Key Highlights
- Atlassian shares rose 23% during premarket hours following fiscal third quarter 2026 results that exceeded projections.
- The company reported $1.787 billion in revenue against expectations of $1.696 billion; earnings per share reached $1.75 versus the anticipated $1.33.
- Management elevated annual revenue growth projections to 24% from the previous 22% forecast.
- Cloud segment revenue expanded 29% compared to the same period last year, surpassing consensus by 4.5%.
- Several Wall Street firms increased their price objectives, including Cantor Fitzgerald raising its target to $107 and KeyBanc holding at $130.
Shares of Atlassian reached levels above $84 during Friday’s premarket session, marking approximately a 23% gain after the software company delivered robust fiscal third quarter results.
The shares had settled at $68.59 during Thursday’s regular session, declining nearly 3% that day, following a year-to-date decline exceeding 50% in 2026 prior to this earnings announcement. The trailing twelve-month performance showed a decline of more than 70%.
Quarterly revenue totaled $1.787 billion, surpassing the consensus forecast of $1.696 billion. Earnings per share of $1.75 significantly exceeded the $1.33 analyst estimate.
The cloud segment delivered exceptional performance, expanding 29% year-over-year — an acceleration from the 26% growth registered in the second quarter — while exceeding analyst projections by 4.5%.
The company’s Service Collection achieved a milestone by surpassing $1 billion in annual recurring revenue, posting growth above 30% compared to the prior year.
Remaining performance obligations climbed 37% year-over-year to reach $4.0 billion, representing growth exceeding 40% when accounting for data center revenue timing adjustments.
Atlassian increased its annual revenue growth forecast to 24%, an upgrade from the 22% projection provided during the previous quarter. The company also enhanced its outlook for cloud and data center revenue, alongside improved guidance for adjusted gross and operating margins.
CEO Mike Cannon-Brookes attributed the strong performance to customer adoption of larger, extended-term agreements on Atlassian’s AI-powered platform.
Restructuring Expenses Impact Cash Generation
Free cash flow fell short of analyst expectations by 31%, primarily attributable to $94 million in restructuring-related cash outflows during the quarter. An additional $76 million in such expenses is anticipated for the fourth quarter.
During March, the organization revealed plans to eliminate approximately 1,600 positions — representing about 10% of total headcount. Cannon-Brookes explained the workforce reduction would enable the company 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 expansion.
Gross margin improved through cloud infrastructure optimization efforts, exceeding consensus forecasts by one percentage point while maintaining the 84% level.
Wall Street Firms Increase Price Objectives
Cantor Fitzgerald elevated its price objective to $107 from $98, reaffirming an Overweight rating, highlighting strong cloud revenue momentum and solid data center results.
BofA Securities increased its target to $100, while BMO Capital adjusted upward to $105 accompanied by an Outperform rating.
UBS modestly reduced its target to $95 while recognizing that cloud revenue expansion exceeded both company guidance and the firm’s internal projections.
KeyBanc maintained its Overweight rating alongside a $130 price objective, emphasizing revenue acceleration as an encouraging indicator.
Data center performance benefited partially from timing factors, as customers accelerated purchases in anticipation of an end-of-life announcement and a March price adjustment.
InvestingPro analysis identified the stock as trading below fair value at present levels, positioning it among attractive opportunities within the software sector.
