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Atlassian Corp (TEAM)·Q1 2026 Earnings Summary

Executive Summary

  • Revenue rose 21% year over year to $1.433B, with Cloud revenue up 26% to $998M; both top-line and non-GAAP EPS beat consensus (Revenue: $1.402B*, EPS: $0.838*) with non-GAAP EPS of $1.04. Bold beat: Revenue and EPS beat .
  • GAAP operating margin fell to (7%) due to $55.7M restructuring (customer support reduction and lease consolidation), while non-GAAP operating margin was 23% and in-line with prior year .
  • FY26 guidance raised: total revenue growth to ~20.8% (from 18.0%), Cloud growth to ~22.5% (from 21.0%), non-GAAP operating margin to ~25.5% (from 24.0%); management cited stronger-than-expected DC-to-Cloud migrations and RPO momentum to $3.3B (+42% YoY) .
  • AI usage is a key catalyst: AI MAUs surpassed 3.5M (+50% QoQ), Collections (Teamwork/Software/Service) launched, and Atlassian completed The Browser Company acquisition to build an AI-native enterprise browser, framing a durable AI-driven adoption narrative .

What Went Well and What Went Wrong

What Went Well

  • Cloud momentum and migrations exceeded expectations: “We’re off to a solid start in FY26… total revenue over $1.4B… RPO to $3.3B, up 42% YoY,” and cloud guidance raised as DC-to-Cloud migrations outperformed .
  • AI adoption accelerated: “We… surpassed 3.5M monthly active users of our AI capabilities, up 50% quarter-over-quarter,” supporting Teamwork Collection upgrades and enterprise adoption .
  • Collections strategy went live: Software and Service Collections GA; Rovo Dev GA; customers consolidating tools and upgrading editions, with Atlassian recognized as a Leader in 2025 Gartner DevOps Platforms, reinforcing product leadership .

What Went Wrong

  • GAAP margin compression: GAAP operating margin declined to (7%) from (3%) YoY, driven by $55.7M restructuring charges (negative ~4ppt impact) .
  • Marketplace growth slowed to 4%, pressured by lower DC app sales as Cloud migrations accelerated and a lower Cloud take-rate, partially offset by Cloud Marketplace sales .
  • Non-GAAP OpEx rose 25% YoY and was higher-than-expected due to timing and acquisition-related costs; Data Center revenue growth (11%) showed increased quarter-to-quarter variability under EOL revenue recognition policy .

Financial Results

Quarterly Summary (YoY and sequential comparison; exacts)

MetricQ3 2025Q4 2025Q1 2026
Revenue ($USD Millions)$1,356.7 $1,384.3 $1,432.6
Non-GAAP Diluted EPS ($)$0.97 $0.98 $1.04
GAAP Operating Margin (%)(1%) (2%) (7%)
Non-GAAP Operating Margin (%)26% 24% 23%
GAAP Gross Margin (%)84% 83% 82%
Non-GAAP Gross Margin (%)86% 85% 86%

Revenue by Deployment (trend across quarters)

Metric ($USD Thousands)Q3 2025Q4 2025Q1 2026
Cloud$880,429 $927,730 $997,708
Data Center$388,516 $380,776 $372,648
Marketplace & Other$87,771 $75,838 $62,197
Total Revenues$1,356,716 $1,384,344 $1,432,553

KPIs and Cash Flow

KPIQ3 2025Q4 2025Q1 2026
Cash Flow from Operations ($USD Millions)$652.7 $375.3 $128.7
Free Cash Flow ($USD Millions)$638.3 $360.3 $114.6
AI Monthly Active Users (#)~1.5M ~2.3M >3.5M
Customers with >$10k Cloud ARR (#)50,715 51,978 53,017

Guidance Changes

FY26 Guidance (previous vs current)

MetricPeriodPrevious Guidance (Aug 7, 2025)Current Guidance (Oct 30, 2025)Change
Total Revenue Growth YoYFY26~18.0% ~20.8% Raised
Cloud Revenue Growth YoYFY26~21.0% ~22.5% Raised
Data Center Revenue Growth YoYFY26~12.5% ~20.0% (incl. EOL recognition benefit) Raised
Marketplace & Other Growth YoYFY26~10.0% ~5.0% Lowered
GAAP Gross MarginFY26~83.5% ~84.0% Raised
Non-GAAP Gross MarginFY26~85.5% ~86.5% Raised
GAAP Operating MarginFY26~(2.5%) ~(2.0%) Raised
Non-GAAP Operating MarginFY26~24.0% ~25.5% Raised

Q2 FY26 Guidance (current)

MetricPeriodCurrent Guidance
Total Revenue ($USD Millions)Q2 FY26$1,535–$1,543
Cloud Revenue Growth YoY (%)Q2 FY26~22.5%
Data Center Revenue Growth YoY (%)Q2 FY26~17.0%
Marketplace & Other Growth YoY (%)Q2 FY26~2.0%
GAAP Gross Margin (%)Q2 FY26~85.0%
Non-GAAP Gross Margin (%)Q2 FY26~87.0%
GAAP Operating Margin (%)Q2 FY26~(5.0%)
Non-GAAP Operating Margin (%)Q2 FY26~24.5%

Earnings Call Themes & Trends

TopicQ3 2025 (Previous Mentions)Q4 2025 (Previous Mentions)Q1 2026 (Current Period)Trend
AI/Technology InitiativesRovo included in premium/enterprise; AI MAU ~1.5M; FedRAMP Moderate; Government & Isolated Cloud announced AI MAU ~2.3M; Collections momentum; cloud NRR 120%; Google Cloud partnership AI MAU >3.5M (+50% QoQ); Rovo Dev GA; Software & Service Collections GA; partnerships with Anthropic/OpenAI and others Accelerating
Cloud MigrationsBack-end loaded enterprise deals; DC annual terms reduce upfront recognition DC-to-Cloud migrations up 60% YoY Stronger-than-expected migrations; raised Cloud growth outlook; DC EOL recognition increases variability Accelerating
Tariffs/MacroMacro vigilance; pipeline healthy; CRO onboarding begins Conservative risk-adjusted guide; bookings/RPO strength Organic drivers maintained conservatively; migrations drive raised FY outlook Stable to positive
Product Performance/CollectionsTeamwork Collection announced; attach and edition upgrades expected Teamwork Collection strong early traction; large enterprise deals Continued consolidation; Collections GA; enterprise editions uptake Strengthening
Regulatory/ComplianceFedRAMP Moderate; Government Cloud authorized —Government Cloud GA; Isolated Cloud EAP; scaling Confluence to 250k users Expanding
R&D Execution & MarginsCloud gross margin optimization; GM at 86% Gross margin 85% non-GAAP; strong FCF Non-GAAP GM 86%; OpEx higher from timing/acq. costs Mixed: GM strong, OpEx elevated

Management Commentary

  • “Our relentless pace of AI innovation is driving results… Cloud revenue… $998 million, up 26% year-over-year, and surpassed 3.5 million monthly active users of our AI capabilities, up 50% quarter-over-quarter.” — Mike Cannon-Brookes (CEO) .
  • “We’re off to a solid start in FY26… total revenue… over $1.4 billion… and RPO to $3.3 billion, up 42% year-over-year… investments… enterprise, AI, and System of Work… position us well to drive durable long-term growth and profitability.” — Joe Binz (CFO) .
  • “We are increasing our FY26 Cloud revenue growth outlook to 22.5%… and total company revenue growth outlook to approximately 20.8%… reflecting greater expected DC-to-Cloud migrations.” — Shareholder letter .
  • Collections strategy: Software and Service Collections GA; Rovo Dev GA; Teamwork Collection customers consolidating competitor tools and upgrading editions .
  • Strategic moves: Completed acquisition of The Browser Company (Dia/Arc) to build an AI-native enterprise browser; definitive agreement to acquire DX (engineering intelligence) to strengthen developer productivity analytics .

Q&A Highlights

  • Guidance math and migrations: Management raised FY26 total/Cloud growth outlook solely on stronger DC-to-Cloud migrations; organic drivers maintained conservatively, with marketplace take-rate lower on Cloud impacting mix .
  • Consumption monetization: AI/agents and credits are available; focus is on deployment/usage first; monetization to flow through premium/enterprise attach and consumption over time .
  • M&A rationale: Browser Company acquisition expands interface layer for AI-era knowledge work; DX strengthens engineering intelligence; both consistent with long-term, pragmatic M&A philosophy .
  • Enterprise GTM and partners: Channel touches ~50% of revenues; FastShift and partner-led migrations support acceleration; large multi-year Cloud deals across sectors .
  • CFO transition: Retirement effective June 30, 2026; focus on smooth handover; finance team in good shape .

Estimates Context

MetricQ3 2025Q4 2025Q1 2026
Consensus Revenue ($USD)$1,353.1M*$1,356.6M*$1,402.1M*
Actual Revenue ($USD)$1,356.7M $1,384.3M $1,432.6M
Consensus EPS ($)$0.925*$0.855*$0.838*
Actual Non-GAAP EPS ($)$0.97 $0.98 $1.04
Beat/Miss vs ConsensusBeatBeatBeat

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Q1 FY26 was a clean beat on both revenue and non-GAAP EPS, driven by Cloud growth and stronger-than-expected migrations; near term narrative favors multiple expansion despite GAAP margin noise from restructuring .
  • FY26 guide raised broadly (revenue and margins), signaling confidence in Cloud platform differentiation (AI, governance, Isolated/Government Cloud) and enterprise sales execution .
  • AI adoption is a tangible driver (3.5M MAUs, +50% QoQ), with Collections and Rovo Dev likely increasing attach and edition mix; expect sustained cross-sell and seat expansion in enterprise .
  • Watch marketplace revenue mix and DC variability under EOL recognition; Cloud take-rate and migration pace introduce quarterly noise, but RPO and multi-year commitments underpin durability .
  • Near-term trading: Positive catalyst path includes Q2 revenue range ($1.535–$1.543B), execution on Cloud gross margins, and continued AI usage growth; risks center on OpEx timing and marketplace mix .
  • Medium-term thesis: AI-native System of Work, browser/interface expansion, and engineering intelligence (DX) support >20% CAGR to FY27 with non-GAAP OM ≥25.5%, per reiterated targets .
  • Capital returns: New $2.5B share repurchase authorization after completing $1.5B program supports downside protection and signals management’s conviction .

Appendix: Additional Data Points

  • Restructuring detail: $55.7M total ($31.6M cost of revenue; leases and support rebalancing) .
  • Segment growth commentary: DC growth +11% (pricing), offset by migrations; Data Center EOL revenue recognition added ~5.7ppt to DC growth and ~1.6ppt to total revenue growth in Q1 .
  • Balance sheet: Cash, equivalents, and marketable securities totaled ~$2.8B at quarter end .