped 32% to $1.8B with a record 34% operating margin and its Service Collection crossing $1B in recurring revenue. Yet the stock crashed ~60% (to $67, since recovered to $89) and trades at only 15x — the market is pricing in AI coding tools disrupting Jira. The catch: management sees zero seat compression and rising AI usage, so the fear isn't in the numbers yet — but a chunk of that 32% was a one-time Data Center pull-forward, and growth steps down in FY2027.

Summary

Finding	Assessment
5-Year Stock Return	$88.86 now vs $387.60 five years ago (−77%); a severe de-rating despite tripling profit.
Business Model	"System of Work" software (Jira / Confluence / JSM + Rovo AI); Cloud + Data Center; subscription ~95%.
Competitive Moat	MODERATE Entrenched standards + ecosystem + Teamwork Graph context, but AI-disruption-debated.
Past 5-YR Drivers	Cloud transition, enterprise mix shift, Server/Data Center migration, and the Rovo/AI pivot.
Recent Stock Move	$88.86 now vs $161.22 two years ago; crashed ~60% to ~$67, recovered to ~$89.
Revenue Trend	DECELERATING YoY revenue growth 31.7%→20.0% (Q3'26→Q4'26E).
Margin Trend	CONTRACTING Margin 34.0%→31.0% (Q3'26→Q4'26E).
TTM OP Trajectory	DECELERATING TTM OP QoQ +18.0%→+10.5% (Q3'26→Q4'26E).
Key Opportunities	AI monetization (Rovo / Service Collection), enterprise + migration, and a cheap multiple + buyback.
Key Risks	AI-disruption overhang, an FY2027 growth step-down, and governance + SBC dilution.
Catalysts	Q4 print + first FY2027 guide (August), Rovo monetization, and AI-fear resolution.
P/E(ttm) Valuation	15x — near a record low; growth-at-a-value price if the AI fear is wrong.

What Just Reported

Revenue accelerated to $1,787M (+32%) with a record 34% operating margin. Non-GAAP operating income rose to $607M (+8ppt margin YoY) and non-GAAP EPS jumped 80% to $1.75; the Service Collection (IT service management) crossed $1B in ARR.
But part of the acceleration was a one-time event. Cloud revenue grew a healthy +29% ($1,132M), but Data Center surged +44% ($561M) on a pull-forward of multi-year licenses ahead of its 2029 end-of-life — worth ~$50M and borrowed from FY2027. Underlying growth is closer to the mid-20s.
Cash and customers stayed strong. Subscription ARR reached $6.3B (+23%, accelerating), customers topped 350,000, those spending >$1M ARR grew 36% to 685, and Cloud net revenue retention held above 120%. Free cash flow was $561M (down 12% on restructuring costs).

Guidance: Q4 & Medium-Term

Q4 FY2026: revenue $1,653–1,661M (Cloud ~25.5%) with a ~30.5% non-GAAP operating margin. Full-year FY2026: revenue +24%, Cloud +26.5%, non-GAAP margin ~29%.
Medium-term targets reaffirmed: 20%+ compound revenue growth through FY2027 and a 25%+ non-GAAP operating margin in FY2027 — durable, profitable growth as a new fourth priority under the incoming CFO.
The FY2027 catch: Data Center revenue turns negative next year as the end-of-life pull-forward reverses, mechanically slowing total growth before a FY2028 re-acceleration — though subscription ARR stays smooth through it.

Key Takeaways from Earnings Call

The entire debate is AI disruption. The stock fell ~60% on fears that AI coding agents (Cursor, Copilot, Claude Code) shrink demand for Jira and Confluence seats — even as the business accelerated. As one analyst put it, Atlassian is in a "software twilight zone."
Management's answer: AI is a tailwind, not a threat. CEO Mike Cannon-Brookes — "AI is one of the best things that has ever happened to Atlassian" — says the company is "not seeing any signal of seat compression; if anything, the opposite," and that AI creates more software, which means more work to track, not less.
Rovo (its AI layer) is scaling fast. Rovo has >5M monthly active users, is used by 75% of the Fortune 500, its usage is growing 20%+ month-over-month, and customers who adopt it grow ARR about 2x faster than those who don't.
Context is the moat. The "Teamwork Graph" (100B+ connected objects across work, people and code) is pitched as what makes Atlassian's AI "better, faster and cheaper" — and even rival agents like Anthropic's Cowork are framed as partners that feed it.
Capital discipline sharpened. Atlassian cut ~10% of its workforce to self-fund AI and enterprise sales, and bought back $1.0B of stock (~4% of shares) into the crash at ~$85 — with $2.2B of authorization left.

Key Segments and Revenue Mix (FY2025)

Deployment	FY2025 Revenue	% / Growth	Key Details
Cloud	$3,447M	66% · +28%	Hosted multi-product platform — the growth engine; Rovo AI bundled in.
Data Center	$1,467M	28% · +21%	Self-managed; end-of-life March 2029 forces migration to Cloud.
Marketplace & other	$301M	6% · +10%	Third-party app ecosystem + services.
Total	$5,215M	+20%	>300K customers; non-GAAP OI $1.29B (25%); FCF $1.4B (27%).

Business Model

SUPPLIERS

Cloud infrastructure (AWS)
AI models (Anthropic, Google Gemini, OpenAI)
Marketplace app developers
300K+ free-tier funnel & engineers

Cloud infra / AI models →

ATLASSIAN

Jira + Confluence + Jira Service Management
+ Rovo AI · Teamwork Graph context layer
Cloud + Data Center subscription (~95%)
88% gross margin; 120%+ Cloud NRR

System of Work SaaS → $ Subscription

CUSTOMERS

350,000+ customers, 85% of the Fortune 500
Software, IT & business teams
Developers + knowledge workers
Self-serve + enterprise sales

Moat Assessment: MODERATE

Entrenched standards. Jira and Confluence are the default tools for software and knowledge teams — 350,000+ customers and 85% of the Fortune 500 — with deep, customized workflows that make switching genuinely painful.
Ecosystem + context. The Marketplace app ecosystem and the Teamwork Graph (100B+ objects linking work, people and code) form a data moat that management argues makes its AI cheaper and more accurate than rivals'.
So we rate it MODERATE, not wide — the AI-disruption debate rules the stock. Bears fear AI coding agents restructure how software is built and shrink Jira seats; Atlassian counters it sees no seat compression and that AI creates more software to manage. Entrenchment and the Teamwork Graph keep it off NARROW, but ~85% founder control and an unproven AI defense cap it.

Stock vs. Earnings — 5-Year Performance

Stock $88.86, down 77% from $387.60 (5 years ago) and −45% over 2 years. Atlassian round-tripped from a ~$385 bubble peak to ~$67 in March 2026 — a ~60% crash from just $163 in December — before recovering to ~$89.
The business went the other way: revenue roughly tripled toward a ~$7B run-rate, trailing operating profit more than tripled from ~$600M to $2,085M, and non-GAAP margins expanded to a record 34% in the latest quarter.
The multiple did all the damage: P/E compressed from 200x+ at the peak to ~13x at the March low (now 15x) — the widest gap between improving fundamentals and a falling stock of any name in this group.

Chart 1: Stock vs TTM Operating Profit & Free Cash Flow

Past 5-Year Key Drivers

The Cloud transition. Atlassian shifted from on-prem licenses to a Cloud subscription platform (now 66% of revenue), ending Server and putting Data Center on a path to 2029 end-of-life — driving durable ~25%+ subscription growth.
Enterprise + up-market mix. High-touch enterprise grew from 27% to 45% of the business, with premium/enterprise editions and $1M+ customers (685, +36%) compounding as it moved beyond self-serve developers.
Profitability + the AI pivot. Operating profit more than tripled while Atlassian rebuilt the platform around AI (Rovo, Teamwork Graph) — the bet that now defines the stock's bull and bear cases.

Quarterly Key Metrics

USD	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26	Q3'26	Q4'26E	Q1'27E
Quarter End	Jun 2024	Sep 2024	Dec 2024	Mar 2025	Jun 2025	Sep 2025	Dec 2025	Mar 2026	Jun 2026	Sep 2026
Stock	$176.88	$161.22	$247.10	$217.99	$202.32	$165.31	$162.93	$66.88	$77.80	$88.86
Stock QoQ	-9%	-9%	53%	-12%	-7%	-18%	-1%	-59%	16%	14%
Rev YoY	21%	21%	21%	14%	22%	21%	23%	32%	20%	20%
OM%	20%	23%	26%	26%	24%	23%	27%	34%	31%	31%
R40	40%	44%	47%	40%	47%	43%	50%	66%	51%	51%
TTM OP	$1,014M	$1,057M	$1,142M	$1,174M	$1,287M	$1,342M	$1,437M	$1,696M	$1,875M	$2,085M
TTM OP QoQ	2%	4%	8%	3%	10%	4%	7%	18%	11%	11%
FCF/OP	140%	125%	121%	125%	110%	108%	89%	71%	65%	70%
Debt/EBITDA	1.1x	1.1x	1.0x	1.0x	0.9x	0.9x	0.8x	0.7x	0.7x	0.7x
P/E	60x	53x	75x	65x	55x	41x	39x	13x	14x	15x

Recent Stock Performance & Drivers

Stock $88.86, down 45% over 2 years and 77% over 5 — one of the most severe software de-ratings in this group despite tripling profit.
The round-trip: ~$163 in December 2025, a ~60% crash to ~$67 by March on AI-disruption fear and a broad software selloff, and a recovery to ~$89 — with Atlassian buying $1.0B of its own stock (~4% of shares) into the low at ~$85.
The disconnect is stark: fundamentals hit a multi-year best (Rule-of-40 of 66%, 34% margin, growth re-accelerating) while the multiple fell to ~13–15x — the market is pricing in a disruption that isn't in the numbers yet.

Opportunities

AI monetization. Rovo (5M+ MAU, usage +20%/month) and the Teamwork Collection turn AI into seat and credit expansion; Rovo customers grow ARR ~2x, and Service Collection just crossed $1B ARR.
Enterprise + migration. Enterprise is 45% of the business (from 27%) with the Fortune 500 only ~10% penetrated; Data Center's 2029 end-of-life funnels the on-prem base to higher-value Cloud (~1.75x ARR uplift).
Cheap valuation + buyback. At ~15x with a Rule-of-40 of 66% and $1.4B+ of free cash flow, plus a $2.5B buyback shrinking the share count — rare growth-at-a-value pricing if the AI fear proves wrong.

Challenges

AI-disruption overhang. The bear thesis — AI coding agents shrinking Jira/Confluence seat demand — is unproven but dominates sentiment, and the 10-K itself barely addresses the risk.
FY2027 growth step-down. The +32% Q3 was flattered by a Data Center end-of-life pull-forward (DC +44%); Data Center revenue turns negative in FY2027, slowing total growth before a FY2028 re-acceleration.
Governance + dilution. Founders control ~85% of the vote, stock-based comp runs ~26% of revenue (GAAP is still a loss), and a ~10% workforce cut signals margin pressure beneath the AI investment.

Next 12 Months

Q4 FY2026 print (August) and the first FY2027 guide — the market wants Cloud-growth durability and a read on how much the Data Center pull-forward dents FY2027.
Rovo / AI monetization traction — whether AI usage converts to visible seat and ARR expansion, defending the seat-based model against the disruption fear.
Multiple re-rating — whether a ~15x stock re-rates as "AI kills Jira" is tested against the no-seat-compression data quarter after quarter.

Next 12-24 Months

The core question: does AI expand Atlassian's market (more software to manage) or erode it (fewer seats)? The answer decides the multiple.
Enterprise scaling + Cloud migration (Data Center EOL 2029) driving toward the 20%+ revenue CAGR and 25%+ margin FY2027 targets.
FY2028 re-acceleration as the Data Center headwind laps — the setup management is pointing investors toward.

Core Metrics Scorecard

	Q2'22	Q3'22	Q4'22	Q1'23	Q2'23	Q3'23	Q4'23	Q1'24	Q2'24	Q3'24	Q4'24	Q1'25	Q2'25	Q3'25	Q4'25	Q1'26	Q2'26	Q3'26	Q4'26E	Q1'27E
	Dec21	Mar22	Jun22	Sep22	Dec22	Mar23	Jun23	Sep23	Dec23	Mar24	Jun24	Sep24	Dec24	Mar25	Jun25	Sep25	Dec25	Mar26	Jun26	Sep26
R40 > 40%	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅		✅	✅	✅	✅	✅	✅
R40 accelerate	✅								✅	✅		✅	✅		✅		✅	✅
TTM OP QoQ > 10%							✅	✅		✅								✅	✅	✅
TTM OP QoQ accelerate			✅		✅	✅	✅			✅		✅	✅		✅		✅	✅
TTM FCF/OP > 60%	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Debt/EBITDA < 3.5	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅	✅
Total passes	4	3	4	3	4	4	5	4	4	6	3	5	5	2	5	3	5	6	4	4
Stock QoQ	-1%	-21%	-36%	+10%	-39%	+25%	+1%	+25%	+18%	-18%	-9%	-9%	+53%	-12%	-7%	-18%	-1%	-59%	+16%	+14%
P/E ttm	226x	181x	113x	133x	83x	100x	84x	91x	96x	69x	60x	53x	75x	65x	55x	41x	39x	13x	14x	15x

Atlassian's scorecard is the strongest in years — while the stock sits near multi-year lows. Q3 FY2026 was a 6/6 sweep, with a Rule-of-40 of 66% (32% growth + 34% margin), re-accelerating growth and expanding margins.
The valuation collapsed as fundamentals improved. P/E fell from 200x+ in 2022 to ~13x at the March low and the stock is down 77% over five years — the widest fundamentals-versus-multiple gap of any name in this group.
The one blemish is cash conversion. Free cash flow fell from consistently >100% of operating profit to ~70% on restructuring charges and timing, but it still clears the bar — the swing factor now is whether AI-disruption fear or AI-monetization reality wins.

Chart: R40 vs Stock Price (Since 2020)

Chart: Scorecard Total Passes vs Stock Price (Since 2020)

Source: SEC EDGAR annual and quarterly filings, company earnings conference calls and presentations.

Disclaimer: This report is for educational purposes only. NO investment advice.