TLDR
- Shares of Atlassian soared 23% during premarket hours following a solid fiscal Q3 2026 performance that exceeded Wall Street projections.
- The software company delivered $1.787 billion in quarterly revenue versus the anticipated $1.696 billion; earnings per share reached $1.75, surpassing the $1.33 forecast.
- Management elevated its annual revenue growth projection to 24% from the previous 22% target.
- Cloud-based revenue expanded 29% compared to the prior year, outperforming consensus predictions by 4.5%.
- Wall Street firms upgraded their price objectives, including Cantor Fitzgerald’s increase to $107 and KeyBanc’s maintained $130 projection.
Shares of Atlassian were changing hands above $84 during Friday’s premarket session, reflecting an approximately 23% gain, following the software firm’s impressive third-quarter fiscal performance.
The equity had settled at $68.59 during Thursday’s regular session, declining nearly 3% for the day, and had shed more than half its value throughout 2026 prior to this earnings announcement. Looking at the trailing twelve-month period, the stock had tumbled over 70%.
Quarterly revenue totaled $1.787 billion, exceeding analyst expectations of $1.696 billion. Earnings per share of $1.75 comfortably surpassed the anticipated $1.33 figure.
Cloud-based revenue emerged as a highlight, expanding 29% year-over-year—an improvement from the 26% recorded in the previous quarter—and outpacing consensus projections by 4.5%.
The firm’s Service Collection surpassed the $1 billion mark in annual recurring revenue while expanding more than 30% compared to last year.
Remaining performance obligations climbed 37% year-over-year to reach $4.0 billion, or exceeding 40% when factoring in data center revenue timing adjustments.
Atlassian enhanced its annual revenue growth forecast to 24%, representing an increase from the 22% projection issued during the previous quarter. The company also boosted expectations for cloud and data center revenue streams, alongside adjusted gross and operating margin guidance.
Chief Executive Mike Cannon-Brookes attributed the performance to clients committing to larger, extended agreements on Atlassian’s AI-powered platform.
Restructuring Expenses Weigh on Cash Generation
Free cash flow fell short of analyst estimates by 31%, primarily attributed to $94 million in restructuring-related payments during the quarter. An additional $76 million in such costs is projected for the fourth quarter.
During March, the organization revealed plans to eliminate approximately 1,600 positions—roughly 10% of total headcount. Cannon-Brookes explained the reductions were designed to “self-fund further investment in AI and enterprise sales.”
Savings from the restructuring initiative are projected to contribute approximately five percentage points to fourth-quarter operating margin performance.
Gross margin widened thanks to cloud infrastructure optimization efforts, exceeding consensus by one percentage point while maintaining the 84% level.
Wall Street Elevates Price Projections
Cantor Fitzgerald boosted its price objective to $107 from $98, reaffirming an Overweight stance, highlighting cloud revenue momentum and data center execution.
BofA Securities lifted its projection to $100, while BMO Capital advanced to $105 with an Outperform designation.
UBS trimmed its target modestly to $95 but recognized cloud revenue expansion exceeded both company guidance and internal forecasts.
KeyBanc maintained its Overweight recommendation with a $130 price objective, emphasizing revenue acceleration as an encouraging indicator.
Data center strength during the period was partially influenced by timing factors, as clients accelerated purchases in advance of an end-of-life notification and a March price adjustment.
InvestingPro analysis identified the stock as undervalued at present levels, positioning it among attractive opportunities within the software industry.
