Atlassian (NASDAQ:TEAM) reported 24% revenue growth in the first quarter of fiscal 2027, as cloud sales and larger enterprise commitments helped drive gains across its business.
Total revenue rose to $1.8 billion, while cloud revenue increased 31% to $1.3 billion, CEO and Co-Founder Mike Cannon-Brookes said on the company’s earnings call. Subscription annual recurring revenue, or ARR, grew 23% to $6.8 billion.
The company reported a GAAP operating margin of 11% and free cash flow of $463 million, up 304% from a year earlier. Free cash flow represented 26% of revenue.
Remaining performance obligations, a measure of contracted future revenue, rose 44% to $4.7 billion. Cannon-Brookes said customers spending more than $1 million annually grew by well over 30% year over year.
Cloud Migration and Data Center Retention
CFO James Chuong said strong Data Center retention exceeded Atlassian’s expectations as some of its largest and most complex customers continued to migrate to the cloud. Data Center migrations contributed approximately mid- to high-single-digit percentage points to cloud revenue growth in the quarter, he said.
Chuong said some large customers have signed multiyear cloud migration commitments through hybrid deployments, under which revenue is split between Data Center and cloud rather than customers being charged twice. That resulted in slightly more Data Center revenue and slightly less cloud revenue in the quarter, he said. Atlassian did not quantify the impact.
Cannon-Brookes said artificial intelligence features were among the factors encouraging customers to move to the cloud. Chuong added that customers moving from Data Center to cloud increase their spending by 1.75 times after three years.
Asked how much of the Data Center business might 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.
Guidance Questions
Analysts pressed executives on the growth outlook, including the implied slowdown in second-quarter cloud revenue growth and why the company’s full-year revenue guidance increase was smaller than its first-quarter revenue beat.
Chuong said Atlassian was taking a prudent approach early in the year, balancing business momentum against uncertainty related to the macroeconomic environment, fiscal policy and geopolitics. He also noted that the company would begin to lap its DX acquisition in the second quarter and face tougher comparisons in the second half following acceleration in fiscal 2026.
On the full-year guidance question, Chuong said Atlassian was passing through slightly more than its $20 million first-quarter cloud revenue beat. The $33 million Data Center beat, however, included timing effects related to revenue recognition, he said, explaining why the full quarterly total revenue beat was not carried through to the annual outlook.
AI Adoption and Pricing
More than 87% of Atlassian’s enterprise cloud customers use its Rovo AI offering, Cannon-Brookes said. He also said the company’s 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, and those deep adopters grow ARR more than twice as fast as customers with light Rovo usage, according to Cannon-Brookes. He said 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 the Teamwork Collection, a sevenfold increase from a year earlier. The 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. The company plans to begin enforcing usage-based pricing features in early December, but he said Atlassian is not assuming meaningful revenue from that pricing in fiscal 2027.
“It is not a near-term revenue driver,” Cannon-Brookes said, adding that the pricing is intended to align value delivered with usage, particularly for customers with unusually high consumption.
Agent Collaboration Strategy
Atlassian introduced its Agentic Multiplayer Protocol, or AMP, at Team ’26 Europe as a collaboration layer across its platform rather than a separate product. Cannon-Brookes described the 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.
Responding to a question about whether AI could reduce the need for coordination tools such as Jira and Confluence, Cannon-Brookes argued that a rise in 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.
Atlassian is also expanding its forward-deployed engineer program. Cannon-Brookes said the engineers work with customers on production code and AI workflows, while training customer teams to continue deployments themselves. He said the program is still early and that the engineers are rarely charged for, emphasizing that Atlassian is not seeking to build a services business.
About Atlassian (NASDAQ:TEAM)
Atlassian Corporation develops collaboration, project-management and workflow software for technology, business and service teams. Its products are designed to help organizations plan projects, manage software development, coordinate work and share knowledge across departments.
Its product portfolio includes Jira for project and issue tracking, Confluence for team collaboration and knowledge management, Jira Service Management for IT and enterprise service workflows, Trello for organizing tasks and projects, Loom for video messaging and screen recording, and Bitbucket for source-code management and collaboration.
