Atlassian Corporation (NASDAQ:TEAM) is one of the AI Stocks in the Spotlight This Week. On September 23, Bernstein SocGen Group analyst Peter Weed reiterated an Outperform rating on the stock with a $296.00 price target. The rating affirmation follows Atlassian’s two recent acquisitions, both of which are expected to close before the end of the year. The first of the two acquisitions is Browser Co for $610M, while the other is DX for $1B. The firm believes that both of the acquisitions are a “nice fit” fo ...

According to a report from CNBC, companies are increasingly spending on agentic AI without fully understanding its capabilities. However, technology leaders must change this trend if they want to avoid wasting future investments. “It’s not surprising that many organizations are still trying to figure out what agentic AI really is. Agentic AI has a buzz about it that many in the market want to capitalize on, and we’ve seen an incredible rebranding of anything related to generative AI presented as ‘agentic AI ...

Group 1 - Atlassian Corporation (NASDAQ:TEAM) is recognized as one of the best NASDAQ stocks to buy, with significant upside potential, supported by a Buy rating from Morgan Stanley analyst Keith Weiss and a price target of $320 [1] - The company's transition to a cloud-first model is expected to enhance revenue and operating margins starting in fiscal 2026, as it plans to phase out Data Center products by March 2029 [2] - Strong growth in the Cloud segment is anticipated, with projections of mid-teens growth beyond fiscal 2026, aided by the launch of the Atlassian Ascend program to facilitate customer migration from Data Center to Cloud [3] Group 2 - Atlassian Corporation specializes in software development for team collaboration and project management, with key products including Jira, Confluence, and Jira Service Management [4]

Financial Data and Key Metrics Changes - Atlassian closed FY 2025 with revenue exceeding $5.2 billion and free cash flow of over $1.4 billion, achieving a balanced rule of 40 plus performance [8] - Free cash flow for the quarter was $360 million, down 13% year over year, primarily due to strong collections in the prior year [25][26] - The remaining performance metrics indicate a strong foundation for future growth, with a cloud net revenue retention rate of 120% [9] Business Line Data and Key Metrics Changes - The Teamwork platform now serves over 300,000 customers, with significant growth in enterprise sales and a record number of deals over $1 million in annual contract value (ACV) [8][9] - The AI Now user base reached 2.3 million, reflecting a 50% increase from the previous quarter [9] - Core applications such as Jira, Confluence, and Jira Service Management are growing in line or faster than total company revenue, indicating strong demand [11] Market Data and Key Metrics Changes - The company reported a 38% year-over-year increase in the remaining performance obligation (RPO) balance, reaching $3.3 billion, with 74% expected to be recognized as revenue in the next twelve months [42][43] - Data center to cloud migrations increased by 60% year over year, showcasing strong customer commitment to the cloud platform [42][69] Company Strategy and Development Direction - Atlassian is focusing on serving enterprise customers, delivering AI innovations, and enhancing collaboration through its system of work [9][11] - The partnership with Google Cloud is a significant step in Atlassian's multi-cloud strategy, aimed at accelerating cloud transformation and AI solution delivery [10] - The company is committed to long-term growth, with a target of 20% compounded annual growth from FY 2024 through FY 2027 [33][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to maintain growth despite macroeconomic uncertainties, emphasizing the importance of AI and enterprise transformations [33][34] - The management team highlighted that they are not seeing any negative impacts from the integration of code-generating AI tools on their product usage [16][21] - The company anticipates continued strong performance in the enterprise segment, with a robust pipeline of large deals and ongoing improvements in customer success operations [67][72] Other Important Information - Anu, the President of Atlassian, will transition away from her role in December after nearly twelve years, with management expressing gratitude for her contributions [11][12] - The company is investing heavily in R&D and sales to support its strategic priorities, which include enterprise cloud, AI, and system of work [100] Q&A Session Summary Question: Concerns about tool generation tools and developer roles - Management clarified that they are not seeing any negative impact on growth rates or adoption rates of their technical products despite market concerns [16][21] Question: Free cash flow trajectory for 2026 - Free cash flow for FY 2025 was flat at around $1.4 billion, with expectations for correlation to non-GAAP operating income trends moving forward [25][27] 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 providing additional opportunities [33][34] Question: Guidance for data center segment growth - Management noted that Q1 guidance reflects a seasonal decline due to a smaller expiration base and headwinds from prior programmatic changes [76][78] Question: Driving wall-to-wall deployments in enterprises - Management emphasized ongoing consolidation efforts and the growth of business user segments as key strategies to increase penetration in non-technical roles [80][82]

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]

Financial Data and Key Metrics Changes - The company reported a $5 billion run rate, with a serviceable addressable market (SAM) of $67 billion, indicating significant growth potential [23][92] - The transition from a perpetual license model to a subscription model has been successful, with over 90% of customers now on the cloud [47][48] Business Line Data and Key Metrics Changes - Atlassian serves approximately 300,000 customers, with 85% of Fortune 500 companies using its products, showcasing broad market penetration [9][10] - The company has a diverse product portfolio, including Jira, Confluence, Trello, and Bitbucket, which are utilized across various teams beyond just development [11][25] Market Data and Key Metrics Changes - Jira holds about two-thirds of the market share for project management tools, with Microsoft Excel being the next closest competitor [20][21] - The company has seen a significant increase in the adoption of its AI features, with a 50% increase in users of its AI tools within a quarter [52] Company Strategy and Development Direction - Atlassian focuses on a "land and expand" model, allowing products to be adopted organically within organizations, which leads to broader usage across different teams [24][32] - The company emphasizes long-term investment in R&D, which has created a technical moat that is difficult for competitors to replicate [26][37] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, noting that the shift to cloud services has been smoother than anticipated, with lower churn rates than expected [44][48] - The integration of AI into the platform is seen as a significant opportunity, enhancing productivity and expanding the user base [55][56] Other Important Information - Atlassian has successfully migrated most of its server customers to the cloud, with a focus on enterprise customers who have specific regulatory needs [47][49] - The company has built a robust ecosystem with over 50 connectors to various applications, enhancing its platform's utility [64] Q&A Session Summary Question: How has the transition to cloud impacted customer retention? - Management noted that the transition has resulted in lower churn rates than initially modeled, indicating strong product value and customer satisfaction [48][49] Question: What role does AI play in Atlassian's future? - AI is integrated into all products, enhancing workflows and increasing productivity, with significant adoption rates observed [52][55] Question: How does Atlassian plan to capture new customers? - The company sees a substantial opportunity within its existing customer base, estimating an $18 billion opportunity without acquiring new customers, while also expecting healthy growth in new customer acquisition [92][93]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 reached $1.4 billion, with cloud revenue growing 25% year over year and a free cash flow margin of 47% [6][10]. - Gross margins improved to 86%, exceeding prior guidance, driven by price increases and engineering investments [40][41]. Business Line Data and Key Metrics Changes - Cloud revenue growth was primarily driven by increased adoption of premium enterprise editions, which rose over 40% year on year [14]. - Data center growth was mainly attributed to pricing, offset by strong migrations to cloud and fewer multiyear agreements [24][25]. Market Data and Key Metrics Changes - The company achieved FedRAMP Moderate Authorization for U.S. Federal Government customers, expanding its cloud platform offerings [9]. - Over 300,000 customers, including major enterprises like Mercedes and SAP, utilize Atlassian's solutions [9]. Company Strategy and Development Direction - Atlassian is focusing on integrating AI capabilities into its core products, with Robo being central to this strategy [7][10]. - The company aims to scale to $10 billion in revenue and beyond, leveraging its strategic priorities in enterprise solutions and AI advancements [10]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 20% compound annual growth rate (CAGR) through FY 2027, despite macroeconomic uncertainties [18][19]. - The company is adapting to longer deal cycles due to the complexity of enterprise deals, which is seen as a natural evolution rather than a macroeconomic issue [28]. Other Important Information - The introduction of the Teamwork Collection is expected to simplify purchasing for customers and drive long-term revenue growth [69][70]. - The isolated cloud offering is designed to meet the needs of large and complex organizations, providing dedicated resources [76]. Q&A Session Summary Question: Impact of embedding Robo on near-term revenue growth - Management noted that embedding Robo is expected to enhance user adoption and long-term growth potential, despite potential short-term revenue trade-offs [14][15]. Question: Cloud revenue growth and deal timing - Management acknowledged that enterprise deals were back-end loaded, impacting Q3 cloud revenue growth, but expected recognition in Q4 [23]. Question: Transition to annualized data center agreements - Management indicated that the change in agreement duration would lead to better cloud revenue growth contributions in FY 2026 and FY 2027 [36]. Question: Gross margin and efficiency gains - Management highlighted that gross margins of 86% were driven by price increases and efficient cloud infrastructure management, with expectations for continued improvements [40][41]. Question: Effect of tariffs on customer businesses - Management reported no significant macro impact from tariffs, emphasizing a strong pipeline and customer demand for cloud upgrades [54][55]. Question: CRO transition and go-to-market strategy - Management confirmed that the new CRO is adapting well, and the go-to-market strategy continues to evolve to meet customer needs [86][87].

Financial Data and Key Metrics Changes - The company reported total revenue of $1.4 billion for Q3, with cloud revenue growing by 25% year over year and a free cash flow margin of 47% for the quarter [8][20][41] - Gross margins reached 86%, exceeding prior guidance, driven by price increases and engineering investments [41][43] Business Line Data and Key Metrics Changes - Cloud revenue growth was impacted by enterprise deals landing later than expected, affecting the growth rate recognized in Q3 [25][48] - Data center growth was primarily driven by pricing, offset by strong migrations to cloud and fewer multiyear agreements [26][27] Market Data and Key Metrics Changes - The company achieved FedRAMP Moderate Authorization for U.S. Federal Government customers, expanding its cloud platform offerings [10] - Over 300,000 customers, including major enterprises like Mercedes and SAP, utilize Atlassian's solutions [10] Company Strategy and Development Direction - The company is focusing on embedding AI capabilities into core products, aiming for user expansion and maximizing adoption [15][16] - The strategic goal is to scale to $10 billion in revenue and beyond, leveraging advancements in AI and enterprise solutions [11][20] Management's Comments on Operating Environment and Future Outlook - Management remains confident in achieving a 20% compound annual growth rate (CAGR) through FY '27, despite macroeconomic uncertainties [21][67] - The company is adapting its go-to-market strategy to better serve enterprise customers, reflecting a shift in customer mix and needs [86][88] Other Important Information - The introduction of the Teamwork Collection is seen as a long-term growth driver, simplifying purchasing behavior for customers [68][70] - The company is committed to maintaining structural efficiency gains and optimizing cloud costs while expanding its AI capabilities [42][81] Q&A Session Summary Question: Impact of AI adoption on revenue growth - Management noted that AI adoption is still in early stages, with many enterprises experimenting and cautious about deployment [91][92] Question: Changes in go-to-market strategy with new CRO - The company is continuously evolving its go-to-market strategy to adapt to customer needs and market dynamics, with the new CRO bringing valuable experience [86][89] Question: Effect of tariffs on customer businesses - Management indicated that the business remains healthy and customers are eager to upgrade to the cloud, with no significant macro impacts observed [54][55]

Core Insights - The competitive landscape in IT Service Management (ITSM) is evolving due to the rise of agentic AI, with predictions that by 2029, 80% of general customer issues will be resolved autonomously, leading to a 30% cost reduction [2] Company Analysis: ServiceNow (NOW) - ServiceNow's Now Platform integrates Now Assist, its AI solution, enhancing productivity across various domains such as CRM, HR, and IT [3] - The company has a strong partner ecosystem, including Amazon, NVIDIA, Microsoft, and DXC Technology, which aids in expanding its offerings [4] - As of Q4 2024, ServiceNow had 2,109 customers with over $1 million in annual contract value, reflecting a 14% year-over-year growth [5] - ServiceNow's subscription revenue is projected to be between $12.635 billion and $12.675 billion for 2025, indicating an 18.5% to 19% increase from 2024 [12] - The consensus estimate for ServiceNow's 2025 earnings has declined by three cents to $16.21 per share, suggesting a 16.45% growth over 2024 [15] - ServiceNow shares have dropped 23.5% year-to-date, impacted by unfavorable forex and a back-end loaded federal business [9][12] Company Analysis: Atlassian (TEAM) - Atlassian has integrated AI features across its major products, resulting in over one million monthly active users engaging with these features daily [6] - The company reported a 40% year-over-year increase in sales for its Premium and Enterprise editions, driven by higher-value AI-infused products [6] - Atlassian's partnership with Microsoft-backed OpenAI enhances its product capabilities, particularly in Confluence and Jira Service Management [7] - The company closed a record number of deals worth over $1 million in Q2 of fiscal 2025, indicating strong enterprise penetration [8] - Atlassian expects revenues to grow by 18.5% to 19% year-over-year in fiscal 2025, with a non-GAAP gross margin of 84.5% and an operating margin of 23.5% [13] - The consensus estimate for Atlassian's 2025 earnings is $3.47 per share, reflecting an 18.43% increase over fiscal 2024 [14] Valuation Comparison - Both companies are considered overvalued, with Atlassian trading at a forward Price/Sales ratio of 9.6X, compared to ServiceNow's 12.23X [17] Conclusion - Atlassian's strategy of leveraging AI for enterprise growth positions it favorably, while ServiceNow faces potential volatility in its growth trajectory due to external factors [20]