Atlassian posts 24% growth as guidance stays cautious

How strong was fiscal Q1?

Atlassian reported fiscal Q1 2027 revenue of $1.8 billion, up 24% year over year, as cloud sales and larger enterprise commitments lifted the business. Cloud revenue rose 31% to $1.3 billion. Subscription annual recurring revenue, or ARR, grew 23% to $6.8 billion.

GAAP operating margin reached 11%. Free cash flow rose 304% to $463 million, equal to 26% of revenue. Remaining performance obligations, a measure of contracted future revenue, increased 44% to $4.7 billion. CEO and co-founder Mike Cannon-Brookes said customers spending more than $1 million annually grew by well over 30% year over year.

Reported growth, cash generation and contracted revenue support continued enterprise spending, but Data Center timing effects limit how much of the run rate can be carried forward.

How much Data Center business remains?

CFO James Chuong said Data Center retention exceeded Atlassian's expectations even as some of the company's largest and most complex customers continued to migrate to the cloud. Those migrations contributed approximately mid- to high-single-digit percentage points to quarterly cloud revenue growth.

Some large customers have signed multiyear cloud migration commitments through hybrid deployments. Under those arrangements, revenue is split between Data Center and cloud rather than customers being charged twice. The mix produced slightly more Data Center revenue and slightly less cloud revenue in the quarter, although Atlassian did not quantify the effect.

AI features also encouraged cloud moves. Chuong said customers that migrate from Data Center to cloud increase spending by 1.75 times after three years. The company did not supply a cohort size or measurement method for that claim.

Asked how much Data Center business may remain beyond the platform's March 2029 end-of-life date, Chuong did not provide an estimate. He said migrations remained on pace and pointed to planned government cloud authorization submissions as part of the company's commitments to public-sector customers.

Cloud migration is contributing to reported growth, but Atlassian has not quantified the remaining Data Center runoff.

Why did guidance trail the beat?

Analysts pressed executives about the implied slowdown in second-quarter cloud revenue growth and the full-year revenue guidance increase, which trailed the first-quarter revenue beat. Chuong said Atlassian was taking a prudent approach early in the year, balancing business momentum against uncertainty in the macroeconomic environment, fiscal policy and geopolitics.

He also noted that Atlassian would begin to lap its DX acquisition in the second quarter and face tougher comparisons in the second half after the company's fiscal 2026 acceleration.

On guidance, Chuong said Atlassian would pass through slightly more than its $20 million first-quarter cloud revenue beat. The $33 million Data Center beat included revenue-recognition timing effects, which he said explained why the full quarterly total revenue beat did not carry through to the annual outlook.

Management's guidance embeds caution and tougher comparisons rather than a straight-line extension of the first quarter.

Is AI monetization visible?

More than 87% of Atlassian's enterprise cloud customers use Rovo, Cannon-Brookes said. Teamwork Graph connects more than 250 billion objects and relationships, with more than 80 out-of-the-box connectors to third-party tools.

Customers with richer Teamwork Graphs are twice as likely to become deep Rovo adopters. Those deep adopters grow ARR more than twice as fast as customers with light Rovo usage. More than 10 million human-agent collaborations take place on the platform each month, double the level six months earlier.

More than 3,000 customers have upgraded to Teamwork Collection, a sevenfold increase from a year earlier. Service Collection surpassed 70,000 customers and reached $1 billion in ARR, growing more than 30%, Chuong said. Cannon-Brookes said the collections remain Atlassian's primary way of monetizing AI.

Atlassian will begin enforcing usage-based pricing features in early December, but it assumes no meaningful pricing revenue in fiscal 2027. “It is not a near-term revenue driver,” Cannon-Brookes said. The plan aligns value delivered with usage, particularly for customers with unusually high consumption.

AI usage is broad and the collections show commercial traction, but Atlassian assumes no meaningful fiscal 2027 revenue from usage pricing.

What does the agent strategy require?

Atlassian introduced Agentic Multiplayer Protocol, or AMP, at Team ’26 Europe as a collaboration layer across its platform rather than a separate product. Cannon-Brookes described Teamwork Graph as the underlying context layer and AMP as an experience layer intended to help people work with agents across Atlassian and third-party tools.

Asked whether AI could reduce demand for coordination tools such as Jira and Confluence, Cannon-Brookes argued that more agent-driven work would increase the need to track and coordinate it. He cited Morgan Stanley's plans to move Jira and Confluence to the cloud and roll out Rovo to thousands of users. That is one customer plan, not a quantified demand forecast.

Atlassian is also expanding its forward-deployed engineer program. The engineers work with customers on production code and AI workflows, then train customer teams to continue deployments themselves. Cannon-Brookes said the program remains early, the engineers are rarely charged, and Atlassian is not seeking to build a services business.

The agent thesis assumes more work will need coordination, while the deployment program remains early and mostly uncharged.

What does Atlassian sell?

Atlassian develops collaboration, project-management and workflow software for technology, business and service teams. Its products help organizations plan projects, manage software development, coordinate work and share knowledge across departments.

Its products include Jira for project and issue tracking, Confluence for team collaboration and knowledge management, Jira Service Management for IT and enterprise service workflows, Trello for task and project organization, Loom for video messaging and screen recording, and Bitbucket for source-code management and collaboration.

The portfolio spans coordination and developer workflows, but the quarter does not resolve the Data Center runoff or near-term AI pricing question.