Atlassian Corp. shares closed the holiday-shortened week with an impressive 26% gain, fueled by a strong quarterly earnings report and robust cloud revenue growth. The stock jumped 15.35% on Friday alone to end the session at $107.61, before edging higher to $108.50 in after-hours trading.
The collaboration-software maker's rally was part of a broader rebound in U.S. software stocks, which had been under pressure earlier this year due to fears that artificial intelligence could cannibalize traditional subscription sales. However, investors shifted focus to companies seen as potential AI beneficiaries, lifting the software-services index by more than 6% on Friday, according to Reuters. The Nasdaq Composite added 0.21% on the day and finished the week up 2.39%.
Atlassian's strong performance was underpinned by its fiscal third-quarter results, which showed total revenue surging 32% year-over-year to $1.79 billion. Cloud revenue climbed 29%, while remaining performance obligations rose 37% to approximately $4.0 billion. Co-founder and CEO Mike Cannon-Brookes noted that customers are signing "bigger, longer-term commitments," and CFO James Chuong highlighted accelerating cloud growth. The company also highlighted that its Service Collection business now exceeds $1 billion in annual recurring revenue (ARR), growing over 30%.
The broader tech rally was supported by Snowflake (SNOW), which jumped more than 33% on Thursday after raising its annual revenue forecast and announcing a $6 billion deal with Amazon Web Services. Dell also lifted its outlook, sending AI hardware and software stocks higher. Matt Britzman, senior equity analyst at Hargreaves Lansdown, noted that Snowflake demonstrates "how quickly sentiment can turn" when AI positively impacts the top line.
Despite the optimism, risks remain. Salesforce issued a second-quarter revenue forecast that fell short of Wall Street expectations, reigniting concerns that AI could disrupt the traditional seat-based software model. Rebecca Wettemann, CEO of Valoir, told Reuters that the next few quarters will be critical for Salesforce to prove the value of its model and its Agentforce AI tool.
Atlassian's CFO James Chuong, speaking at a Jefferies software event, positioned the company as "well diversified" and argued that AI will simplify code and workflow creation, driving demand for team-based tools. He noted that customers for Atlassian's Teamwork Collection are using more AI credits and deploying more agents than standalone users.
Looking ahead, market attention will shift to macro data, with the U.S. jobs report due on June 5. Economists surveyed by Reuters expect 85,000 new jobs and an unemployment rate of 4.3%. Liz Ann Sonders of Schwab Center for Financial Research cautioned that a stronger-than-expected jobs report combined with rising inflation could influence Federal Reserve policy expectations.
Atlassian's near-term trajectory will likely depend on whether Friday's software rally can withstand the jobs report, changes in bond yields, and further AI-related earnings. The stock has bounced from its lows but remains well below its 52-week high.
