Key Highlights
- Shares of Atlassian surged 23% during premarket hours following exceptional fiscal Q3 2026 results that exceeded Wall Street expectations.
- Quarterly revenue reached $1.787 billion, surpassing analyst projections of $1.696 billion; earnings per share of $1.75 eclipsed the $1.33 forecast.
- Management elevated full-year revenue growth projections to 24%, representing an increase from the previous 22% guidance.
- Cloud segment revenue expanded 29% on a year-over-year basis, outperforming consensus forecasts by 4.5%.
- Several Wall Street firms increased their price targets, including Cantor Fitzgerald raising to $107 and KeyBanc holding steady at $130.
Atlassian shares were changing hands above $84 during Friday’s premarket session, reflecting a substantial 23% gain, following the software company’s impressive fiscal third-quarter performance.
The shares had settled at $68.59 during Thursday’s regular session, declining nearly 3% that day, and had surrendered more than half their value throughout 2026 prior to this earnings release. Looking back over a full year, the stock had tumbled more than 70%.
Quarterly revenue totaled $1.787 billion, exceeding Wall Street’s consensus estimate of $1.696 billion. Earnings per share of $1.75 substantially surpassed the $1.33 analyst projection.
The cloud division proved particularly impressive, expanding 29% compared to the prior-year period — accelerating from 26% growth in the previous quarter — and outpacing consensus expectations by 4.5%.
The company’s Service Collection surpassed the $1 billion milestone in annual recurring revenue while posting growth exceeding 30% year-over-year.
Remaining performance obligations climbed 37% year-over-year to reach $4.0 billion, or above 40% when accounting for data center revenue timing adjustments.
Atlassian increased its full-year revenue growth forecast to 24%, representing an upgrade from the 22% projection issued in the previous quarter. The company also boosted its cloud and data center revenue expectations, alongside adjusted gross and operating margin guidance.
CEO Mike Cannon-Brookes attributed the strong performance to customers committing to larger, extended-term agreements on Atlassian’s AI-powered platform.
Workforce Reduction Impacts Cash Flow Metrics
Free cash flow fell short of consensus projections by 31%, primarily attributable to $94 million in restructuring-related cash outlays during the quarter. An additional $76 million in such payments is anticipated in the fourth quarter.
The company revealed in March that approximately 1,600 positions would be eliminated — representing roughly 10% of total headcount. Cannon-Brookes explained the reductions were designed to “self-fund further investment in AI and enterprise sales.”
The restructuring initiative is projected to contribute approximately five percentage points to fourth-quarter operating margin.
Gross margin improved due to cloud infrastructure optimization efforts, exceeding consensus by one percentage point and maintaining an 84% level.
Wall Street Raises Price Projections
Cantor Fitzgerald elevated its price objective to $107 from $98, reaffirming an Overweight rating, highlighting cloud revenue momentum and data center execution.
BofA Securities increased its target to $100, while BMO Capital adjusted upward to $105 accompanied by an Outperform rating.
UBS made a modest reduction to its target, lowering it to $95, though acknowledged that cloud revenue growth exceeded both company guidance and the firm’s internal projections.
KeyBanc maintained its Overweight rating with a $130 price objective, emphasizing revenue acceleration as an encouraging development.
Data center outperformance during the quarter was partially influenced by timing factors, as customers accelerated purchases in anticipation of an end-of-life announcement and a March price increase.
InvestingPro analysis identified the stock as undervalued at present levels, positioning it among attractive opportunities within the software sector.
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