8-K: Atlassian Soars with Record Cloud Revenue, AI Adoption

Atlassian reports strong Q2 FY26 results, achieving its first $1 billion Cloud revenue quarter and significant growth in RPO and AI product adoption.

Summary

• Total revenue for Q2 FY26 reached $1,586.3 million, marking a 23% year-over-year increase.
• Cloud revenue surpassed $1 billion for the first time, growing 26% year-over-year to $1,067 million.
• Remaining performance obligations (RPO) increased by 44% year-over-year to $3,814 million, reflecting long-term customer commitments.
• Rovo, Atlassian's AI offering, exceeded 5 million monthly active users (MAU).
• The company crossed 350,000 customers, with over 80% of the Fortune 500 utilizing its collaboration software.
• Non-GAAP operating income was $430.2 million, with a non-GAAP operating margin of 27%, up from 26% in the prior year.
• GAAP operating loss improved to $47.7 million from $57.5 million in Q2 FY25.
• Free cash flow for the quarter was $168.5 million, a 51% decrease year-over-year, primarily due to timing differences in cash collections and tax payments.
• Atlassian increased its FY26 total company revenue growth outlook to approximately 22.0% and Cloud revenue growth outlook to approximately 24.3%.
• The company plans to accelerate share repurchases in the second half of FY26, and founders will pause their stock selling plans.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong report, driven by exceptional cloud growth, AI adoption, and enterprise momentum. The significant RPO increase and improved non-GAAP operating margin are highly positive, despite the temporary free cash flow decline attributed to billing timing.

Positives

• Achieved first-ever $1 billion Cloud revenue quarter, growing 26% year-over-year.
• Total revenue grew 23% year-over-year to $1.6 billion, surpassing $6 billion in annual run-rate revenue.
• Remaining performance obligations (RPO) increased significantly by 44% year-over-year to $3.8 billion, indicating strong future revenue visibility and customer commitment.
• Rovo, the AI product, surpassed 5 million monthly active users, demonstrating strong AI adoption.
• Cloud net revenue retention rate (NRR) is 120%+, ticking up for the third consecutive quarter, showing existing customers are expanding usage.
• Record number of $1 million+ ACV deals, up nearly 2x year-over-year, and over 600 customers with >$1 million ARR, up almost 40% year-over-year, highlighting enterprise growth.
• Non-GAAP operating margin improved to 27% from 26% year-over-year, indicating improved operational efficiency on a non-GAAP basis.
• Recognized as a Leader in multiple Gartner Magic Quadrants (Marketing Work Management, Collaborative Work Management) and The Forrester Wave (Enterprise Service Management Platforms).
• Appointed Anil Sabharwal, a seasoned technology entrepreneur and innovator from Google, to its Board of Directors.
• Increased FY26 total revenue growth outlook to approximately 22.0% and Cloud revenue growth outlook to approximately 24.3%.
• Accelerating share repurchases in H2 FY26 and founders pausing their stock selling plans, signaling confidence in the company's valuation.

Negatives

• GAAP net loss increased to $42.6 million from $38.2 million in Q2 FY25.
• Free cash flow decreased by 51% year-over-year to $168.5 million, primarily due to timing differences in cash collections and tax payments.
• Operating cash flow decreased by 49% year-over-year to $177.8 million.

Risks

• Uncertainties related to the platform, offerings, capabilities, investments, System of Work, and AI solutions.
• Risks associated with customers, company culture, strategic priorities, and leadership transitions.
• Potential impacts on anticipated growth, outlook, and financial results.
• Uncertainty in the macroeconomic environment affecting key growth drivers like paid seat expansion, cross-sell, upsell, and customer retention.
• Challenges related to the ongoing evolution of the enterprise go-to-market sales motion.

Future Outlook

Atlassian expects Q3 FY26 total revenue to be between $1,689 million and $1,697 million, with Cloud revenue growth of approximately 23.0% and Data Center revenue growth of approximately 33.5%. For the full fiscal year 2026, the company increased its total revenue growth outlook to approximately 22.0% and Cloud revenue growth to approximately 24.3%, with DX acquisition contributing about 1 percentage point. Data Center revenue growth is projected at approximately 20.0% for FY26, but is expected to meaningfully decelerate in FY27 due to increasing Cloud migrations and the lapping of the Data Center EOL revenue recognition impact. Non-GAAP operating margin for FY26 is expected to remain at approximately 25.5%. The company anticipates significantly higher free cash flow margin in H2 FY26 compared to H1, driven by timing of cash collections and billing transitions. Diluted share count is expected to increase by less than 1% in FY26, with an accelerated pace of share repurchases in H2.

Management Comments

• Mike Cannon-Brookes, CEO and co-Founder: "closed out Q2 with incredible momentum across the Atlassian platform and achieved some impressive milestones along the way. We delivered our first-ever $1 billion Cloud revenue quarter, which grew 26% year-over-year, crossed 350,000 customers, and Rovo surpassed 5 million monthly active users."
• Mike Cannon-Brookes, CEO and co-Founder: "Companies from the largest enterprises in the world, to the most innovative startups, rely on the Atlassian platform every day to power workflows across their organizations and unleash teamwork and knowledge at scale."
• Joe Binz, CFO: "We delivered another strong quarter of enterprise sales and partner execution, which drove total revenue up 23% year-over-year to $1.6 billion, surpassing $6 billion in annual run-rate revenue."
• Joe Binz, CFO: "With RPO up 44% year-over-year to $3.8 billion, our investments across enterprise, AI and system of work are yielding results and deeper, long-term customer commitments to the Atlassian platform."
• Mike Cannon-Brookes, CEO and co-Founder: "I'm convinced AI is great for Atlassian. Others think software is dead. In this environment, it seems that noise swamps signal, nuance gets lost. So this quarter I'm going to give you straight signal. The Q2 facts that make me bullish."
• Mike Cannon-Brookes, CEO and co-Founder: "Over the last decade, we've had a revenue CAGR of 30%+."
• Mike Cannon-Brookes, CEO and co-Founder: "I believe you can't fight uncertainty with certainty you fight it with clarity and conviction."

Industry Context

StockSavvy.ai notes that Atlassian's strong cloud revenue growth and significant adoption of its AI-powered Rovo platform align with broader industry trends emphasizing digital transformation, cloud migration, and the integration of artificial intelligence into enterprise workflows. The company's recognition as a leader in multiple Gartner and Forrester reports for work management and service management platforms underscores its competitive positioning in a rapidly evolving market. The focus on enterprise sales and long-term customer commitments, as evidenced by accelerating RPO growth, suggests Atlassian is effectively capturing market share among larger organizations seeking comprehensive 'system of work' solutions. The decline in free cash flow, while attributed to timing, warrants attention as the industry increasingly scrutinizes cash generation alongside revenue growth.

Comparison to Industry Standards

• Atlassian's Cloud revenue growth of 26% year-over-year is robust, comparing favorably to many established enterprise software companies that typically see cloud growth in the high teens to low twenties. For example, Microsoft's Intelligent Cloud segment often reports growth in the low to mid-20s, while Salesforce's subscription and support revenue growth has been in the mid-teens.
• The 44% year-over-year increase in Remaining Performance Obligations (RPO) to $3.8 billion is a strong indicator of future revenue and customer stickiness, often exceeding RPO growth rates seen in competitors like ServiceNow or Workday, which typically report RPO growth in the 20-30% range.
• The 120%+ Cloud Net Revenue Retention (NRR) rate is a strong performance metric, indicating significant expansion within existing customer accounts. This is competitive with, and often surpasses, NRR rates of leading SaaS companies like HubSpot or Zoom, which typically aim for NRR above 110-120%.
• Atlassian's recognition as a Leader in the 2025 Gartner Magic Quadrant for Marketing Work Management Platforms and Collaborative Work Management, and The Forrester Wave: Enterprise Service Management Platforms, Q4 2025, places it among top-tier providers like Asana, Smartsheet, or monday.com in work management, and ServiceNow or BMC in enterprise service management, validating its product strength and vision.
• The decline in free cash flow by 51% year-over-year to $168.5 million, while explained by timing, is a notable deviation from the strong cash generation often expected from mature SaaS companies. Companies like Adobe or Intuit typically demonstrate consistent or growing free cash flow, making Atlassian's decline a point of scrutiny, even if temporary.

Management Changes

Stakeholder Impact

• Shareholders: Positive impact from strong revenue growth, increased RPO, improved non-GAAP profitability, increased FY26 outlook, accelerated share repurchases, and founders pausing stock sales, signaling confidence. However, the GAAP net loss increased, and free cash flow declined significantly due to timing issues.
• Customers: Benefit from continued AI innovation (Rovo, Teamwork Collection, Service Collection, DX), cloud migration support, and enhanced collaboration and productivity tools. Increased customer base and retention rates indicate strong value proposition.
• Employees: Recognized on Forbes Worlds Best Employers 2025 List, indicating a positive work environment. Headcount increased, suggesting continued investment in talent.
• Competitors: Atlassian's strong performance in cloud and AI, coupled with its leadership positions in Gartner and Forrester reports, indicates a strengthening competitive stance in the work management and enterprise service management markets.

Next Steps

• Host a webcast on February 5, 2026, at 2:00 p.m. Pacific Time to answer questions regarding the financial results.
• Continue to make steady progress against strategic priorities by delivering innovation and differentiated value across the product portfolio.
• Accelerate the pace of share repurchases in the second half of FY26.
• Founders will pause their stock selling plans that have been in place since the IPO.

Key Dates

Recommendation

Atlassian's Q2 FY26 results demonstrate exceptional momentum in its core cloud business, with record cloud revenue and accelerating RPO growth signaling robust future performance. The strong adoption of AI-powered products like Rovo and significant enterprise deal wins underscore the company's strategic positioning and market leadership. While the GAAP net loss increased and free cash flow saw a temporary decline due to timing, the underlying operational metrics, improved non-GAAP profitability, and increased full-year guidance are highly positive. The commitment to accelerated share repurchases and the founders pausing their selling plans further reinforce confidence in the company's long-term value. These factors collectively suggest a strong investment opportunity.

Keywords

Atlassian, TEAM, Cloud Software, AI, Work Management, Enterprise Software, Jira, Confluence, Rovo, Financial Results, SEC Filing, Q2 FY26, Software Development, Service Management, Corporate Governance