Atlassian (TEAM) Q1 2026: Cloud Migrations Double, Driving 26% Cloud Growth and AI Adoption Surge
Atlassian’s Q1 2026 delivered a decisive inflection in cloud adoption, with data center migrations doubling year-on-year and fueling both revenue and AI platform usage. The company’s long-telegraphed data center end-of-life is now accelerating migration volumes, shifting the revenue mix and reinforcing Atlassian’s positioning as an AI-first, integrated work platform. With enterprise cloud demand and AI engagement both surging, the outlook now centers on Atlassian’s ability to monetize new AI capabilities and manage the complex timing of revenue recognition through the migration wave.
Summary
- Cloud Migration Acceleration: Data center migrations doubled YoY, catalyzing cloud revenue and platform adoption.
- AI Engagement Momentum: AI monthly active users rose 50% QoQ, now surpassing 3.5 million.
- Revenue Recognition Shift: Cloud transition alters revenue timing, requiring careful guidance management.
Performance Analysis
Atlassian’s Q1 2026 results were defined by a sharp acceleration in cloud migration and AI adoption, with total revenue up 21% year-on-year and cloud revenue up 26%. The company’s cloud-first strategy is now manifesting in operational metrics, as the number of data center seats migrated doubled compared to last year, and remaining performance obligations (RPO) jumped 42% to $3.3 billion. This migration surge is not only expanding Atlassian’s cloud installed base, but also driving increased uptake of higher-value product editions and consolidation of competitor tools.
AI usage is scaling rapidly—over 3.5 million monthly active users now engage with Atlassian’s AI features, a 50% sequential increase, and platform-wide AI interactions have grown nearly 150% in six months. The company’s Teamwork Collection, a bundled offering that unifies collaboration and AI tools, is seeing double-digit user growth and higher adoption of premium editions. However, the revenue recognition dynamic is nuanced: as more customers migrate to cloud, revenue shifts from upfront (data center) to ratable (cloud), temporarily dampening organic growth optics despite underlying health.
- Cloud Revenue Mix Shift: Migration-driven cloud growth is now a mid- to high-single-digit contributor, with organic cloud drivers steady.
- Marketplace Take Rate Impact: Lower marketplace margins on cloud apps versus data center apps modestly dilute incremental cloud revenue.
- RPO Strength: The 42% RPO increase underscores strong forward demand visibility, supporting multi-year growth commitments.
While headline growth is robust, the transition to cloud revenue recognition and marketplace margin dilution will require ongoing navigation as migration volumes continue to ramp.
Executive Commentary
"Cloud migrations also, however, have an impact on the timing of revenue recognition because cloud revenue is recognized ratably. And data center has a combination of upfront recognition and some ratable. And then lastly, the move to cloud also impacts marketplace revenue because we have a lower take rate on cloud app sales than we do on data center apps."
Joe Binns, Chief Financial Officer
"AI is one of the best things that's ever happened to Atlassian. The need to track, plan, and manage work while harnessing your organizational knowledge are things that don't change in this era. And I'd argue those things become even more important as more software is created and more people have the ability to create amazing technology that changes our lives."
Mike Cannon-Brooks, CEO & Co-founder
Strategic Positioning
1. Cloud-First Migration Playbook
Atlassian’s end-of-life for data center products is now a primary lever, with migration programs like Ascend and FastShift enabling partners and customers to transition at scale. The company’s long-term planning and communication have minimized customer disruption, and migration is now a “when, not if” conversation for large customers. The partner network, responsible for about half of revenues, is mature and well-integrated into the migration motion, reinforcing Atlassian’s ability to manage the transition globally.
2. AI Platform Integration and Monetization
AI is now deeply embedded across Atlassian’s platform, with features such as Rovo and AI-powered agents driving both user engagement and migration incentives. The Teamwork Graph, Atlassian’s data fabric for work relationships, has surpassed 100 billion objects, and AI-driven workflows are now central to product adoption. Customers cite AI as a key reason for upgrading and standardizing on Atlassian, while AI monetization is already visible in higher-value product mix and new consumption-based pricing models.
3. Enterprise Expansion and Cohort Growth
Enterprise adoption is accelerating, with 80% of the Fortune 500 now customers and large deals signed across verticals in Q1. AI-enabled developer cohorts are expanding paid Jira seats 5% faster than non-AI users, and managing 20% more projects, underscoring Atlassian’s centrality in the modern software development stack. The company’s ability to serve complex enterprise needs—compliance, governance, isolated and government clouds—remains a competitive moat.
4. Product Innovation and Acquisitions
Recent acquisitions (Loom, Browser Company, DX) are strategically aligned to AI and workflow integration, with Loom’s AI-powered video collaboration already exceeding $100 million ARR and growing over 100% year-on-year. The Browser Company acquisition aims to deliver a knowledge-worker-optimized browser packed with AI, while DX will enhance developer productivity analytics. Atlassian’s disciplined M&A philosophy remains unchanged, prioritizing strategic fit and long-term value creation.
Key Considerations
This quarter marks a strategic inflection point for Atlassian, as cloud migration, AI adoption, and enterprise expansion all converge to reshape the business model and revenue mix. The company’s execution on multi-year migration planning and AI integration is now translating into measurable business outcomes, but also introduces new operational and financial complexities.
Key Considerations:
- Migration Timing Volatility: The pace of data center-to-cloud migrations will remain variable, with the bulk of transitions expected closer to the March 2029 end-of-life date.
- Revenue Recognition Dynamics: The shift from upfront to ratable cloud revenue recognition requires careful guidance management to avoid misinterpretation of underlying growth.
- Marketplace Margin Dilution: Lower take rates on cloud apps versus data center apps will modestly pressure incremental cloud profitability.
- AI Monetization Pathways: Consumption-based pricing and premium AI features are gaining traction, but customer caution around pricing models could temper near-term monetization velocity.
- Partner Ecosystem Readiness: The extended partner network is well-prepared for migration support, but will need to scale further as migration volumes accelerate globally.
Risks
The primary risk stems from the complex timing of cloud migrations, which may lead to quarter-to-quarter revenue variability and investor misinterpretation of growth health. Marketplace margin dilution and customer adoption of new AI pricing models also pose challenges to near-term profitability. Enterprise customers’ evolving needs for compliance, governance, and security in AI-driven workflows present additional execution risk, especially as platform complexity increases.
Forward Outlook
For Q2 2026, Atlassian guided to:
- Cloud revenue growth of 22.5% YoY, reflecting increased migration volumes
- RPO growth expected to remain elevated, supporting multi-year targets
For full-year 2026, management maintained its long-term 20% CAGR target and raised cloud revenue guidance, while holding organic cloud driver assumptions steady:
- Full-year revenue growth outlook now includes a higher contribution from migrations, with organic growth assumptions unchanged
Management highlighted several factors that will shape results:
- Migration volumes are expected to be lumpy, with acceleration as the data center end-of-life approaches
- AI engagement and monetization are expected to continue driving upgrades and higher-value product adoption
Takeaways
Atlassian’s Q1 2026 marks a pivotal moment in its cloud and AI transformation, with migration momentum, AI engagement, and enterprise expansion all contributing to robust forward visibility.
- Cloud Migration as Growth Engine: Doubling of migration volumes and rising cloud adoption reinforce Atlassian’s transition to a recurring, AI-powered platform model.
- AI as a Differentiator: Surging AI usage and integration across products are deepening customer stickiness and fueling premium product uptake.
- Look for Monetization Leverage: Investors should watch for evidence of sustained AI monetization, partner channel scaling, and the pace of migration-driven revenue recognition in coming quarters.
Conclusion
Atlassian enters FY26 with clear momentum in cloud migrations and AI adoption, but must carefully manage the operational and financial complexities of this transition. The company’s multi-year planning and execution are yielding tangible results, positioning Atlassian as a central platform for the future of collaborative, AI-enabled work.
Industry Read-Through
Atlassian’s results signal a broader inflection in enterprise software, as customers increasingly prioritize cloud-native platforms and integrated AI capabilities. Vendors with mature migration programs and deep AI integration will be best positioned to capture share as legacy on-premises solutions sunset. The shift in revenue recognition timing and marketplace margin dilution are likely to be recurring themes for other SaaS vendors navigating similar transitions. Enterprise demand for compliance, governance, and workflow integration in AI-driven environments is now a clear market expectation, raising the competitive bar across the sector.