Collaboration software company Atlassian (NASDAQ: TEAM) beat Wall Street’s revenue expectations in Q2 CY2026, with sales up 27.6% year on year to $1.77 billion. Guidance for next quarter’s revenue was optimistic at $1.71 billion at the midpoint, 2.8% above analysts’ estimates. Its non-GAAP profit of $1.87 per share was 24.5% above analysts’ consensus estimates.
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Atlassian (TEAM) Q2 CY2026 Highlights:
- Revenue: $1.77 billion vs analyst estimates of $1.66 billion (27.6% year-on-year growth, 6.4% beat)
- Adjusted EPS: $1.87 vs analyst estimates of $1.50 (24.5% beat)
- Adjusted Operating Income: $636.3 million vs analyst estimates of $510.8 million (36% margin, 24.6% beat)
- Revenue Guidance for Q3 CY2026 is $1.71 billion at the midpoint, above analyst estimates of $1.66 billion
- Operating Margin: 11.9%, up from -2.1% in the same quarter last year
- Billings: $2.02 billion at quarter end, up 34.7% year on year
- Market Capitalization: $37.83 billion
StockStory’s Take
Atlassian delivered a standout Q2, with revenue and non-GAAP profitability surpassing Wall Street expectations and a market response reflecting strong investor confidence. Management pointed to broad-based enterprise adoption, rapid expansion in its cloud and AI-powered offerings, and sustained customer seat growth across both technical and business teams. CEO Michael Cannon-Brookes credited the Teamwork Graph’s unique contextual capabilities and Rovo AI’s growing usage for improving customer engagement and driving larger, longer-term deals. The company also highlighted disciplined cost management, which helped boost operating margins despite increased AI usage.
Looking ahead, management’s forward guidance is anchored in continued AI integration, further scaling of the enterprise go-to-market strategy, and prudent planning in light of macroeconomic uncertainties. CFO James Chuong emphasized ongoing investment in AI and sales capacity while maintaining a measured approach to operating margin expansion. Cannon-Brookes noted, “The best is truly yet to come for Atlassian,” underscoring expectations that deeper AI adoption and expansion of the Teamwork Graph will further entrench the platform in enterprise workflows. The company also outlined plans to roll out more flexible consumption-based offerings.
Key Insights from Management’s Remarks
Management attributed Q2’s strong performance to the compounding impact of AI innovations, enterprise deal momentum, and the strategic value of Atlassian’s context-driven Teamwork Graph.
- Enterprise deal momentum: The quarter saw record large enterprise transactions, with the number of $3 million and $5 million annual recurring revenue customers growing over 50% and 70% year-over-year, respectively, as organizations deepened commitments and expanded platform usage.
- AI and Teamwork Graph impact: Rovo AI, now used by over 80% of Fortune 500 companies, drove a surge in assisted actions and customer adoption. Management highlighted that customers leveraging Rovo grew their recurring revenue at double the rate of non-adopters, attributing this to the graph’s ability to provide highly accurate, context-rich responses while reducing AI costs.
- Broad-based seat expansion: Growth was not limited to technical users; two-thirds of new seats came from business functions such as HR, finance, and marketing. This reflects increasing cross-department reliance on Atlassian’s collaboration tools, further embedding the platform across organizations.
- Disciplined cost and margin management: Despite rising AI usage, Atlassian maintained margin improvement by leveraging a blended AI model strategy and cost controls. CFO James Chuong credited long-term R&D efforts and resource allocation for enabling the company to deliver high-quality AI services while expanding margins.
- Ongoing product synergy: The introduction of new connectors and features in the Teamwork Graph, and deeper integration with external AI agents, enhanced the platform’s utility and stickiness. Management cited growing cross-sell momentum between Service Collection, Teamwork Collection, and new AI-powered solutions as a driver of both current and future growth.
Drivers of Future Performance
Atlassian expects future performance to be shaped by AI adoption, further enterprise penetration, and ongoing investment in product innovation, balanced against cautious planning for external risks.
- AI monetization and platform upgrades: Management expects continued expansion of AI-driven features, especially through Rovo and the Teamwork Graph, to drive seat growth and motivate customers to upgrade to higher-value collections. The company is also piloting new consumption-based pricing models to better align with evolving customer usage patterns, aiming to improve average revenue per user.
- Enterprise sales scaling: Scaling the enterprise go-to-market strategy remains a priority, with management citing significant untapped opportunity among large organizations where Atlassian’s presence is still a small fraction of total revenue potential. Deeper engagement, longer deal terms, and cross-selling across business units are expected to support sustained growth.
- Prudent approach to macro uncertainty: The company is maintaining a cautious outlook in the face of macroeconomic and geopolitical risks. Management emphasized that guidance reflects a balanced view, with careful resource allocation and a willingness to adjust investments in sales and R&D as conditions evolve.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be watching (1) the pace of enterprise seat expansion and success of cross-sell initiatives, (2) further integration and monetization of AI features, particularly Rovo and Teamwork Graph, and (3) execution of new consumption-based pricing models. Additionally, we will closely monitor Atlassian’s ability to navigate macroeconomic uncertainties while maintaining margin discipline and innovation velocity.
Atlassian currently trades at $149.55, up from $110.20 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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