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Atlassian's Cloud Business Gains Pace: A Sign of More Upside?
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Key Takeaways
Atlassian's cloud business is gaining momentum, with Q3 cloud revenues rising 29% YoY to over $1.13B.
AI is fueling cloud expansion, as Rovo customers grow ARR at about twice the rate of non-Rovo users.
RPO climbed 37% to $4B, giving Atlassian stronger visibility into future recurring revenues.
Atlassian Corporation’s (TEAM - Free Report) cloud business is gaining momentum, reinforcing consistent revenue growth and the potential for better results in the future. Cloud revenues surged 29% year over year to more than $1.13 billion in the third quarter of fiscal 2026, outpacing previous growth trends and prompting management to raise its full-year cloud revenue growth outlook to 26.5%. This acceleration reflects growing enterprise adoption as customers increasingly migrate workloads to Atlassian's cloud platform and expand deployments across Jira and other cloud offerings. At the same time, larger enterprise commitments lifted remaining performance obligations (RPO) 37% year over year to $4 billion, providing stronger visibility into future recurring revenues.
AI is becoming another key catalyst for Atlassian's cloud expansion. Customers using Rovo are growing annual recurring revenues at roughly twice the rate of non-Rovo customers, while AI credit usage continues to increase more than 20% month over month. Meanwhile, Teamwork Collection customers consume about twice as many AI credits and AI agents as comparable standalone users, highlighting stronger cross-selling and monetization opportunities. The company's rapidly growing Service Collection, which has surpassed $1 billion in ARR and is expanding at more than 30% annually, further broadens Atlassian's cloud opportunity beyond software development into enterprise-wide service management.
Recent product updates strengthen this momentum. Since June 2026, Atlassian has continued rolling out AI-powered cloud capabilities, including Rovo Dev and additional Teamwork Graph enhancements, which should deepen customer engagement, support broader cloud adoption and strengthen long-term subscription revenue growth.
TEAM Faces Stiff Competition in Cloud Race
Atlassian faces strong competition from GitLab (GTLB - Free Report) and ServiceNow (NOW - Free Report) , both of which are expanding enterprise AI capabilities, cloud platforms and large customer adoption while targeting similar enterprise transformation opportunities.
GitLab is intensifying its competition with Atlassian through its cloud-first DevSecOps platform, growing enterprise subscriptions and AI-powered Duo agent platform. The company leverages cloud-neutral architecture, governance and consumption-based AI monetization to attract enterprises expanding cloud adoption. GitLab also targets broader collaboration with unified software delivery, while it benefits from growing enterprise ARR, platform reliability and AI-led workflow automation.
ServiceNow contests aggressively through AI-native enterprise workflows, robust subscription revenue growth and a unified cloud platform. The company differentiates itself with AI Control Tower, Workflow Data Fabric and hybrid consumption pricing that support enterprise-wide collaboration and governance. ServiceNow also benefits from broad cross-product adoption while it expands AI-driven automation across IT, CRM, HR and security workloads.
TEAM’s Price Performance, Valuation & Estimates
TEAM shares have declined 48.3% in the year-to-date period, underperforming the broader Zacks Computer & Technology sector’s rise of 14.7% and the Zacks Internet - Software industry’s fall of 11.2%.
TEAM’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Atlassian trades at a forward 12-month price-to-sales ratio of 2.9X, compared with the industry’s 3.78X. TEAM has a Value Score of D.
TEAM’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for TEAM's fiscal 2027 earnings stands at $6.07 per share. While the estimate has been unchanged over the past month, it has been revised downward over the last 60 days, reflecting expected year-over-year growth of 10.8%.
View the Zacks #1 Rank List
Image: Shutterstock
Atlassian's Cloud Business Gains Pace: A Sign of More Upside?
Key Takeaways
Atlassian Corporation’s (TEAM - Free Report) cloud business is gaining momentum, reinforcing consistent revenue growth and the potential for better results in the future. Cloud revenues surged 29% year over year to more than $1.13 billion in the third quarter of fiscal 2026, outpacing previous growth trends and prompting management to raise its full-year cloud revenue growth outlook to 26.5%. This acceleration reflects growing enterprise adoption as customers increasingly migrate workloads to Atlassian's cloud platform and expand deployments across Jira and other cloud offerings. At the same time, larger enterprise commitments lifted remaining performance obligations (RPO) 37% year over year to $4 billion, providing stronger visibility into future recurring revenues.
AI is becoming another key catalyst for Atlassian's cloud expansion. Customers using Rovo are growing annual recurring revenues at roughly twice the rate of non-Rovo customers, while AI credit usage continues to increase more than 20% month over month. Meanwhile, Teamwork Collection customers consume about twice as many AI credits and AI agents as comparable standalone users, highlighting stronger cross-selling and monetization opportunities. The company's rapidly growing Service Collection, which has surpassed $1 billion in ARR and is expanding at more than 30% annually, further broadens Atlassian's cloud opportunity beyond software development into enterprise-wide service management.
Recent product updates strengthen this momentum. Since June 2026, Atlassian has continued rolling out AI-powered cloud capabilities, including Rovo Dev and additional Teamwork Graph enhancements, which should deepen customer engagement, support broader cloud adoption and strengthen long-term subscription revenue growth.
TEAM Faces Stiff Competition in Cloud Race
Atlassian faces strong competition from GitLab (GTLB - Free Report) and ServiceNow (NOW - Free Report) , both of which are expanding enterprise AI capabilities, cloud platforms and large customer adoption while targeting similar enterprise transformation opportunities.
GitLab is intensifying its competition with Atlassian through its cloud-first DevSecOps platform, growing enterprise subscriptions and AI-powered Duo agent platform. The company leverages cloud-neutral architecture, governance and consumption-based AI monetization to attract enterprises expanding cloud adoption. GitLab also targets broader collaboration with unified software delivery, while it benefits from growing enterprise ARR, platform reliability and AI-led workflow automation.
ServiceNow contests aggressively through AI-native enterprise workflows, robust subscription revenue growth and a unified cloud platform. The company differentiates itself with AI Control Tower, Workflow Data Fabric and hybrid consumption pricing that support enterprise-wide collaboration and governance. ServiceNow also benefits from broad cross-product adoption while it expands AI-driven automation across IT, CRM, HR and security workloads.
TEAM’s Price Performance, Valuation & Estimates
TEAM shares have declined 48.3% in the year-to-date period, underperforming the broader Zacks Computer & Technology sector’s rise of 14.7% and the Zacks Internet - Software industry’s fall of 11.2%.
TEAM’s YTD Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Atlassian trades at a forward 12-month price-to-sales ratio of 2.9X, compared with the industry’s 3.78X. TEAM has a Value Score of D.
TEAM’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for TEAM's fiscal 2027 earnings stands at $6.07 per share. While the estimate has been unchanged over the past month, it has been revised downward over the last 60 days, reflecting expected year-over-year growth of 10.8%.
Image Source: Zacks Investment Research
TEAM stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.