Atlassian Tanks After Huge Run as Guidance Disappoints, But Strength Remains

Wall Street Veteran Warns of Coming Market Disruption (From Weiss Ratings)

Atlassian’s (NASDAQ: TEAM) August earnings report was a standout performance for the company. CEO Mike Cannon-Brookes noted, “In the enterprise, we had an all-time record quarter at the $1 million level, the $3 million level and the $5 million level of deals. With our $3 million ARR customers growing over 50% year-on-year and our $5 million ARR customers growing over 70%.”

Shares surged 35% afterward, contributing significantly to TEAM’s nearly 100% gain in the six months leading up to its latest earnings. This set a high bar for Atlassian’s November report as investors looked to assess whether the stock's dramatic rally was fully warranted.

The post-earnings sell-off suggested investors weren't convinced the rally was justified. Atlassian opened the next trading day down around 16%, pushing its year-to-date return into moderately negative territory. The numbers in the quarter were solid, but Atlassian’s forecast over the rest of its fiscal year clearly disappointed investors.

Atlassian Posts Headline Beats During the Quarter

In its fiscal first-quarter 2027 results, Atlassian posted revenue of $1.77 billion, up 23.7% year over year (YOY) and beating analysts’ estimates of $1.71 billion. Meanwhile, adjusted earnings per share (EPS) increased by 58.7% YOY to $1.65 and solidly exceeded estimates of $1.39. Cloud revenue increased by 30.5%, beating the firm’s guidance of 28.5%, and subscription annual recurring revenue (ARR) rose 22.5% to $6.81 billion.

Margins and cash flow also improved greatly. The firm’s GAAP operating margin flipped from negative 7% a year ago to 11%, and free cash flow soared by over 300% to $463 million.

Although management did not repeat its “all-time record” language related to deal signings from last quarter, growth remained strong in key cohorts. Cannon-Brookes noted that customers with north of $3 million in ARR increased 50% YOY and those at more than $5 million grew 70% YOY, the same numbers as last quarter.

Teamwork Collection Gains Serious Traction

The company also noted massive growth in its Teamwork Collection offering. The Teamwork Collection bundles Jira, Confluence, and Loom, and provides 10 times more credits for its AI assistant and agent layer, Rovo. Atlassian says the Teamwork Collection is one of the primary ways it is monetizing AI, as customers bundle into larger plans for more Rovo credits.

Over 3,000 customers have upgraded to the Teamwork Collection, up seven times YOY. Additionally, Teamwork Collection customers completed 35% more work items per Jira user than those using Jira alone, and are running twice as many agents. These metrics show very strong momentum for the company’s key AI offering, and that the Teamwork Collection may be making customers more productive.

Analysts Question Atlassian’s Guide for Decelerating Growth

Despite posting many strong headline and underlying metrics during the quarter, Atlassian’s outlook for the remainder of its fiscal year is what hit the stock.

The company guided for Cloud growth of 27% next quarter, which would be a significant deceleration from the 30.5% growth it just posted. And despite beating its guidance substantially in Q1, the company only raised its full-year Cloud growth guidance from 25.5% to 26%.

The story was similar when it came to subscription ARR guidance. After subscription ARR grew 22.5% in the quarter, full-year guidance only increased from 18% to 18.5%, implying a sizeable deceleration through the rest of the year.

Mizuho analyst Gregg Moskowitz directly flagged both dynamics on the call, noting Atlassian’s “potentially slowing growth outlook” as an investor concern. BMO analyst Keith Bachman went on to note that Atlassian raised its full-year guidance by less than its Q1 beat, which he called “unusual.”

CFO James Chuong cited timing-related pull-forward effects in Atlassian’s Q1 Data Center growth as a key reason why the full Q1 beat did not flow into its full-year guidance. In other words, part of the revenue beat reflected the timing of revenue recognition rather than stronger-than-expected demand.

Can Atlassian Overcome Deceleration Fears in Coming Quarters?

Ultimately, Atlassian’s Q1 results were solid, but not as strong as the headline numbers would suggest at first glance. After the stock's significant rally in recent months, shares fell as investors reassessed its growth outlook.

Still, analysts who updated their Atlassian targets remained constructive. BTIG Research lowered its target moderately from $260 to $240, and Piper Sandler actually raised its target from $175 to $190. However, Piper Sandler’s target was near the low end of TEAM’s price target range prior to its revision. Both targets remained above the stock's post-earnings trading price, suggesting analysts still saw potential upside despite concerns about slowing growth.

After this significant correction, investors will likely want to see Atlassian’s cloud growth exceed its 27% guidance next quarter and look for an increase in its full-year guidance to ease concerns about slowing growth.

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