San Francisco —Atlassian shares fell 17 percent in extended trading on Thursday, according to SiliconANGLE, after the maker of Jira and Confluence forecast subscription growth for the rest of its fiscal year that is well below its current pace. First-quarter results beat the company’s own targets, but its outlook for subscription annual recurring revenue (ARR) to grow about 18.5 percent in fiscal 2027 implies a marked slowdown from the 23 percent growth it reported for the quarter.
The results, published shortly after the close, landed on a day when a broad selloff in artificial intelligence-linked stocks had already hit technology shares. The S&P 500 closed down 4.36 percent at 7,353.73, and the Nasdaq Composite fell 5.52 percent to 24,315.00. The Cboe Volatility Index rose to 28.18 from 16.61 the previous session. MarketWatch described it as the worst day for tech stocks since 2020.
A quarter ahead of the company’s targets
Atlassian said in its earnings release, filed with the Securities and Exchange Commission, that revenue rose 24 percent from a year earlier to $1.772 billion for the quarter ended Sept. 30. That was above the range of $1.705 billion to $1.715 billion the company had projected in August. Cloud revenue grew 31 percent to $1.302 billion, compared with the roughly 28.5 percent growth Atlassian had projected.
Profitability also improved. On a GAAP basis, Atlassian earned net income of $91 million, or 35 cents a diluted share, compared with a net loss of $52 million a year earlier, and its operating margin was 11 percent. Non-GAAP net income was $1.65 a diluted share, up from $1.04. Free cash flow was $463 million. Remaining performance obligations, a measure of contracted future revenue, rose 44 percent to $4.746 billion. Yahoo Finance reported that the results topped analysts’ earnings and revenue estimates.
“Enterprise AI has hit an inflection point. Model power is table stakes.”
Why the outlook weighed on the shares
The full-year forecast is slightly higher than the one Atlassian gave in August. The company now expects subscription ARR growth of about 18.5 percent for fiscal 2027, up from about 18 percent, and total revenue growth of about 13.75 percent, up from about 13 percent. It nudged up its cloud revenue growth target to about 26 percent from 25.5 percent.
Those numbers still mean growth will slow for the rest of the year. Subscription ARR stood at $6.812 billion at the end of the quarter, up 23 percent from a year earlier, so the full-year target leaves room for a significant deceleration. For the second quarter, Atlassian projected revenue of $1.825 billion to $1.835 billion and cloud revenue growth of about 27 percent, below the first quarter’s 31 percent. It expects Data Center revenue to decline about 14 percent and its non-GAAP operating margin to narrow to about 26 percent from 32 percent in the first quarter. The GAAP operating margin is projected at about 4.5 percent.
Atlassian is trying to persuade investors that AI agents will deepen use of its products rather than replace them. In its shareholder letter, the company said its MCP server, which lets outside AI agents connect to Atlassian’s tools, has more than 2 million monthly users, and that customers using it are growing ARR at about twice the rate of those who are not. It also said Service Collection, its service management bundle, has passed $1 billion in ARR and more than 70,000 customers.
Change in the finance team
In the same filing, Atlassian said Chief Accounting Officer Gene Liu will step down effective Nov. 13 after more than 12 years with the company. The company said his departure was not the result of any disagreement over accounting practices, financial reporting or internal controls. Eli Berkovitch, who has been chief accounting officer at Box since April 2021, will take over the role on Nov. 16.
The next test is whether Thursday’s after-hours decline holds once regular trading opens and how it compares with the wider AI selloff. Investors will also watch whether second-quarter cloud growth and subscription ARR keep pace with the guidance. Atlassian’s original plan for fiscal 2027 already assumed a slowdown. What the share move shows is how little patience the market has for that in software stocks.
