TEAM Software · Collaboration software · AI apps · Cloud transition · Thesis updated June 13, 2026

Cloud momentum, but profits still trail

Cloud passed $1 billion in Q2 FY26 revenue, up 26% year over year.
RPO, which is contracted revenue not yet recognized, grew 44% year over year to $3.8 billion.
The Teamwork Collection has sold more than 1 million seats in less than nine months, giving Atlassian its clearest AI upsell proof so far.
Data Center migrations are helping Cloud growth today, but the end-of-life plan still creates churn risk.
The main tension is clear: growth looks better, while GAAP operating losses and stock-based pay still weigh on quality.

01 Running thesis

AI is helping the cloud story

Atlassian had a strong latest thesis update. Management said Cloud revenue crossed $1 billion for the first time in Q2 FY26 and grew 26% year over year. RPO grew 44% to $3.8 billion, which means customers have signed larger future commitments. Cloud net revenue retention, a measure of renewals plus expansion from existing customers, rose above 120%.

The bull case is that Atlassian is turning AI into paid upgrades, not only free product sparkle. The Teamwork Collection, which bundles Jira, Confluence, Loom, and Rovo, sold more than 1 million seats in less than nine months. Management also said customers using third-party AI coding tools created 5% more Jira tasks, had 5% higher monthly active users, and expanded Jira seats 5% faster than other customers. That suggests AI may create more work to organize, which helps Atlassian.

The bear case is not gone. Part of Cloud growth comes from Data Center customers being pushed to migrate, so investors must ask how much growth remains after that tailwind fades. Atlassian is also still reporting GAAP operating losses, mostly because of stock-based compensation and other charges. The stock needs investors to believe in long-term growth, better margins, and clean execution on recent deals. That is a lot to prove.

Feb 2026▲Atlassian reported its first $1 billion Cloud revenue quarter, with Cloud up 26% year over year. RPO grew 44%, and Teamwork Collection passed more than 1 million seats, strengthening the AI monetization case.

Oct 2025▼The 10-Q showed more than $1.6 billion committed to The Browser Company and DX, adding integration risk. It also formalized the Data Center end-of-life plan and recorded $55.7 million of restructuring charges.

Oct 2025▲Q1 FY26 results showed total revenue of $1.43 billion, Cloud revenue of $998 million, and RPO growth of 42%. AI usage and migration seat volume both improved, supporting the new Collections strategy.

Aug 2025→The FY25 10-K confirmed a shift from stand-alone products to apps, AI agents, and Collections. The strategy looked more focused, but the filing also added AI monetization and cloud cost risks.

Aug 2025▲Q4 FY25 showed renewed enterprise momentum, including a record number of deals above $1 million in ACV. Management reaffirmed its 20% compound annual growth target through FY27.

May 2025▼Q3 FY25 showed slower growth, with Cloud up 25% and Data Center up 7% year over year. That raised questions about the durability of growth after earlier migration tailwinds faded.

Jan 2025▲The Q2 FY25 10-Q confirmed strong subscription growth of 30% year over year. Cloud grew 30%, Data Center grew 32%, and free cash flow improved.

Jan 2025▲Q2 FY25 earnings beat expectations and showed AI features helping premium and enterprise upgrades. Management still kept guidance conservative because of macro and go-to-market execution risk.

02 Business model

Small starts, bigger renewals

Atlassian uses a product-led model. That means many teams can try products online, start small, and grow without a big sales pitch. This keeps selling friction low and lets the company spend heavily on research and product development.

Most revenue comes from recurring subscriptions. Customers pay for Cloud products hosted by Atlassian or for Data Center products they run themselves. Over time, Atlassian tries to expand each account by adding seats, moving users to premium and enterprise tiers, and selling Collections that bundle more tools and AI credits.

The model can break in three main places. Cloud hosting costs can pressure margins as more customers move off Data Center. Large enterprises may resist migration if Cloud does not meet their security or control needs. The Browser Company and DX deals could open new product lanes, but they also add cost and integration risk before the payoff is clear.

03 Product portfolio

Tools for tracking work

Cash cow

Jira

Jira is the core work tracking tool, especially for software teams. It benefits when teams create more tickets, add more users, and connect more workflows.

Steady

Confluence

Confluence is Atlassian's shared knowledge and documentation product. It helps teams store plans, decisions, and project notes in one place.

Growth engine

Teamwork Collection

Teamwork Collection bundles Jira, Confluence, Loom, and Rovo. It is the main paid package for Atlassian's AI strategy and has passed more than 1 million seats sold.

Growth engine

Jira Service Management

Jira Service Management helps IT, HR, finance, and other service teams handle requests and incidents. It has passed 65,000 customers, with enterprise customer growth above 60% year over year.

Option

Rovo

Rovo is Atlassian's advanced AI product. It includes enterprise search, chat, and a studio for building custom agents that act across company information.

Option

Strategy Collection

Strategy Collection is built for enterprise leaders. It includes Jira Align, Focus, and Talent to connect company goals with team-level work.

Steady

Marketplace and developer tools

Bitbucket and the Atlassian Marketplace extend the platform for software teams and outside app makers. Marketplace and other revenue was $62.2 million in the September 2025 quarter.

04 Business segments

Cloud now leads the mix

Cloud70%growing fast

Data Center26%modest

Marketplace and other4%modest

Atlassian reports one operating segment, so the mix below uses deployment revenue from the Form 10-Q for the three months ended September 30, 2025. Management later said Cloud crossed $1 billion in Q2 FY26, but did not provide a full filed deployment mix for that quarter here.

05 Risk factors

What could go wrong

Data Center migration churn

High impact · Medium odds

Atlassian has announced an end-of-life plan for Data Center. New term licenses stop in March 2026, expansions to existing customers stop in March 2028, and maintenance is planned to end in March 2029, with limited extensions. If large customers do not accept Cloud, revenue could be lost instead of migrated.

We watchCloud migration contribution, Cloud net revenue retention above 120%, and any rise in Data Center customer churn.

AI costs outrun AI revenue

High impact · Medium odds

Rovo and the Teamwork Collection are now central to the growth plan. AI can raise hosting and compute costs, while customers may resist paying enough for the added features. The early seat count is strong, but the margin payoff is not proven yet.

We watchTeamwork Collection seat additions, AI credit usage, Cloud gross margin, and hosting fee growth.

GAAP losses stay sticky

Medium impact · High odds

Atlassian is targeting strong non-GAAP margins by FY27, but GAAP results still show operating losses. Stock-based compensation, restructuring charges, and acquisition costs can make reported profits weaker than adjusted profits. This matters more when valuation already asks for a lot of future success.

We watchGAAP operating margin, stock-based compensation as a share of revenue, and progress toward 25%+ non-GAAP operating margin by FY27.

Acquisitions distract the core business

Medium impact · Medium odds

Atlassian agreed to buy The Browser Company for about $610 million and DX for about $1.0 billion. A browser and an engineering intelligence platform could add useful technology, but they also pull management into new areas. The strategic link to Jira, Confluence, and Rovo still needs proof.

We watchManagement updates on Dia, Arc, and DX integration, plus any disclosed revenue or margin impact from the deals.

Platform competition pressures expansion

Medium impact · Medium odds

Microsoft, Alphabet, ServiceNow, Asana, Monday.com, and other tools all compete for team workflows. Atlassian wins when customers standardize on its system of work. It loses leverage if customers choose broader vendor bundles or lower-cost point tools.

We watchCloud net revenue retention, large deal counts, RPO growth, and Jira Service Management enterprise customer growth.

06 Quick answers

In one breath

How does Atlassian make money?

Atlassian mainly sells recurring software subscriptions. Customers pay for Cloud products hosted by Atlassian or Data Center products they run themselves, though Data Center is now being phased out.

Why is Atlassian talking so much about AI?

AI is now part of the product and pricing plan. Rovo and the Teamwork Collection give Atlassian a way to charge more when customers want AI search, chat, agents, and more credits.

What is the biggest risk for TEAM stock?

The biggest risk is that Cloud growth and AI upsells do not turn into durable GAAP profits. Data Center migration churn, high AI costs, and hard-to-integrate acquisitions are the main watch points.