Morningstar

Atlassian Earnings: Huge Quarter with Cloud Acceleration and AI Starting to Drive a Positive Impact

Atlassian continues to report results that blow consensus estimates away.

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Securities in This Article
Atlassian Corp Class A
(TEAM)

Key Morningstar Metrics for Atlassian

  • Fair Value Estimate
    : $220.00
  • Morningstar Rating
    : ★★★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : Very High

What We Thought of Atlassian’s Earnings

Atlassian TEAM reported fourth-quarter results that again crushed guidance, with revenue up 28.0% year over year to $1.766 billion and non-GAAP operating margin of 36.0%, versus the high end of guidance of $1.661 billion and 30.5%, respectively.

Why it matters: Atlassian continues to report results that blow consensus estimates away. Revenue upside was largely driven by cloud acceleration, broad-based seat expansion, and cross-selling, and not revenue pull-forwards, which is a very high-quality beat in our view.

  • Cloud revenue accelerated to 31% year-over-year growth to $1.214 billion, while data center grew 21% to $462 million and marketplace grew 20% to $91 million. Cloud and marketplace were meaningfully better than we anticipated. Data center migrations did not contribute to cloud strength, unlike last quarter.
  • Artificial intelligence data points remain clearly favorable and highlight the stark disconnect from the all-encompassing software selloff. Rovo users are growing their spending at more than 2 times the rate of nonadopters, which signals that the firm can still thrive in the AI era.

The bottom line: We maintain our fair value estimate for narrow-moat Atlassian at $220 per share. Considering the AI data points, quarterly results, good guidance, and accelerating buybacks, we continue to see shares as attractive.

Coming up: The deceleration in fiscal 2027 that we dreaded in our third-quarter note arrived, with management calling for 13% revenue growth for the year and a non-GAAP operating margin of 25%. We think this guidance is conservative and may border on sandbagging, especially given stellar results over the past few quarters.

  • The first-quarter outlook includes total revenue of $1.71 billion and non-GAAP operating margin of 28.5% at the midpoints. Given the momentum in pricing trends, retention, seat expansion, and cross-sells, we think the implied deceleration after the first quarter may materialize, just not at the guidance rate.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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