SAN FRANCISCO, Feb 5, 2026, 14:03 (PST)
- TEAM shares dropped roughly 6% in after-hours trading following earnings and updated guidance
- Free cash flow fell to $168.5 million, with Q3 revenue forecast between $1.689 billion and $1.697 billion
- CEO calls AI “great for Atlassian” amid investor doubts over Jira and Trello’s long-term demand
Atlassian shares dropped roughly 6% in after-hours trading Thursday following its latest earnings report. The software firm posted a 23% increase in quarterly revenue, hitting $1.586 billion for the quarter ended Dec. 31. However, free cash flow plunged to $168.5 million, down from $342.6 million a year earlier. The company forecast third-quarter revenue between $1.689 billion and $1.697 billion, projecting around 22% revenue growth for the fiscal year.
The move comes amid a wider selloff in software and data-services stocks, rattled by fears that rapidly advancing AI tools might undermine the seat-based subscription model charging per user. The S&P 500 software and services index dropped 3.1% on Thursday, poised to lose around $1 trillion in market value since Jan. 28. ServiceNow and Salesforce were among the latest to take hits, Reuters reported.
Atlassian, the Sydney-born software giant, has found itself tangled in the ongoing AI debate. Sellers fear that if AI takes over tasks tracked by Jira or Trello, corporate clients might cut back on licenses. CEO Mike Cannon-Brookes pushed back, telling shareholders, “I’m convinced AI is great for Atlassian. Others think software is dead,” according to The Nightly. The outlet also noted the stock has plunged about 70% over the past year. Atlassian pointed to the timing of billings and some one-off payments as reasons behind the weak free cash flow this quarter. The Nightly
Atlassian posted a net loss of $42.6 million, or 16 cents per share, but its adjusted earnings came in at $1.22 per share, the Associated Press reported. Analysts polled by Zacks had forecast adjusted earnings of $1.12 per share and revenue of $1.54 billion, according to the AP.
In a shareholder letter released with the earnings, Cannon-Brookes described the quarter as “fantastic” and said the company plans to ramp up buybacks, expecting second-half repurchases to be two to three times higher than the first half. He highlighted Rovo surpassing 5 million monthly active users and shared customer feedback on Atlassian’s AI tools rollout, including CIO Chris Burgess noting widespread internal adoption. MarketScreener
Wall Street continues to trim its long-term outlook for the sector. Truist analyst Miller Jump lowered his price target on Atlassian from $210 to $150 but maintained a buy rating. He pointed to concerns around “terminal value” rather than short-term fundamentals as the main reason for the selloff, noting that AI narratives have become more challenging for seat-based software providers. TipRanks
The math isn’t straightforward. Atlassian has to prove AI add-ons boost customer spending, not just efficiency, all while managing margins and cash flow. If firms trim staff or tighten IT spending, the impact usually hits new seats and expansions first.
Atlassian offers project-management and collaboration tools like Jira, Confluence, and Trello, while nudging users away from on-premise setups toward cloud subscriptions. The company argues that AI capabilities boost the value of these products, especially at scale. But investors are questioning just how lasting that advantage will be amid the fast-changing AI environment.
