Atlassian Corporation (TEAM) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong growth in RPO and strategic cloud migrations, driven by AI advancements and a new Google Cloud partnership. Despite a minor revenue guidance reduction, the overall outlook is positive, with strong cloud adoption and strategic acquisitions. The Q&A section further confirms management's confidence in cloud migration and AI as growth drivers. These factors, combined with a positive market strategy and shareholder return plans, suggest a positive stock price movement over the next two weeks.
Key Financial Performance
Total Revenue $1.4 billion, a 21% year-over-year increase. The growth was driven by strong execution.
Cloud Revenue $998 million, a 26% year-over-year increase. The growth was fueled by strong execution and demand for AI-powered cloud offerings.
Remaining Performance Obligations (RPO) $3.3 billion, a 42% year-over-year increase. The growth was attributed to accelerated demand and strategic priorities.
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Operating Highlights
AI capabilities: Over 3.5 million monthly active users of AI capabilities across the platform, up over 50% since last quarter. AI is driving demand for cloud offerings and enabling customers to migrate to the cloud and upgrade to higher-value editions.
Teamwork collection: Launched less than 2 quarters ago, it has driven a double-digit percentage increase in users, upgrades to higher-value editions, and consolidation of competitive tools.
Customer base: Over 300,000 customers, including major companies like Databricks, Expedia, Ford, and Wells Fargo, rely on Atlassian's AI-enabled cloud platform.
Revenue growth: Total revenue grew 21% year-over-year to $1.4 billion in Q1. Cloud revenue grew 26% year-over-year to $998 million. RPO grew 42% year-over-year to $3.3 billion.
AI integration: AI is positioned as a central element in Atlassian's platform and offerings, driving innovation and customer engagement.
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Risk or Challenges
Forward-looking statements: The company acknowledges that forward-looking statements involve risks, uncertainties, and assumptions. If these risks materialize or assumptions prove incorrect, results could differ materially from expectations.
Regulatory and compliance risks: The company mentions that factors affecting business performance and financial results are detailed in filings with the SEC, including risk factors in annual and quarterly reports.
Cloud migration and AI adoption: While AI and cloud offerings are driving growth, there is an implied risk in ensuring successful customer migration to the cloud and adoption of AI-powered tools, as well as maintaining competitive differentiation.
Economic uncertainties: The company operates in a dynamic environment where economic uncertainties could impact customer spending and overall business performance.
Competitive pressures: The company faces competition in the AI and cloud space, which could impact its ability to maintain or grow its market share.
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Guidance & Outlook
AI-driven cloud adoption: AI is directly driving demand for Atlassian's cloud offerings. Customers are migrating to the cloud and upgrading to the Teamwork collection to leverage the AI-powered cloud platform. This has resulted in a double-digit percentage increase in users and upgrades to higher-value editions.
AI integration and innovation: Atlassian is placing AI at the center of its platform and applications, driving innovation and customer adoption. The company has amassed over 3.5 million monthly active users of its AI capabilities, a 50% increase from the previous quarter.
Teamwork collection impact: The recently launched Teamwork collection has driven significant user growth and upgrades, consolidating competitive tools as customers standardize on Atlassian's offerings.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Why is the full year revenue guidance, excluding the data center end-of-life impact, reduced by 50 basis points?
A:The CFO explained that stronger-than-expected cloud migrations from data centers impacted revenue recognition timing, as cloud revenue is recognized ratably compared to upfront recognition for data centers. Additionally, cloud migrations affect marketplace revenue due to a lower take rate on cloud app sales. All other organic growth drivers were in line or slightly better than expectations, and the guidance reflects a conservative and risk-adjusted outlook.
Q:What is the playbook for cloud migration in the years ahead?
A:The CEO highlighted that the partner and customer reaction to cloud migration has been positive due to clear communication and technical advancements. AI is a significant driver for cloud adoption. The company has learned from its fast shift program and partner network, doubling migration seats year-over-year. The CEO emphasized that the playbook evolves with experience, and the company is confident in its ability to manage migrations across industries and geographies.
Q:Why was the decision made to end data center operations now, and how will it impact cloud migrations?
A:The CEO stated that the decision was based on the readiness of the enterprise-grade cloud platform and customer preparedness. The company expects migration momentum to increase in the short term but anticipates most migrations to occur closer to the data center end-of-life date in March 2029. The CFO added that while migrations will accelerate, there will be variability in the pace quarter-to-quarter.
Q:How does Atlassian view the role of AI in its software ecosystem and its integration with other tools?
A:The CEO emphasized that Atlassian is making significant progress in AI capabilities, which are driving customer migrations to the cloud and deeper partnerships. Atlassian's platform is highly integrated, allowing AI to interact with other tools. The company focuses on human-AI collaboration and enterprise concerns like governance and compliance. AI is seen as a core driver of growth and customer value.
Q:What insights were shared about customers using AI coding tools and their impact on Atlassian's business?
A:The CEO shared that customers using AI coding tools like GitHub Copilot are expanding Jira paid seats 5% faster and managing 20% more projects. Atlassian's AI interactions and workflows have significantly increased, and the company sees AI as a major growth driver. The CEO also highlighted the importance of human-AI collaboration and enterprise governance in AI adoption.
Q:What is Atlassian's approach to M&A in the AI era, and how does the browser company acquisition fit into this strategy?
A:The CEO stated that Atlassian's M&A philosophy remains unchanged, focusing on strategic fit, great teams, and timing. The browser company acquisition aligns with the belief that AI will reshape knowledge work and interface layers. The acquisition aims to optimize for knowledge workers and SaaS apps, integrating AI capabilities and enterprise-grade security.
Q:How prepared is Atlassian's partner network for the cloud migration transition?
A:The CEO stated that the partner network is well-prepared due to long-term planning and clear communication. The network has evolved to support cloud migrations and explain AI benefits to customers. The channel, which touches about 50% of revenues, is mature and ready to handle the transition.
Q:What changes has Brian Duffy brought to Atlassian's go-to-market strategy?
A:The CEO noted that Brian Duffy has made significant progress in evolving go-to-market motions, focusing on being a strategic partner to large enterprises. The strategy includes leveraging the $14 billion opportunity in the existing customer base and driving adoption of cloud and AI capabilities. The company has signed large deals across various sectors and geographies.
Q:Is the increased cloud revenue guidance solely due to better-than-expected data center to cloud migrations?
A:The CFO clarified that the increased cloud revenue guidance reflects stronger migrations performance and Q1 outperformance. Other organic drivers of cloud revenue growth remain unchanged, and the company maintains a conservative approach to guidance.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the size of the cohort using AI coding tools, only stating that the data provided was statistically relevant. Additionally, while discussing the browser company acquisition, the CEO provided general strategic rationale but did not offer specific details on how it would integrate with Atlassian's existing offerings.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
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The earnings call summary and Q&A session highlight strong financial performance, AI-driven growth, enterprise adoption, and market leadership. Positive factors include record high revenue, robust cross-sell growth, and strategic investments in AI and data governance. The announcement of data collection changes and competitive displacements further support a positive outlook. Although data center revenue recognition may be lumpy, overall sentiment is positive, with strong enterprise adoption and growth in the Service Collection. The absence of management avoiding direct answers also supports a positive sentiment.
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Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
