Atlassian (NASDAQ:TEAM) was indicated more than 30% higher in pre-market trading on Friday after delivering fiscal fourth-quarter results that comfortably exceeded Wall Street expectations, prompting investors to rethink concerns that artificial intelligence could undermine traditional enterprise software providers.
The company reported quarterly revenue of $1.77 billion, up 28% from a year earlier and well ahead of analysts’ forecasts of $1.66 billion.
Strong Quarter Shifts Sentiment Across Enterprise Software
The earnings release is being viewed as more than just a company-specific success. Enterprise software stocks have faced heavy selling this year amid fears that AI would replace many workplace productivity and collaboration platforms.
Atlassian’s performance is now being interpreted as evidence that AI can enhance, rather than disrupt, software businesses. Analysts suggested the results could also improve sentiment toward peers including Datadog (NASDAQ:DDOG) and Snowflake (NASDAQ:SNOW), both of which may benefit from a broader sector re-rating.
Adjusted earnings reached $1.87 per share, comfortably exceeding the consensus estimate of $1.50.
Cloud revenue climbed 31% year over year to $1.21 billion and accounted for 68.7% of total revenue, compared with 67.0% a year earlier. Remaining performance obligations increased 44% to $4.8 billion, providing strong visibility over future revenue. Atlassian also returned to GAAP operating profitability for the first time in more than two years, delivering a 12% operating margin.
AI Platform Gains Traction
The company’s Rovo AI platform emerged as one of the standout drivers during the quarter.
Management said more than 80% of Fortune 500 companies now use Rovo, while Rovo-assisted actions increased 50% compared with the previous quarter. Users of the platform completed 20% more Jira tasks and created 25% more Confluence pages than customers not using the AI tools.
CEO Mike Cannon-Brookes described the company’s competitive advantage by saying, “in the AI era, context is the edge.”
He also demonstrated confidence in Atlassian’s outlook by announcing plans to purchase up to $250 million worth of the company’s shares.
Analysts Turn Increasingly Bullish
The earnings report prompted a wave of positive analyst reactions.
Bank of America upgraded Atlassian to Buy from Neutral and lifted its price target to $175 from $105, describing the company as “an AI beneficiary rather than AI victim.” The bank highlighted Atlassian’s Teamwork Graph as a key competitive advantage that could prove difficult for rivals to replicate.
Mizuho’s Jordan Klein was equally enthusiastic, writing, “TEAM would be my GAME CHANGER stock of the day and key name to watch.”
He added, “28% rev growth crushed Street at 20%, core Cloud growth accelerated, and the big risk of initial FY27 growth guide now defanged and was better. Best yet is CEO buying $250M of stock, and new AI related products gaining serious traction. WHY I THINK STOCK GETS CHASED & GOES HIGHER: its still super cheap for the growth: 5x EV/Sales even up 33% and 16x EV/FCF.”
AI Narrative Continues to Evolve
Atlassian’s results arrive as investors reassess how artificial intelligence will affect the software industry.
Earlier this week, Shopify delivered stronger-than-expected results that also suggested AI is supporting business growth rather than replacing software platforms. That contrasted with earlier concerns following results from ServiceNow and IBM, which had intensified fears of AI-driven disruption across the sector.
HSBC had previously argued that enterprise software companies “will not be threatened by AI” and that depressed valuations presented an attractive buying opportunity. Atlassian’s latest performance is likely to reinforce that view.
Investors Weigh Strong Results Against Slower Guidance
Before Friday’s rally, Atlassian shares had fallen around 32% since the start of the year. At the indicated pre-market price of approximately $144.61, the stock was on course to reach its highest level in roughly seven months after closing at $110.17 on Thursday.
Despite the upbeat quarter, investors will continue to examine the company’s fiscal 2027 outlook. Management forecast annual revenue growth of 13%, well below the 28% growth reported for the latest quarter, as its Data Center business is expected to decline 17% while customers continue migrating to cloud-based services.
The combination of slower forward guidance and the release of the U.S. July employment report ahead of Friday’s opening bell could contribute to heightened volatility as the market assesses Atlassian’s longer-term outlook.
Atlassian stock price
