TLDR
- Atlassian shares surged 23% during premarket hours following third-quarter fiscal 2026 results that exceeded analyst projections.
- The company reported $1.787 billion in quarterly revenue, surpassing expectations of $1.696 billion; earnings per share of $1.75 topped the $1.33 forecast.
- Full-year revenue growth projections were elevated to 24%, an increase from the previous 22% outlook.
- Cloud segment revenues expanded 29% on a year-over-year basis, outperforming consensus forecasts by 4.5%.
- Several Wall Street firms increased their price objectives, including Cantor Fitzgerald’s upgrade to $107 and KeyBanc’s maintained $130 target.
Shares of Atlassian were changing hands above $84 during Friday’s premarket session, representing an approximately 23% surge, following the software company’s robust third fiscal quarter performance.
The equity had settled at $68.59 during Thursday’s regular trading session, declining nearly 3% that day, and had shed over 50% of its market value throughout 2026 prior to this earnings announcement. Looking at a full-year timeframe, the stock had depreciated more than 70%.
Quarterly revenue totaled $1.787 billion, eclipsing the Street’s $1.696 billion projection. Earnings per share of $1.75 substantially exceeded the anticipated $1.33 figure.
The cloud division emerged as a particular bright spot, posting 29% year-over-year expansion — an acceleration from the prior quarter’s 26% growth rate — while surpassing consensus projections by 4.5%.
The firm’s Service Collection achieved a milestone by crossing the $1 billion mark in annual recurring revenue, expanding at a rate exceeding 30% year-over-year.
Remaining performance obligations climbed 37% year-over-year, reaching $4.0 billion, or topping 40% when factoring in data center revenue timing adjustments.
Atlassian elevated its full-year revenue growth projection to 24%, representing an uptick from the 22% outlook provided during the previous quarter. The company also enhanced its cloud and data center revenue expectations, alongside adjusted gross and operating margin guidance.
Chief Executive Mike Cannon-Brookes attributed the performance to customers entering into more substantial, extended commitments on Atlassian’s AI-powered platform.
Restructuring Expenses Impact Free Cash Flow
Free cash flow fell short of consensus projections by 31%, primarily attributable to $94 million in restructuring-related cash outlays 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 roughly 10% of its total employee base. Cannon-Brookes explained the workforce reduction was designed to “self-fund further investment in AI and enterprise sales.”
Cost reductions from the restructuring initiative are projected to contribute approximately five percentage points to fourth-quarter operating margin performance.
Gross margin improved thanks to cloud infrastructure optimization efforts, exceeding consensus expectations by one percentage point while maintaining an 84% level.
Wall Street Analysts Boost Price Objectives
Cantor Fitzgerald elevated its price objective to $107 from $98, retaining an Overweight recommendation, highlighting cloud revenue momentum and data center execution.
BofA Securities increased its target to $100, while BMO Capital advanced to $105 alongside an Outperform designation.
UBS modestly reduced its target to $95 but recognized that cloud revenue growth exceeded both company guidance and the firm’s internal projections.
KeyBanc preserved its Overweight stance with a $130 price objective, emphasizing revenue acceleration as an encouraging development.
Data center outperformance during the quarter was partially attributed to timing factors, as customers accelerated purchases in anticipation of an end-of-life announcement and a March pricing adjustment.
InvestingPro analysis identified the stock as undervalued at present levels, positioning it among attractive opportunities within the software industry.
