Atlassian (NASDAQ:TEAM) said its cloud business momentum continued through the fourth quarter of fiscal 2026, supported by customer upgrades, cross-selling activity and expanding paid seats across both software development and non-technical teams.
Speaking at a KeyBanc conference, Martin Lam, Atlassian’s head of investor relations, said cloud outperformance was driven by upgrades to the company’s Teamwork Collection and cross-sell activity into its Service Collection. Customers upgrading to Teamwork Collection receive 10 times the number of Rovo AI credits, which Lam said has become a primary driver of adoption.
Seat Growth Extends Beyond Developers
Lam said the company’s seat expansion spanned both software developers and knowledge workers, including teams in human resources, marketing, legal and finance. Atlassian previously disclosed that roughly two-thirds of Jira users and about 70% of Confluence users are knowledge workers or non-software developers.
He said artificial intelligence is lowering the cost of software development and enabling more businesses to develop digital products and services. However, the resulting growth in work also increases the need for coordination across organizations, Lam said.
Atlassian’s platform is designed to help companies manage, track and plan work across teams, according to Lam. He pointed to the Teamwork Graph, a contextual layer within the platform that connects information, workflows, tools and people.
Lam said the Teamwork Graph can improve AI results by providing context from products including Jira and Confluence. He said Atlassian has found the technology delivers 48% more efficient token usage and 44% better results, as it reduces the need for AI systems to search broadly across an organization without contextual relationships.
Profitability Focus Shifts Toward GAAP Metrics
On margins, Lam said Atlassian is increasingly focused on GAAP operating margins as part of its effort to deliver “durable, profitable growth.” The company reported GAAP profitability in the fourth quarter and guided for fiscal 2027 GAAP operating margin of 4.5%, compared with approximately flat GAAP operating margin at the end of fiscal 2026.
Lam said non-GAAP comparisons are affected by several accounting and compensation-related factors. The end of life for Atlassian’s data center product created changes under ASC 606 revenue recognition rules, producing about a four-point benefit to fiscal 2026 non-GAAP operating margin because more subscription revenue was recognized upfront.
For fiscal 2027, the company expects a roughly three-point non-GAAP margin headwind from changing compensation mix between cash and equity for certain employees and roles. Excluding those factors, Lam said non-GAAP operating margins would increase.
Subscription ARR Introduced to Address Migration Noise
Atlassian introduced subscription annual recurring revenue as a measure intended to provide a clearer view of its subscription business during the transition away from data center offerings and toward cloud services.
The company reported 23% year-over-year subscription ARR growth in the quarter and initially guided for subscription ARR to grow 18% year-over-year by the end of fiscal 2027. Lam said the measure includes both cloud and data center subscriptions and helps reduce the accounting and timing effects associated with customer migrations.
He cautioned that quarterly ARR performance can vary as Atlassian changes data center pricing, sales compensation structures and partner alignments to support its cloud migration. The company had previously cited customer purchasing that shifted from the fourth quarter into the third quarter following data center pricing changes.
AI Monetization and Enterprise Expansion
Lam said Teamwork Collection is currently Atlassian’s main AI monetization vehicle because it gives customers a larger, more predictable pool of Rovo credits at a higher price per user. The company plans to begin enforcing Rovo credit limits during the year, while usage- or consumption-based pricing could become more significant over time.
According to Lam, customers adopting Rovo are growing ARR at twice the rate of customers that do not use the AI offering. Atlassian also has more than 1 million monthly active users of its MCP server and Teamwork Graph command-line interface, which allow third-party AI agents to access Atlassian’s platform. Users of those tools are creating four times as many Jira work items and Confluence pages, Lam said, while growing ARR at twice the rate of non-users.
Service Collection surpassed $1 billion in ARR during the third quarter and was growing more than 30% year over year at that time, Lam said. Growth accelerated in the fourth quarter as customers expanded deployments beyond IT workflows. More than 60% of Service Collection use cases are outside IT, he said, while Rovo agentic automations in the offering increased threefold over a six-month period.
Lam also highlighted Atlassian’s enterprise opportunity. The company has about 400 quota-carrying enterprise sales representatives and 350,000 customers, with many initial customer deployments beginning in relatively small teams before expanding across the organization. He said remaining performance obligations grew 44% year over year, while the cohort of customers spending more than $3 million annually grew more than 50%.
About Atlassian (NASDAQ:TEAM)
Atlassian Corporation Plc is a software company headquartered in Sydney, Australia, best known for developing collaboration, project management and software development tools. Founded in 2002 by Mike Cannon-Brookes and Scott Farquhar, Atlassian grew from a small engineering-focused team into a publicly traded company after its initial public offering in 2015. The company serves a global customer base that spans small teams to large enterprises across technology, financial services, government and other sectors.
Atlassian’s product portfolio centers on tools designed to help teams plan, build and support software and business processes.
