Atlassian (TEAM) Q4 2025 earnings review
Strong Q4 Finish Can't Mask Guided Slowdown in FY26 Cloud Growth
Atlassian closed its fiscal year with a strong Q4, posting 22% YoY revenue growth that beat expectations, driven by stellar enterprise execution and a record number of deals over $1 million. The narrative remains bullish, highlighting surging AI adoption (2.3M monthly active users) and strong initial momentum for its new Teamwork Collection. However, this operational strength is overshadowed by a cautious FY26 outlook. The company guided for total revenue growth to decelerate to ~18% and, more critically, for its core Cloud segment to slow to ~21% growth. While management remains confident in its long-term targets, the official guidance implies a year of moderating growth lies ahead.
🐂 Bull Case
Remaining Performance Obligation (RPO) grew a robust 38% YoY to $3.3B, with the long-term portion growing 71%. This, combined with a record number of >$1M deals, confirms strong commitment from large customers.
AI monthly active users surged over 50% sequentially to 2.3 million. This adoption is a key driver for customers upgrading to higher-value plans, with Premium and Enterprise edition ARR growing over 40% YoY.
🐻 Bear Case
Guidance for the core Cloud segment is for ~21% growth in FY26, a notable step down from 26% in Q4 and the ~30% rates seen in H1 FY25. This raises questions about the near-term impact of AI and other growth initiatives.
The FY26 revenue growth guide of ~18% is below the company's long-term target of a 20%+ compounded annual growth rate through FY27, implying a significant re-acceleration is required in the out-year to meet this goal.
⚖️ Verdict: ⚪
Mixed. The strong execution, particularly in the enterprise segment, and impressive RPO growth are undeniable positives. However, the decelerating forward guidance for the core Cloud business is a significant headwind that tempers enthusiasm. The company's bullish long-term narrative now hinges on its ability to prove it can re-accelerate growth in FY27.
Key Themes
The Cloud Growth Deceleration is Official
The primary concern is the guided slowdown in the company's main growth engine. Management projects FY26 Cloud revenue growth of ~21%, a material deceleration from 26% in Q4 FY25 and 27.5% for the full FY25. This contradicts the narrative that AI is a powerful near-term tailwind and places more pressure on FY27 to show a significant re-acceleration to meet long-term targets. The guidance suggests migrations, seat expansion, and upsell are not expected to fully offset macro headwinds and the lapping of prior tailwinds.
Enterprise Execution Generates Strong Commitments
Despite cautious guidance, Atlassian's enterprise business is firing on all cylinders. The company signed a record number of deals with over $1 million in annual contract value, up more than 2x YoY. This momentum is reflected in the Remaining Performance Obligation (RPO), which surged 38% to $3.3 billion. The non-current portion of RPO, representing commitments beyond 12 months, grew an even faster 71%, signaling strong long-term confidence from its largest customers.
AI is a Proven Upsell Engine
Atlassian is successfully translating AI usage into revenue. The number of AI monthly active users jumped to 2.3 million, up over 50% from 1.5 million last quarter. Management directly links this engagement to customers upgrading to higher-value plans, with annualized recurring revenue (ARR) from Premium and Enterprise editions growing over 40% YoY. This demonstrates a clear path to monetization for its AI investments through edition upgrades, even before direct consumption models for Rovo fully ramp up.
'System of Work' Vision Drives Consolidation
The strategy of providing a unified platform for both technical and business teams is gaining traction. The new Teamwork Collection saw early uptake exceeding expectations, with large customers like a major automotive manufacturer standardizing on Atlassian for over 50,000 employees and consolidating away from multiple point solutions. This 'wall-to-wall' adoption strategy is a key lever for long-term seat expansion.
Operating Margin Expansion Pauses for Investment
After reaching 25% in FY25, the non-GAAP operating margin is guided to be approximately 24% for FY26. Management is deliberately reinvesting in strategic priorities, including R&D for AI and expanding the enterprise sales organization. While this aligns with their growth strategy, it marks a pause in margin expansion and puts more pressure on delivering revenue acceleration in FY27 to demonstrate ROI.
Large Customer Growth Shows Signs of Slowing
While revenue from large customers is strong, the growth rate of acquiring new ones is decelerating. The number of customers with >$10,000 in Cloud ARR grew 13% YoY. This is a slowdown from 14% in Q3, 15% in Q2, and 17% in Q1. This trend suggests that future growth will rely more heavily on expanding within the existing base rather than landing new high-value logos.
Other KPIs
Stable. Grew a very strong 38% YoY, accelerating from Q3. The current portion (revenue expected in the next 12 months) grew 29%, while the non-current portion grew an impressive 71%. This indicates a healthy pipeline of large, multi-year cloud agreements, providing good forward visibility.
Stable. Free cash flow for the full year was essentially flat compared to FY24 ($1.416B vs $1.415B). Management expects FCF to generally track non-GAAP operating income over time, but FY25 was impacted by the transition of multi-year deals to annual billing. The guidance for lower operating margin in FY26 suggests FCF may not see significant growth in the coming year.
Decelerating. This cohort grew 13% YoY, continuing a trend of slower growth from 14% in Q3, 15% in Q2, and 17% in Q1. While still growing, the rate of adding new, meaningful cloud customers is slowing, putting more emphasis on seat expansion within the existing base.
Guidance
Decelerating. This is a slowdown from 19.6% growth in FY25 and 23.9% in FY24. The guidance is described as 'conservative and risk-adjusted' to account for macroeconomic uncertainty and the ongoing evolution of their enterprise sales efforts.
Decelerating. This is the most critical metric, showing a marked slowdown from 27.5% growth for the full FY25. It implies that the combination of migrations, seat expansion, and AI-driven upsell will not accelerate the business in the coming fiscal year.
Stable/Slightly compressing from 25.0% in FY25. The company is choosing to reinvest for future growth, particularly in R&D and enterprise sales, rather than delivering margin expansion in FY26. This is a slight compression from FY25.
Decelerating. The midpoint of $1,399M implies ~17.8% YoY growth, a slowdown from the 22% growth reported in Q4 FY25. This sets a soft tone for the start of the new fiscal year.
Reversing. This is a significant sequential step-down from 24% in Q4, which management attributes to the seasonal timing of employee bonus payouts. It is the company's typical seasonal low point for profitability.