Atlassian Corporation (TEAM) Earnings

Management highlights

### Enterprise Deal Growth - Achieved an all-time record quarter for large deals at the $1 million, $3 million, and $5 million ARR tiers - $3 million ARR customer cohort grew over 50% year-over-year, while $5 million ARR customer cohort grew over 70% year-over-year - 85% of the Fortune 500 use Atlassian, but large enterprise customers still only represent ~10% of total revenue, leaving significant long-term headroom ### AI and Teamwork Graph Differentiation - Atlassian's AI product Rovo is now used by over 80% of the Fortune 500 - Rovo Assisted Actions grew 50% quarter-over-quarter, and Rovo-adopting customers grow ARR at more than twice the rate of non-adopting customers - The teamwork graph, Atlassian's proprietary enterprise knowledge graph built from 25 years of workflow data, spans over 200 billion objects and connections, delivering 44% more accurate AI answers while reducing token consumption by 48% - The teamwork graph's context advantage is a sustainable, compounding moat that generic standalone AI models cannot replicate - Model Context Protocol (MCP) calls to access the teamwork graph from external agents grew 400% quarter-over-quarter, and total MCP/CLI users surpassed 1 million, doubling in the quarter ### Operational and Profitability Discipline - Maintained stable margins even as AI usage grew sharply, through disciplined hiring, resource reallocation to high-ROI opportunities, and moderated stock-based compensation - Multi-year investment in AI gateway architecture and multi-model blending has allowed the company to manage AI serving costs effectively while maintaining high output quality - Cloud outperformance in Q4 was driven by cross-sell and seat expansion, rather than above-expected data center to cloud migrations, which proceeded in line with expectations and contributed mid-to-high single digits to cloud revenue growth ### Product and Adoption Trends - Customers are consolidating their collaboration stacks onto the Atlassian platform, with broad-based seat expansion across both technical developer users and non-technical knowledge workers (who make up roughly two-thirds of total Jira/Confluence users) - Developer hiring resurgence observed in market data aligns with customer signals, and Atlassian expects long-term growth in both developer and non-technical developer tool usage across business functions - Named a Leader in Gartner's Magic Quadrant for conversational AI platforms for employee services

Guidance

- Full fiscal year 2027 subscription ARR growth guidance is 18% year-over-year, down from 23% growth in FY2026. Approximately 1 percentage point of FY26's ARR growth came from the November 2025 DX acquisition, so the guidance reflects lapping that acquisition. Management characterizes the lower guidance as a balanced, prudent approach accounting for ongoing macroeconomic, fiscal policy, and geopolitical uncertainty, and it is also due to the early stage of FY27 when guidance was issued. - GAAP operating margin guidance is 6.5% for Q1 FY27 and 4.5% for full FY27, aligned with the company's long-term commitment to durable, profitable growth and gradual GAAP margin expansion over time. - Guidance philosophy remains consistent with prior periods, with a continued focus on balancing investment in high-growth opportunities like AI and enterprise sales with profitability goals.

Segment performance

Atlassian does not break out separate product segment revenue figures with absolute amounts and revenue contribution percentages in this call. Aggregated total results are as follows: total Q4 FY2026 revenue grew 28% year-over-year to $1.8 billion, with cloud revenue reaching $1.2 billion, growing 31% year-over-year. Remaining Performance Obligation (RPO) grew 44% year-over-year to $4.8 billion. Non-GAAP operating margin was 12%. Subscription ARR grew 23% year-over-year for full FY2026. Key high-growth sub-segments include: Service Collection, where revenue growth accelerated in Q4 with a 3x increase in agentic automations, and it reached $1 billion in ARR growing over 30% year-over-year; Teamwork Collection, which serves as the primary vehicle for AI adoption on Atlassian's platform, and Teamwork Collection customers have 4-5x more paid seats than standalone Jira or Confluence customers.

Risks & headwinds

- Forward-looking statements are inherently subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially from management's current expectations. Key sources of uncertainty cited include broader macroeconomic conditions, fiscal policy, and geopolitical instability. - No additional operational failures or specific material unresolvable risks were discussed in the call. Additional risk factors are available in Atlassian's SEC filings.

Analyst Q&A

• Q: Why is FY27 ARR growth guidance lower than FY26's actual growth, and what factors are driving that moderation? /

  A: Management notes FY26's 23% ARR growth benefited ~1 percentage point from the DX acquisition, so the 18% FY27 guidance reflects lapping that acquisition. The lower guidance is a deliberate, prudent balanced approach that accounts for ongoing macro, policy, and geopolitical uncertainty, and it also reflects that guidance is being issued very early in the fiscal year. Management emphasized they are very pleased with the current strong momentum of the business, with 44% RPO growth and net retention rate over 120% exiting FY26.

• Q: How do the efficiency gains from the teamwork graph translate to actual customer buying behavior and sales? /

  A: The teamwork graph and AI are top two reasons customers cite for upgrading to the cloud and the Teamwork Collection. Customers see better-quality, cheaper AI answers, which directly drives more upgrades, seat expansion, and cross-sell. The teamwork graph is automatically included for Teamwork Collection customers, so customers already have accumulated data they can leverage immediately. The value proposition is especially resonant now that all customers are focused on controlling AI token costs.

• Q: Why are Atlassian's holding up well even as AI usage grows, when other software firms have seen margin pressure from AI costs? /

  A: The company maintains margins through a disciplined hiring approach, reallocating resources to high-ROI opportunities, moderating stock-based compensation, and judiciously balancing AI investment with profitability goals. Technologically, Atlassian has invested for three years in a multi-model AI gateway architecture that optimizes for quality, speed, and cost. This architecture lets the company handle 50% quarter-over-quarter AI growth and 400% quarter-over-quarter MCP call growth without meaningful margin impact, passing cost savings to customers while maintaining profitability.

• Q: Is the faster large enterprise deal growth in Q4 driven by a specific inflection or years of cumulative investment? /

  A: The strong large deal results are not from a one-time unblocking, but from years of cumulative investment. The company has steadily improved enterprise capabilities like compliance (shipping HIPAA compliance for Rovo this quarter) and scaled up enterprise sales and customer success teams over multiple years. Management emphasized the company is still early in capturing enterprise opportunity, with very large headroom for growth in the existing customer base.