Atlassian results seen as 'game changer' for AI kills software worries

Investing.com -- Atlassian (NASDAQ: TEAM) is indicated 31% higher in pre-market trading on Friday after the enterprise software maker posted fiscal fourth-quarter revenue of $1.77 billion, a 28% year-over-year gain that blew past analyst consensus of $1.66 billion by 6.4%.

The results carry implications well beyond Atlassian itself. Enterprise software stocks have been among the year's hardest-hit groups on fears that AI would displace traditional collaboration and productivity tools, and TEAM's print is now being read as a sector-wide inflection point, potentially benefiting direct peers such as Datadog (NASDAQ: DDOG) and Snowflake (NASDAQ: SNOW), both cited by analysts as comparable re-rating candidates.

Adjusted EPS came in at $1.87 against a $1.50 consensus, a 24.7% beat. Cloud revenue rose 31% year-over-year to $1.21 billion and now represents 68.7% of total revenue, up from 67.0% a year earlier, per data cited by ts2.tech. Remaining performance obligations grew 44% year-over-year to $4.8 billion, giving the company substantial forward revenue visibility. The quarter also marked Atlassian's first GAAP operating profit in over two years, at a 12% margin.

The Rovo AI product is emerging as the clearest proof point. Used by more than 80% of Fortune 500 companies, Rovo-assisted actions grew 50% quarter-over-quarter, and Rovo users completed 20% more Jira tasks and generated 25% more Confluence pages than non-users. CEO Mike Cannon-Brookes framed the product's edge simply, saying "in the AI era, context is the edge."

Cannon-Brookes added a personal signal of conviction: he committed to buying up to $250 million of Atlassian shares.

Following the results, Bank of America upgraded TEAM to Buy from Neutral and raised its price target to $175 from $105, a 67% increase, saying Atlassian had become "an AI beneficiary rather than AI victim." The bank specifically flagged the company's Teamwork Graph as a differentiated AI asset that competitors would struggle to replicate quickly.

Jordan Klein, a TMT specialist at Mizuho, was equally emphatic in a note. "TEAM would be my GAME CHANGER stock of the day and key name to watch," he wrote. "28% rev growth crushed Street at 20%, core Cloud growth accelerated, and the big risk of initial FY27 growth guide now defanged and was better. Best yet is CEO buying $250M of stock, and new AI related products gaining serious traction. WHY I THINK STOCK GETS CHASED & GOES HIGHER: its still super cheap for the growth: 5x EV/Sales even up 33% and 16x EV/FCF."

The results land in a market that is actively reassessing the AI-versus-software narrative. Shopify surged roughly 17% on August 5 after its own Q2 showed AI boosting rather than cannibalizing its business. Before that, ServiceNow and IBM earnings had reignited disruption fears and dragged software valuations lower across the sector. HSBC had argued in a note titled "Software Will Eat AI" that enterprise software companies "will not be threatened by AI" and that historic-low valuations represented a buying opportunity. Atlassian's numbers now appear to validate that call.

For context, TEAM had shed roughly 32% year-to-date heading into Friday's pre-market session. At the pre-market indicated price of around $144.61 as of early Friday, the stock would be approaching a seven-month high if those gains hold through the open, having closed at $110.17 on August 6 before surging in after-hours trade.

The key unresolved tension is in the fiscal 2027 guidance. Management projected only 13% total revenue growth for the year ahead, against the 28% just reported, with the Data Center segment expected to contract 17% as customers continue migrating to cloud. Whether that headwind is fully priced in — even after Friday's rally — will be a central question for institutional investors entering positions when New York's regular session opens at 09:30 ET. The U.S. July jobs report, also releasing before the open on Friday, adds a macro overlay: a significant miss or beat could shift broad tech sentiment on the same day TEAM faces its first full-volume price discovery.

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