EPS of $-0.20 increased by 73.7% from previous year
Gross margin of 82.0%
Net income of -51.87M
""AI is one of the best things that's ever happened to Atlassian."" - Michael Cannon-Brookes
Atlassian Corporation (TEAM) QQ1 2026 Results Analysis: AI-Driven Cloud Migration Momentum, Solid Gross Margin, and Long‑Term Growth Outlook
Executive Summary
- Atlassian reported Q1 FY2026 revenue of $1.432B, up 21% year over year, driven by cloud revenue growth of 26% to $998M and a robust backlog (RPO) growth of 42% to $3.3B, underscoring the company’s AI-enabled cloud platform and Teamwork-enabled ecosystem as key value levers. Management highlighted AI’s central role in accelerating cloud adoption and customer workflows, with AI-enabled capabilities reaching over 3.5 million monthly active users across the platform.
- While top-line momentum is strong and the AI/enterprise/“system of work” strategy remains intact, profitability in the quarter remained negative (EBITDA -$96.3M; net income -$51.9M; EPS -$0.20), reflecting continued investments in AI, cloud capabilities, and migration-related mix effects. The gross margin was solid at ~82%, reflecting product resilience even as the company funds growth initiatives. Management reaffirmed a long-term 20% CAGR, with cloud/migration tailwinds positioned to drive the next leg of growth.
- For FY2026 guidance, Atlassian raised its cloud-revenue outlook to about 22.5% YoY, and noted migrations would contribute a mid- to high-single-digit percentage to cloud revenue growth in the back half of the year. A data-center end-of-life tailwind is expected to shift some revenue recognition timing from DC to cloud, prompting a modest 0.5 percentage-point drag to the organic growth outlook outside migrations. The company also emphasized its expanding partner network and recent M&A activity (e.g., Loom) as accelerants for go-to-market and platform expansion. Investors should monitor migration cadence, RPO progression, and the monetization pathway for AI-enabled offerings as primary drivers of the next phase of growth.
Key Performance Indicators
Revenue
1.43B
QoQ: 5.59% | YoY:26.60%
Gross Profit
1.17B
82.00% margin
QoQ: 3.31% | YoY:29.00%
Operating Income
-96.34M
QoQ: -673.42% | YoY:-51.15%
Net Income
-51.87M
QoQ: -123.02% | YoY:73.66%
EPS
-0.20
QoQ: 23.08% | YoY:73.68%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $1.432B in Q1 FY2026 (YoY growth around 21% as stated by management) with Cloud revenue $998M (YoY +26%).
Net Income: -$51.9M; Net Income Margin: -3.62%; EPS: -$0.20 (diluted).
Financial Highlights
- Revenue: $1.432B in Q1 FY2026 (YoY growth around 21% as stated by management) with Cloud revenue $998M (YoY +26%).
- Gross Profit: $1.174B; Gross Margin: 81.996% (approx. 82%).
- Operating Income: -$96.3M; Operating Margin: -6.72%.
- EBITDA: -$96.3M; EBITDA Margin: -6.73%.
- Net Income: -$51.9M; Net Income Margin: -3.62%; EPS: -$0.20 (diluted).
- RPO (Remaining Performance Obligations): $3.3B, up 42% YoY.
- Customers and AI usage: 300k+ customers; >3.5M monthly active users of AI capabilities (YoY growth >50%).
- Backlog/Portfolio: Teamwork collection and AI capabilities cited as growth engines; strategic emphasis on AI, Enterprise, and System of Work.
- Guidance (FY2026): Cloud revenue outlook raised to 22.5% YoY; migrations expected to contribute mid- to high-single-digit cloud growth in FY26; Data-center end-of-life tailwind expected to modestly dampen organic growth by about 0.5 percentage points; overall long-term growth target reaffirmed (20% CAGR).
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.43B
26.60%
5.59%
Gross Profit
1.17B
29.00%
3.31%
Operating Income
-96.34M
-51.15%
-673.42%
Net Income
-51.87M
73.66%
-123.02%
EPS
-0.20
73.68%
23.08%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- Strategy and AI acceleration: Management repeatedly emphasized AI as a core driver of both top-line growth and customer value. Mike Cannon-Brookes stated: “AI is one of the best things that’s ever happened to Atlassian,” and highlighted AI-enabled cloud adoption as a catalyst for customers to migrate to the cloud and upgrade to Teamwork collections.
- Cloud migrations and partnerships: Joe Binz highlighted that stronger-than-expected DC-to-cloud migrations lifted cloud economics, while timing differences in revenue recognition between cloud (ratable) and DC (upfront + ratable) influenced the organic growth outlook. The company underscored its partner network and multi-cloud governance (FedRAMP, isolated cloud, etc.) as critical enablers of migrations.
- Data center end-of-life and guidance: The call reinforced that the DC end-of-life (Mar 2029) is a multi-year tailwind; most customers will migrate over the multiyear horizon, with acceleration anticipated in 2028–2029. Arjun Bhatia and others queried the timing of acceleration, and management reiterated that migrations would be variable quarter-to-quarter but should accelerate later in the period.
- Product integration and “super app” ambitions: The exec team discussed deep platform integration, cross-tool AI interactions, and ecosystem-connectivity (e.g., browser integration considerations and Loom acquisition) as pillars for a more unified, AI-driven workflow experience across enterprise environments.
- Operating discipline and outlook: While the quarter featured negative earnings, management maintained focus on long-term profitability through the cloud transition and AI monetization, while reaffirming the 20% long-term CAGR and the positive質 impact of AI-driven productivity on customer expansion and RPO generation.
"AI is one of the best things that's ever happened to Atlassian."
— Michael Cannon-Brookes
"Cloud is the future. It's the best experience for our customers."
— Michael Cannon-Brookes
Forward Guidance
- Cloud Growth and Migrations: Cloud revenue outlook increased to 22.5% YoY for FY2026, with migrations contributing a mid- to high-single-digit percentage to cloud growth in the back half of the year. This reflects higher-than-expected DC-to-cloud migrations and their impact on revenue recognition timing. Management expects most migrations to land in the back half of FY2026 as part of the ongoing Ascend program and multi-cloud strategy.
- Total Revenue Trajectory: Management communicated a shift in mix toward cloud, with an implied drag of ~0.5 percentage points to organic growth outside migrations due to DC end-of-life timing and lower cloud marketplace take rate versus DC.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
TEAM Focus
82.00%
N/A
N/A
N/A
WDAY
75.30%
2.83%
1.31%
151.21%
CRM
76.30%
18.70%
2.57%
42.54%
INTU
74.90%
8.25%
1.09%
216.86%
SNOW
67.10%
-42.10%
-6.95%
-40.83%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Atlassian’s QQ1 2026 results underscore a thesis anchored in AI-enabled cloud platform acceleration and enterprise-scale adoption. The company’s 82% gross margin, 3.3B RPO backlog, and cloud revenue growth of 26% signal durable demand and pricing power. The near-term profitability challenge is consistent with a deliberate investment phase aimed at converting DC customers to cloud, expanding the Teamwork ecosystem, and embedding AI across workflows. With cloud migration contributing meaningfully to FY2026 guidance (cloud growth target of 22.5% YoY and back-half migration contributions), Atlassian appears well-positioned to achieve its longer-term 20% CAGR through rising ARR, higher seat counts, and deeper adoption of AI-enabled capabilities. Key risks to monitor include migration cadence variability, potential regulatory constraints around AI governance, and execution risk in large enterprise deployments. Overall, the investment thesis remains constructive for patient capital as Atlassian escalates cloud and AI monetization, strengthens its ecosystem, and expands enterprise footprint.
Key Investment Factors
Growth Potential
- AI-enabled platform and Teamwork ecosystem position Atlassian to capture growing demand for integrated development, IT, and business workflows. The 3.5M+ MAUs for AI features and 300k+ customers indicate broad adoption potential. The RPO growth of 42% to $3.3B suggests a durable pipeline and enterprise demand, while the cloud migration tailwind positions Atlassian to convert DC customers to cloud, expanding ARR and cross-sell opportunities across Jira, Confluence, Trello, and Teamwork collections.
Profitability Risk
- Margin compression risk in near term due to ongoing AI investments and the transition to cloud; reliance on successful conversion of DC customers to cloud and continued growth in RPO; execution risk in managing large enterprise migrations and channel partner performance; regulatory and security governance considerations with AI-enabled workflows.
Financial Position
- Strong gross margin (~82%) provides a cushion to absorb ongoing investments in AI and cloud; negative EBITDA and net income indicate near-term profitability challenges despite healthy top-line growth; significant RPO backlog supports visibility into future revenue; fan-out to cloud and AI monetization may drive improved operating leverage as migration cadence accelerates.
SWOT Analysis
Strengths
High gross margin (~82%), indicating strong product economics and pricing power.
Strong ecosystem integration (Teamwork, Jira, Confluence, Trello) enabling cross-sell and deeper data graph connectivity (Teamwork graph).
Expanding partner network and Ascend program to accelerate DC-to-cloud migrations; disciplined GTM with large enterprise wins.
Weaknesses
Near-term profitability pressures due to continued AI and cloud investments (EBITDA and net income negative in Q1).
Revenue recognition timing from cloud vs data center creates volatility in organic growth metrics and margin profiles.
Reliance on cloud migration cadence; DC end-of-life could introduce transition risk if migrations slow or encounter integration issues.
Opportunities
Acceleration of cloud migrations into the back half of FY2026 and beyond, supported by partnerships and multi-cloud governance capabilities.
Expansion of Teamwork collection and AI-enabled capabilities across enterprise customers (e.g., government cloud, FedRAMP).
M&A opportunities (e.g., Loom, Browser Company) to broaden collaboration, AI capabilities, and user experience for knowledge workers.
AI-driven monetization strategies (consumption pricing, Rovo Dev, etc.) contributing to ARR expansion and higher seat adoption.
Threats
Competition from established cloud platform players targeting productivity suites and software development lifecycles.
Regulatory and governance hurdles related to AI usage, data residency, and security; potential escalation of data privacy concerns across global customers.
Execution risk in large-scale migrations and potential variability in quarter-to-quarter migration momentum; reliance on partner ecosystem quality and capacity.
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