Shares shifted dramatically as Atlassian delivered a blowout fiscal third quarter, silencing — at least temporarily — fears that AI would cannibalize traditional enterprise software. Atlassian shares jumped more than 29% on Friday after the company posted results that beat Wall Street on every major line. Adjusted earnings hit $1.75 per share versus $1.32 expected, while revenue reached $1.79 billion versus $1.69 billion expected . The stock, now at $93.47, continues climbing — but the picture is more complicated than the headline suggests.
Customers Are Signing Bigger, Longer Deals — and That Changes the Revenue Math
Remaining performance obligations — a measure of contracted future revenue — grew 37% year over year to $4.0 billion.
CEO Mike Cannon-Brookes said customers are "signing bigger, longer-term commitments" on the platform. That backlog is a strong signal of revenue durability, but a pricing change in March resulted in roughly $50 million more upfront revenue than the company expected , meaning some of Q3's strength was pulled forward from future quarters.
AI Tools Are Actually Driving Spending, Not Replacing It
Atlassian's stock had been among the hardest hit by the "SaaS-pocalypse" this year, with shares down more than 45% year to date as investors feared AI would undercut legacy software. This quarter flipped the script. AI credit usage is growing more than 20% month over month, and customers using the AI assistant are growing their annual recurring revenue at roughly two times the rate of those who aren't . That means AI is enlarging, not shrinking, the average customer bill.
Profitability Is Still a GAAP-Sized Problem
Adjusted operating margin expanded to 34%, up from 26% a year ago, with adjusted operating income of $607.2 million . But on a standard accounting basis, Atlassian posted a net loss of $98.4 million, worsened by $223.8 million in restructuring charges tied to workforce cuts and lease consolidations . Earlier this year, the company eliminated approximately 1,600 positions — about one in ten employees. Management is betting those cuts fund AI development, but at a $23 billion market cap, investors are still pricing in profits that haven't arrived on a GAAP basis.
The Next Quarter Will Show If This Was Real or a One-Time Sugar Rush
The number to watch at Q4 earnings is cloud revenue growth against the roughly 26.5% full-year guidance. If Q4 cloud holds that pace after the data center pull-forward normalizes, it confirms Q3 was structural, not timing-driven. With Cantor Fitzgerald, Oppenheimer, and Bank of America all cutting price targets even as the stock surges, the market is still split on whether Atlassian's AI-powered acceleration is durable — or borrowed time.