Atlassian (TEAM) Q4 2026 earnings call transcript

Welcome to Atlassian's fourth quarter fiscal year 2026 Earnings Call. Thank you for joining us today. On the call with me today, we have Atlassian CEO and co-founder Mike Cannon Brooks and Chief Financial Officer James Chung. Earlier today, we published a shareholder letter and press release with our financial results and commentary for our fourth order of fiscal year 2026.

The shareholder letter is available on the investor relations section of our website, where you will also find other earnings related materials, including the earnings press release and supplemental investor data sheet. As always, our shareholder letter contains management, insight, and commentary for the quarter. So during the call today, we'll have a brief opening remarks and then focus our time on Q&A.

This call will include forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, and assumptions. Any such risks or uncertainties materialize, or if any of the assumptions proven correct, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made, and we undertake no obligation to update or revise such statements should they change or cease to be current.

Further information on these and other factors that could affect our business performance and financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled risk factors and our most recently filed annual and quarterly reports.

During today's call, we will also discuss non-GAP financial metrics. These non-GAP financial measures are in addition to and are not a substitute for or superior to measures of financial performance prepared in accordance with GAP. A reconciliation between GAP and non-GAP financial measures is available in our shareholder letter, earnings release, and investor data sheet on the investor relations section of our website.

We'd like to allow as many of you to participate in Q&A as possible out of respect for others on the call. We'll take one question at a time. With that, I'll turn the call over to Mike for opening remarks.

Thank you all for joining us today. As you've already read in our shareholder letter, Q4 was another outstanding quarter, capping off an incredible fiscal year for Atlassian. Total revenue grew 28% to $1.8 billion. Cloud revenue surged to $1.2 billion as growth accelerated again up 31% year over year.

RPO grew 44% year over year to $4.8 billion and we delivered a GAP operating margin of 12%. We're firing across all of our strategic priorities, enterprise, the system of work and AI, all while driving durable, profitable growth.

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%. In the Atlassian system of work, leading enterprises like Google Cloud and using our platform to power the way their teams collaborate. And in AI, RPO is now used by over 80% of the Fortune 500. RPO assisted actions grew 50% over the prior quarter and RPO adopters that is customers using RPO continue to grow their ARR at more than twice the rate of non-adopters.

When we think about what AI is doing for Atlassian, the results speak for themselves. Customers are getting real value from the AI embedded directly into their workflows and it's translating into direct growth in our business. Customers are committing more deeply to the Atlassian platform because of the value delivered.

We're seeing longer customer commitments, larger deals, stronger seat expansion, great cross-element and higher NRA. Last quarter, we recognized customers like NVIDIA and ResMed at Team 26 for how they're putting the Atlassian platform to work in the AI era to drive their businesses using the team work graph. The reason customers like these and many more are getting so much value from Atlassian comes down to a key structural advantage and that advantage is context.

We believe models will keep improving and organizations will hire that intelligence by the token. But context, their internal knowledge, experience and memory is much harder for organizations to build and it cannot be hired.

With the Teamwork Graph, we have 25 years of deep data about work. That's enabled us to build one of the best context graphs that exist for enterprise knowledge, now spanning over 200 billion objects and connections.

For agents grounded in the Teamwork Graph, organizations can see up to 44% more accurate answers while consuming 48% fewer tokens. In short, it enables to get customers' results from their AI that are cheaper, better and better. As you've read in our shareholder letter, we're executing well on a long-term strategy from a position of strength and we're seeing this play out each quarter in our strong results.

And the best is truly yet to come for Atlassian. With that, I'll pass the call to the operator for Q&A.

Thanks, Adam, for the question and welcome to the coverage. First, I would highlight that we're really pleased to see the strength that we saw in the quarter printing ARR growth, sub-day ARR growth of 23% year over year. When it comes to the guide, we'll continue to take a thoughtful and prudent approach here, really balancing the momentum that we're seeing in the business, the demand signals that we're getting from our customers with the uncertainty as you look out in the macro environment, fiscal policy, and geopolitical landscape.

And as you mentioned, this is the first time we'll be issuing ARR guidance for the full fiscal year. We're also still early in the fiscal year here, so taking a bit more of a prudent approach in that second half of FY27, you know, it's also worth noting that in FY26, the ARR year of year growth benefited by approximately one point from the acquisition of DX at the close of November in 2025. That's our fiscal Q2.

And so we'll be laughing that DX acquisition and the healthy acceleration that we saw in the second half of FY26. And of course, we're going to still continue to scale or enterprise go-to-market sales motion as we unlock the opportunities that we see in front of us. So all of you are really good about the state of the business here.

And you know, coming off a quarter where RPO landed at 44% year-on-year, NRR was north of 120%. So here, just taking a balanced and prudent approach to the guide. That's right. I hope so. Thank you.

Hi, Alan. Sure. I can take that one. Look, I can tell you I've met more than 60 customers over the last six weeks in five different countries around the world and the teamwork graphs and AI comp in every single conversation I've had.

You can see from our results, those customers are continuing to expand their use of the teamwork collection, either upgrading to it, if they're buying single applications, or adding to the seat to move into more of their knowledge workers and across the organization.

And AI and the teamwork graph is one of the biggest reasons. It's one of the top two reasons quoted by our customers for their reason to upgrade to the cloud and to upgrade to the teamwork collection. Now the question is why and where those results come from. Again, our applications have a lot of connections to other applications around their world, whether that's their CRM system, whether that's their documentation knowledge systems.

We have for about eight years been building the teamwork graph as the best way to get answers across all of those applications for their users or for their agents, which increasingly ask a lot of questions in a very short period of time. The quality of those answers is directly related to the queryability of our graph, the density of that graph, so the amount of information, the connections we have between it, the quality of the social and collaboration graph, the people information that we have, and fundamentally the breadth of information, the number of contexts you have. We outlined a little bit of this in the shareholder letter, and there's a number of videos that show direct examples of where that gain comes from.

Fundamentally, the better answers, the quality of information across all those applications we can give to your agents, the less tokens they consume, and the less time it takes them to get to an equivalent quality answer. Customers are seeing that. It's based on all of the structured and unstructured workflows we have from those customers over the last 25 years, and for all those customers that are adopting the teamwork collection and the teamwork graph coming inside that, I frequently get asked to buy the teamwork graph and the answer is no, you already have it, I can often go and say you have 150 million objects and connections in your email graph today, and they're like I do, and then we can do live demos, we can show them in real time their own graph, how it works using the CLI, it's an amazingly powerful story, especially in an age where all of the customers are offering about token costs and AI spend, it's an incredibly powerful story about how we can actually connect their organizational knowledge, their history directly to those AI agents and give them a cost and performance, better quality answers and cheaper answers, so it's a very powerful story when we've been building for a long time, and very customer-reson in all those conversations.

Yeah, thanks, Ryan. No, the philosophy really remains the same here, and on the cloud revenue drivers here on the 49 million B, maybe I'll start with the fact that, you know, and highlight the fact that the DC migrations to cloud were really in line with expectations and not a contributor to the 49 million B. It's progressing well and in line with our expectations for FY26 contributing approximately mid to high single digits to the cloud growth revenue.

So the two primary drivers here of the outperformance were really the cross-sell and seed expansion that we were seeing similar to what we saw in Q3. On the cross-sell side, you know, we continue to see strong uptake in our collections across service collection and teamwork collection. You know, service collection revenue growth accelerated in Q4, just a strong signal of the AI adoption that we're seeing, and that might mention a little bit earlier here. You know, in fact, we're seeing over 3X increase in agentic automations in service collection, as customers are continuing to deploy more agents beyond IT teams in HR and legal and finance and marketing teams.

So, again, also great to see the recognition here being named a leader in Gartner's Magic Quadrant for conversational AI platforms for employee services. You know, we also continue to see a lot of strong performance on the teamwork collection side. That's a good reminder that, you know, teamwork collection is still the best vehicle for customers to adopt and unleash AI on the Atlassian platform. You know, this is where customers are upgrading to increased robo-credits, giving customers what they want in terms of the predictability as well as the ability to really load balance those tokens across their organizations. And we're seeing that drive our strong ARP who uplift here as well.

So, you know, really, I think what this shows is that the customers are consolidating their collaboration stack onto the Atlassian platform, you know, recognizing the value that the teamwork graph really brings here. And we do see that in the results with teamwork customers having four to five times more paid seats, for instance, than standalone Jero or confluence customers. Thank you.

Start with that. You know, again, on the margin guide here, you know, as Mike and I stated back in the Q3 shareholder letter, you know, we're committed to driving durable, profitable growth here and a positive gap operating margin target for FY27 really sets us on that path to accelerate and expand gap profitability over time. And, you know, in terms of drivers, look, the big part of that is disciplined hiring approach, right? We talked about that as well as reallocating resources, again, some of the biggest opportunities in ROI that we see right now, as well as moderating the stock-based compensation here. You know, at the same time, you know, we're going to continue to judiciously invest in AI and scale our enterprise sales motion, where we do see a lot of customer demand right now and our ability to really kind of capture that sustained opportunity in front of us.

So, you know, that goes to really help inform the six and a half gap operating margin guide for Q1 and the 4.5% gap operating margin for FY27 as we continue to focus on driving that profitability and growing that over time.

Yeah, look, like an add-on from the gross margin in the COG side, I would say it's a classic Atlassian story of being thoughtful in long-term thinking, long-term orientation. We've talked for three years now around our AI gateway and how we think about AI. We've been blending multiple models for a multi-year period and we're getting really, really good at it. It's a non-trivial challenge.

I'll give a huge shout out to all of our R&D teams who've been working on that cost to serve, question for a long time in terms of getting the best quality at the best price and the best speed. People want to find fast answers from their AI across Tim work graph, across our enterprise search architecture, which is now the best in the world in terms of giving you answers across your knowledge of state, whether that's to a person, a human or whether that's to an agent or something querying in that manner from an AI perspective, our ability to blend models, our ability to manage traffic costs over time is truly phenomenal. We get better at it every quarter and you can see that we had a huge continued growth in AI usage.

Again, rubber assisted actions are up 50% quarter on quarter and we've continued to do that and focus on the durable profitable growth that we've talked about for a while now. So it's a huge credit to everyone in the Atlassian team to be able to do that. It's a lot of hard work. It's a lot of long-term thinking about the architecture that we've built underneath our AI to be able to give those answers in an incredibly competitive value way to our customers as well. So not only do we give them the best answers, we give them the best answers at an incredible price, which is a part of the reason you're seeing the growth in the service collection.

The growth in the Tim work collection, again, as James mentioned, again, accelerating AI being a huge driver of that service space, again, hitting record numbers for customer conversions from legacy service providers, et cetera. And you see that with our MCP calls as well as an example. That's also non-trivial to surf cheaply to manage that over time. MCP calls are up 400% in the quarter with barely a blip in people actually using the applications through the web or through a mobile client. So really happy where we sit from a technological perspective of being able to live in this and more improvements to come. Got it. Thank you both.

Hey, thanks, Greg. I can start with that and maybe throw it over to Mike, you know, to Ryan's question a little bit earlier about some of the cloud outperformance drivers that we saw. I talked about the cross-sell side of it and we are seeing customers continue to wall-to-wall with Atlassian here and continue to adopt higher additions and move towards teamwork collection, service collection. But I think importantly, we're seeing that growth in teamwork collection, while also seeing continued strong seed expansion in our core GRA and confluence offerings here.

You know, and this expansion is broad-based. Recall that roughly two-thirds of users across GRA and confluence are knowledge workers, right? So these are non-software development teams really sitting in HR legal finance and really speaks to that diversified user base that we're seeing here. And, you know, I think this growth does demonstrate that in the AI-driven world, the need for collaboration at the enterprise scale, tracking, planning, managing work is actually increasing. And lastly, you know, it is a mission-critical platform here, helping our customers orchestrate their teams, their agents, their workflows to really unlock that value in AI and driving real ROI and real outcomes here.

And that really was the other, you know, primary driver of the outperformance that we saw in cloud, including the cross-sell that I talked about a little bit earlier.

Look, I can talk about it from a developer or engineering front in a number of different angles, Greg. I know we've talked about this before. We've been long on record. You can look at the receipts. I think there's going to be more developers in the world in five years time than there are today. The cost of building technology is going down. The amount of technology we're going to build is going to go up.

I believe that will continue to be a good trend. We've said this for a number of years. Those are the signals we see in our customers. The ability to grow that is huge.

I think secondly, the number of people building technology that we don't necessarily call developers is also growing. So we're seeing people in finance and in HR and in marketing using a lot of these tools to build technology of various different forms. Again, we see that in our NCP server usage and our CLI usage, right, coming across the board in lots of different functional areas, not just inside the engineering fraternity. And I think that's really important.

From our perspective, again, the system of work is about helping companies to connect their technology teams with their business teams to have a single platform that allows both sides of the organization in a technology-driven organization. An organization where software is their key competitive advantage. It doesn't make them a technology company. It can be a bank, an insurance company, a health care company, a university. There are lots of companies for whom many organizations in the world, technologies are key competitive advantage.

I believe that is a big growth cycle that we are continuing to participate in. Our strength is in connecting the technology team to the business team. And I do believe that the developer hiring will continue to grow as we see in our customer signals.

Very helpful. Thank you. Okay.

Hi, DJ. Let me think about how to answer that one. I would say we see signals that are only going to be a durable trend. I don't think it's anything to do with early adopters, to be honest. This is a technology that has been adopted incredibly fast. Again, over 80% of the fortune 500 are using rovo. All of the customer meetings that I walk into and it's a lot, they have rovo usage, AI usage, they're looking to expand their usage, they're looking to understand. This is a massive sort of super cycle, right? They are customers inevitably trying to work out how can I apply AI and smart and the teamwork graphs and agents to this workflow or that workflow.

Structured workflows like in a JIRA or a service collection or unstructured workflows like the moon and confluence and Trello and other areas where they have unstructured workflow that they believe they can make more efficient or importantly higher quality, right? The results of that workflow can be better than they were before. I don't see that as being an early adopter problem I see in every single customer I walk into. They're all learning, adopting, moving and trying. What they're also seeing is the quality of rovo is incredibly high, right? It outperforms almost every chat tool on the market across their data. The more they connect into the teamwork graph, the better those results get because of our context, because of a lot of great work in R&D.

So I don't think these are sort of early adopter challenges. I think it's a signal of the more people lean in, the better results they get, the better value they feel like they're getting. They're then expanding across more of their business teams, more areas of their organization or understanding that when they add strategy collection or they add DX or they add the service collection, the platform, the teamwork graph they've built just compounds in value for them. One of the reasons service collection continues to grow so strongly is because of the compounding effect between the teamwork collection and the service collection. And that's a really important thing for them to understand. And I think there's, as we've shown in our addressable market figures of 14 billion within the existing customer base without changing any products or pricing, et cetera, that there is a huge amount of upside opportunity still for us to go out and capture and that's our challenge to do on a weekly basis.

Thank you.

Hi Koji, look, I can talk to that one. I think context is obviously very hard to build. This is a non-trivial problem. It's a unique differentiator that we have and we continue to improve on. We made massive improvements in the last quarter in the teamwork graph. The quality of connectors and the information that we have, Al, we continue to correlate cross-reference and infer across that data. For example, skills we can now infer in the talent app inside the strategy collection across all the information the teamwork graphs and infer in the skills and AI nativity of your employees. For example, the quality of our chat results is up markedly in the last quarter and was already at all time highs.

We're seeing that in a number of true fans of chat growing up and up and up. The quality of our search, the semantic indexing of code that we showed, there is a lot of hard work to continue to do to make that context to make the teamwork graph better and better every quarter. We have in Amsterdam. No doubt there will be further improvements shown there. I don't think it's as simple as every organization will have one graph and we're done. I think most organizations will have three to five large-scale knowledge graphs and we intend to be one of those three. We believe we have a significant advantage at the moment and continue to invest, as Jane said, in our AI and R&D teams to continue to make that accessible and to make that value and quality continue to improve.

The teamwork graph, importantly, we opened up at Team 26 US, which is a really important step with our MCP server, with our command line unified CLI, the ability to put the teamwork graph to access its information in any agent to harness that you're using, other chat applications, agents running on other platforms is really important. This is about being an interconnected part of a customer's technology estate. It's about the Atlassian platform being a strategic piece in the puzzle of how it is that they run their business. I think that integration is a really important point. We're seeing that the reason we talk about the MCP server, MCP and CLI users in the quarter passing a million now.

We don't know where that puts us in a world scale, but I think it's one of the biggest MCP servers that exists. More than doubling in the quarter is because of people getting to the teamwork graph, getting to that context from their agents wherever they're deployed. Again, we also signed and increased our partnerships with all of the foundational labs during the quarter. We released cursor and quad and GitHub agents within JIRA to again bring our interfaces, those agents into our interfaces, so you can use them as natively as possible, so that we are part of the network of tools that help an integral part, a strategic part of the network of tools that helps those companies to do what they need to do.

I think the teamwork to ensure that it remains, the best also context that enterprise can get. Thanks so much.

Thanks, Alex. I would say the most important thing is there was no unblock, so I would say this is a continued delivery of the activity we've seen over the last two quarters, three quarters, four quarters. We've talked for three or four years about how it continued to improve our enterprise motion. That is on a technology side, compliance. We should take a compliance, for example, for Rovo during the quarter. The enterprise group is doing a fantastic job on a technology side about making these tools, technologies, applications, collections available to companies at scale, at incredible scale now in the cloud, in different geographies and different compliance requirements. So technology wise, we're doing a great job. We've continued to improve over the last few years the human side of our enterprise connectivity is we become more of a strategic partner from sales to customer success to all of the groups that have to interact with our customers at the enterprise level.

We've continued to do a better and better job every week for the last multiple years and you see those results coming through. The customer adoption is a continued trend. The RPO acceleration that we have seen again is about customers simply understanding our platform, seeing more value across multiple collections in the strategic platform sense of Atlassian, and then signing camps longer deals, larger deals, and then expanding their footprint. That's why you see the strong NIR numbers and the strong RPO numbers. So the most important thing I would say is it's not a singular unlock. It is many years of hard work, continual work across lots of areas of the business behind a deep belief in the strength we have in the enterprise segment.

James.

Yeah, I know. Again, I'll just say again, you're really pleased with the momentum that we're carrying into FY27 against subs ARR growth of 23% RPO growth of 44% year over year. So we do really feel good about the state of the business and the healthy broad base customer demand signals that we're seeing. And as I mentioned a little bit earlier, worth noting the FY26 AR year over year growth rate did benefit from approximately a point from the DX acquisition. So when it comes to that initial guide of 18% for subs growth for FY27, again, taking a balanced and thoughtful approach here. And it's still early in the year. So just adding a bit more prudence to that second half of FY27.

Hi, Rob. Look, as we said, we continue to see a great increase in rovo assisted actions, which is probably a rough proxy for credit usage. It's just not directly linear, but the 50% quarter on quarter growth gives you a sense of the customer adoption of rovo across the areas. Secondly, as we've said, the teamwork collection with approximately 10 times as many rovo credits included is a great motivator, inducement for upgrade in terms of hitting those limits and looking at upgrading the tumor collection, both in terms of moving to the tumor collection, but also expanding the number of seats, the breadth of deployment. Again, as we talk about it, they see the teamwork graph working in multiple different types of teams.

You see seat increases, right, which is again, driving that ARPOO number, if you're looking at a really macro level that is happening there. We have a series of consumptive elements today. We continue to work on how we judiciously and prudently roll out consumption-based offerings. We talked about both a direct consumption-based offering for overages, and secondly, the Flex model, which we continue to work on, to allow customers to opt in to the entire Atlassian platform with a sort of dollar-based commitment that they can use across various different collections and consumptive elements in a singular package, both of which are early in their cycle, hold great promise for the future, but as always, we maintain our sort of long-term thinking position and working through there.

Right now, the simplest thing I would say is that the teamwork collection and the service collection are the vehicles for AI monetization. Customers adopting those, driving the usage within those, that is, as we said, that's the vehicle to measure AI monetization and adoption, and both are going very, very strongly.

Look, thank you, everyone, for joining the call today. As always, we appreciate the thoughtful questions and continued support. A huge shout out to everyone across the Atlassian team, another great quarter into the books and continued long-term thinking and hard work to deliver for our customers. I hope to see as many of those customers and as many of you on the investment community at Team 26 Europe, which is coming up in October. Other than that, have a kick-ass day.