Atlassian shares fall 17% as slower subscription growth forecast overshadows earnings beat

Shares in Atlassian Corp. fell more than 17% in after-hours trading today on a forecast for slower subscription growth from the Australian collaboration software company.

Its fiscal 2027 first-quarter results beat analyst estimates. The stock had nearly doubled between Atlassian’s August report and late October.

For the quarter ended Sept. 30, Atlassian reported adjusted earnings per share of $1.65, up from $1.04 in the same quarter of the previous year, on revenue of $1.772 billion, up 24% year-over-year. Analysts were expecting $1.43 per share on revenue of $1.71 billion.

Most of the growth came from cloud, where revenue rose 31%, to $1.302 billion. Customers kept adding Jira and Confluence seats in the quarter, according to the shareholder letter, including in business teams well outside software development.

Growth in Data Center, the self-managed product line Atlassian will retire in March 2029, slowed to about 5%, leaving revenue there at $391 million. The company said those customers are expanding less as they plan their moves to the cloud.

Subscription annual recurring revenue came in at $6.812 billion at the end of September, up 22.5%. Remaining performance obligations jumped 44%, to $4.746 billion. Enterprise customers are behind that increase, according to the company, with deals getting larger and stretching over several years.

Atlassian made money on an unadjusted basis for the second quarter running, with net income of $91 million, or 35 cents per share. Chief Financial Officer James Chuong put that down to keeping costs in check while revenue grew. Free cash flow climbed to $463 million on strong collections, and Atlassian returned $581 million to shareholders through buybacks.

On the product side, more than 87% of enterprise cloud customers now use Rovo, the company’s artificial intelligence assistant. Upgrades to the Teamwork Collection bundle rose sevenfold from a year ago to more than 3,000 customers. Annual recurring revenue from the larger Service Collection bundle is now above $1 billion, spread across more than 70,000 customers.

Chief Executive Mike Cannon-Brookes used the earnings release to argue that enterprise AI has reached “an inflection point.” Model power alone no longer sets anyone apart, he said. Platforms that give people and AI agents shared context to work from will pull ahead by his account, and Atlassian has “never been better positioned” to be one of them.

For the second quarter, Atlassian expects revenue of $1.825 billion to $1.835 billion, a little ahead of the $1.82 billion analysts had forecast, with cloud revenue growth of about 27%.

Most of Atlassian’s fiscal 2027 targets edged higher in the update. The company now sees full-year revenue growth of about 13.75%, three-quarters of a point above its August forecast. Because customers pulled Data Center purchases into fiscal 2026 after the retirement announcement, this year’s revenue comparisons are tougher.

Total revenue growth should pick up again in fiscal 2028, Atlassian said. Investors sold the stock on a different number. The company expects subscription annual recurring revenue growth to slow to about 18.5% by fiscal year-end, down from the 22.5% it just reported.

Photo: Atlassian