Atlassian Corporation (NASDAQ: TEAM) experienced a significant after-hours rally on Thursday, with shares climbing 35.4% to $149.20, recovering from a 2.8% decline during regular trading. The surge followed the release of the company's fiscal fourth-quarter results, which exceeded analyst expectations on both revenue and earnings.
Quarterly Performance Beats Estimates
For the quarter ended June 30, Atlassian reported revenue of $1.766 billion, a 28% increase year-over-year and 6.4% above the consensus estimate of $1.660 billion. Adjusted earnings per share came in at $1.87, surpassing the $1.50 forecast by 24.7% and marking a 91% jump from the prior year's $0.98.
Cloud revenue was a standout, reaching $1.213 billion, up 31% from $928 million in the same period last year. This segment contributed 74.6% of the company's total revenue growth, which amounted to nearly $382 million. Cloud's share of total revenue rose to 68.7%, up from 67.0% in the prior year.
Data Center Segment Faces Headwinds
While cloud performance was robust, the Data Center segment showed signs of slowing. Although Data Center revenue grew 21% during the quarter, benefiting from upfront license recognition and pricing actions, management anticipates a 17% contraction in fiscal 2027 as earlier purchases wind down and clients migrate to the cloud. This shift is expected to impact overall revenue growth, which is projected to rise 13% in fiscal 2027, with cloud growing 25.5%.
Chief Financial Officer James Chuong noted that enterprises view Atlassian as a long-term strategic partner, with remaining performance obligations increasing 44% and annual recurring revenue (ARR) growing 23%, driven by record large contracts.
Enterprise Adoption and AI Initiatives
The company reported strong momentum in the enterprise segment, with the number of customers generating at least $3 million in ARR growing over 50%, and those surpassing $5 million climbing more than 70%. Atlassian also secured its largest enterprise deal to date.
On the AI front, usage of Atlassian's Jira control-plane and Teamwork Graph CLI surpassed one million monthly active users, with MCP requests surging over 400%. Rovo users completed 20% more Jira tasks and generated 25% more Confluence pages than non-users, though the company cautions these figures do not imply causation.
Guidance and Analyst Reactions
Looking ahead, Atlassian projects first-quarter revenue between $1.705 billion and $1.715 billion, with the midpoint 2.4% above the consensus of $1.670 billion. For fiscal 2027, the company expects revenue of approximately $7.427 billion, slightly above analyst estimates.
The stock's after-hours surge outpaced most sell-side price targets. Prior to the earnings release, the average analyst target was $138.64, with a median of $117.50, while the after-hours price of $149.20 represented a 7.6% premium to the average and 27% above the median. Analyst ratings were predominantly positive, with 24 Buy, five Overweight, and six Hold recommendations.
Valuation remains a point of debate, with a pre-earnings fair value estimate of $83.41 contrasting with a discounted-cash-flow calculation of $217.56, highlighting the wide range of perspectives on the stock's intrinsic worth.
