Atlassian (NasdaqGS:TEAM) Q2 2026 Earnings call February 05, 2026 05:00 PM ET Company ParticipantsAlex Zukin - Managing Director of Software Equity ResearchGregg Moskowitz - Managing Director of Enterprise SoftwareItay Kidron - Managing DirectorJason Celino - Managing DirectorJoe Binz - CFOKarl Keirstead - Managing Director of Software Equity ResearchKoji Ikeda - Director of Enterprise Software Equity ResearchMartin Lam - Head of Investor RelationsMike Cannon-Brookes - CEO and Co-FounderRaimo Lenschow - Man ...

Financial Data and Key Metrics Changes - Atlassian closed Q2 with an annual run rate revenue surpassing $6 billion, achieving its first-ever $1 billion cloud revenue quarter, which represents a 26% year-over-year increase [5] - Remaining Performance Obligations (RPO) grew 44% year-over-year to $3.8 billion, indicating strong future revenue visibility [5] Business Line Data and Key Metrics Changes - The cloud revenue segment saw significant growth, contributing to the overall revenue increase, while the Data Center (DC) segment is expected to decline due to tough comparisons [31][30] - The Teamwork Collection, which includes AI capabilities, has seen over 1 million seats sold in under nine months, indicating strong adoption and demand [22] Market Data and Key Metrics Changes - Atlassian reported a net revenue retention (NRR) rate of over 120%, reflecting strong customer loyalty and expansion [19] - The company noted that customers using AI code generation tools experienced a 5% increase in task creation and monthly active users compared to those not using these tools [6][60] Company Strategy and Development Direction - Atlassian is focusing on enterprise, AI, and system-of-work transformations, positioning itself as a strategic partner for large enterprises [5][9] - The company is committed to enhancing its AI capabilities and integrating them into customer workflows, which is seen as a key driver for future growth [6][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth trajectory, emphasizing the importance of AI in driving customer engagement and operational efficiency [9][35] - Despite market noise and concerns, management believes that Atlassian is well-positioned to help customers navigate challenges and improve their business processes [15][16] Other Important Information - Atlassian's service collection is growing rapidly, with over 65,000 customers and significant year-over-year growth in the enterprise segment [67] - The company is recognized as a leader in enterprise service management, with a strong focus on integrating AI into service workflows [69] Q&A Session Summary Question: Changes in customer conversations and AI's impact - Management noted that customer conversations have become more strategic, with clients seeking partnerships to leverage AI capabilities, which are driving upgrades to the Teamwork Collection [12][13] Question: Pricing evolution and customer preferences - Management indicated that current pricing models are delivering value, and customers prefer predictable, seat-based pricing, which aligns with their needs [20][21] Question: Competitive landscape and AI tools - Management acknowledged the emergence of new AI tools but emphasized the unique value of Atlassian's offerings and its integration capabilities with various platforms [25][27] Question: Cloud migration impact on revenue - Management reported healthy cloud migrations contributing mid- to high-single-digit impacts to cloud revenue growth rates [49] Question: Seat expansion dynamics - Management highlighted broad-based seat expansion across both tech and non-tech users, particularly in business functions, indicating strong demand for Atlassian's products [52][56] Question: JSM growth and competitive dynamics - Management confirmed that the service collection is performing well, with significant growth in HR and finance sectors, and emphasized the importance of integrating AI into service workflows [68][69]

Financial Data and Key Metrics Changes - Atlassian reported over $5.2 billion in revenue and over $1.4 billion in free cash flow for FY 2025, achieving a balanced rule of 40 plus performance [6][10] - Free cash flow for the quarter was $360 million, down 13% year over year, primarily due to strong collections in the prior year [24][25] - The company achieved a cloud net revenue retention rate of 120% [7] Business Line Data and Key Metrics Changes - The Teamwork platform now serves over 300,000 customers, with significant growth in AI usage, reaching 2.3 million AI users, a 50% increase from the previous quarter [6][7] - Core applications such as Jira, Confluence, and Jira Service Management are growing in line or faster than total company revenue [10] - The Teamwork collection has exceeded expectations since its launch, contributing to strong revenue growth [10] Market Data and Key Metrics Changes - Atlassian's enterprise sales teams executed a record number of deals greater than $1 million in annual contract value (ACV), more than doubling year over year [6][10] - Data center to cloud migrations increased by 60% year over year, indicating strong customer commitment to the cloud platform [42][69] Company Strategy and Development Direction - The company is focusing on serving the enterprise, delivering AI innovations, and connecting teams through the Atlassian system of work [7][10] - A partnership with Google Cloud aims to enhance the AI-powered Teamwork platform and accelerate cloud transformation [8][10] - Atlassian is committed to a long-term growth strategy, targeting a compounded annual growth rate of 20% from FY 2024 to FY 2027 [33][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve long-term growth targets despite macroeconomic uncertainties [33][34] - The company sees AI as a significant tailwind for business growth, with expectations of increased software creation and collaboration [20][21] - Management highlighted the importance of customer-centric processes and partnerships to drive enterprise growth [71][72] Other Important Information - Anu, the President of Atlassian, will transition away from her role in December after nearly twelve years [10][11] - The company is investing heavily in R&D and sales to support its strategic priorities [101][102] Q&A Session Summary Question: Concerns about tool generation tools and developer roles - Management stated that they are not seeing any negative impact on growth rates or adoption from the integration of code-generating AI tools, and user growth remains healthy [15][16] Question: Free cash flow trajectory for 2026 - Free cash flow for FY 2025 was flat at $1.4 billion, with expectations that cash flow will correlate with non-GAAP operating income trends moving forward [24][25][26] Question: Potential inflection points for revenue growth - Management highlighted multiple growth levers, including paid seat expansion, cross-sell, upsell, and new customer growth, with AI opening up additional opportunities [33][34] Question: Guidance for data center segment growth - Management explained that Q1 guidance reflects a smaller expiration base and headwinds from prior programmatic changes, leading to a cautious outlook [78][79] Question: Driving wall-to-wall deployments in enterprises - Management emphasized ongoing consolidation efforts and the growth of business user segments, indicating strong momentum in expanding usage across non-technical roles [81][84]