Atlassian (TEAM) Q4 2025: $1M+ Deal Count Doubles, AI Tailwind Accelerates Enterprise Cloud
Atlassian’s Q4 capped a transformative year, with large enterprise adoption and AI-driven innovation fueling durable growth across cloud and core apps. Record $1 million-plus deals and surging AI feature usage signal a strengthening platform effect, while management’s conservative FY26 guide keeps upside in play amid enterprise sales evolution. With foundational investments in AI, cloud migration, and broader business user penetration, Atlassian enters FY26 positioned for compounding expansion, even as near-term cash flow and margin reflect mix and timing shifts.
Summary
- Enterprise Cloud Wins Accelerate: Large customers consolidated onto Atlassian, doubling $1M+ ACV deals and driving robust RPO growth.
- AI Adoption Unlocks Usage: AI-powered features and the Teamwork Collection exceeded expectations, expanding reach to business users.
- Conservative Guidance Leaves Upside: FY26 outlook embeds macro and go-to-market caution, but long-term 20% CAGR target reaffirmed.
Performance Analysis
Atlassian closed FY25 with $5.2 billion in revenue and over $1.4 billion in free cash flow, marking another year above the Rule of 40 threshold—a metric blending growth and profitability prized among software investors. The quarter’s standout was enterprise momentum, as the number of $1 million+ annual contract value (ACV) deals more than doubled year-over-year, and record migrations from data center to cloud rose 60% YoY. This shift underpinned a 38% increase in remaining performance obligations (RPO) to $3.3 billion, with 74% due for recognition in the next year, reflecting multi-year customer commitments.
AI adoption proved a tangible growth lever, with Atlassian’s AI-powered features reaching 2.3 million monthly active users (up 50% sequentially) and driving higher engagement—Confluence AI users created 15% more pages and made 33% more edits. The Teamwork Collection, Atlassian’s bundled cloud suite, saw rapid uptake, outpacing internal expectations and landing major Fortune 500 wins. Cloud net revenue retention held steady at 120%, supporting durable expansion within existing accounts.
- Enterprise-Driven RPO Surge: Large deal activity and cloud migrations fueled a 38% YoY RPO increase, anchoring forward revenue visibility.
- AI Usage and Engagement Spike: Token usage for AI features jumped 5x QoQ, signaling broad-based adoption and future monetization potential.
- Free Cash Flow Timing Effects: FY25 free cash flow was flat YoY, as billing transitions and back-loaded sales tempered near-term conversion despite strong core profitability.
Marketplace and data center segments performed in line with expectations, with data center growth driven by pricing but offset by cloud migration headwinds. Management highlighted stable macro trends and cross-sell strength, while noting ongoing variability in migration pace and cash flow conversion as large customers shift to annual billing and hybrid cloud models.
Executive Commentary
"We feel a real sense of momentum coming out of Q4 as we signed a record number of deals greater than $1 million in ACV in the quarter, up over 2x year on year...The teamwork collection has seen incredibly strong momentum and is exceeding our expectations."
Mike Cannon-Brooks, CEO & Co-founder
"There are some temporal headwinds in the short term as we transition multi-year agreements from upfront to annual billing terms...In terms of modeling long-term or over the future, we continue to expect our cash flow will correlate to our non-GAAP operating income trends."
Joe Binns, Chief Financial Officer
Strategic Positioning
1. Enterprise Cloud Consolidation
Atlassian’s multi-cloud platform is becoming the system of record for enterprise workflows, as Fortune 500 and Global 2000 clients increasingly consolidate disparate tools onto Atlassian’s cloud suite. The Google Cloud partnership deepens AI infrastructure reach and resilience, supporting global scale and differentiated AI-powered features. Management called out a $14 billion addressable opportunity within the existing customer base, with Fortune 500 customers representing just 10% of revenue, underscoring significant expansion headroom.
2. AI Innovation and Usage-Led Monetization
AI is now embedded at the core of Atlassian’s platform, driving measurable increases in product usage and customer engagement. The Teamwork Collection, now a flagship bundle, leverages AI features as a key differentiator. While near-term AI monetization is minimal by design, higher-tier editions (premium and enterprise) are seeing 40% YoY growth, with AI capabilities cited as a major driver. The company is prioritizing deployment and engagement first, with consumption-based pricing and standalone AI SKUs as emerging future vectors.
3. Business User Penetration
Half of Atlassian’s core app users are now business (non-technical) users, reflecting success in expanding beyond traditional developer and IT teams. Products like Loom and Trello, as well as AI-driven workflow automation, are accelerating adoption in sales, marketing, HR, and finance functions. This broadening user base multiplies the platform effect and underpins management’s conviction in durable, compounding growth.
4. Go-to-Market and Sales Transformation
Enterprise sales execution and partner ecosystem improvements are ongoing, with new leadership and investments in customer success, partner programs, and talent acquisition. The sales hiring pipeline exceeded targets in Q4, and management expects continued progress in sales culture and operational scale. While the transition to enterprise-led sales introduces some near-term execution risk, it is essential to unlocking larger, multi-product deals and deeper customer relationships.
5. Cloud Migration and Hybrid Model Maturation
Data center to cloud migrations remain a multi-year growth lever, with FY25 migration contribution in the mid to high single-digit range. Remaining data center customers are larger and more complex, requiring hybrid and phased approaches. Management’s FY26 guidance embeds conservative migration assumptions, reflecting the inherent variability and timing risk as these transitions mature.
Key Considerations
Atlassian’s Q4 performance and FY25 close highlight a business compounding across multiple vectors, with AI, cloud, and enterprise sales each reinforcing the platform’s strategic moat. Investors should weigh the following:
- Large Deal Velocity: Doubling of $1M+ ACV deals and 38% RPO growth anchor forward revenue and validate enterprise strategy.
- AI Engagement Outpaces Monetization: AI feature usage up 5x QoQ, with monetization lagging by design to drive adoption and future upsell.
- Go-to-Market Evolution: Ongoing enterprise sales transformation introduces near-term execution risk but is critical for scaling large, multi-product deals.
- Cloud Migration Complexity: Migration pace will remain lumpy as largest customers move in stages, creating variability in revenue and cash flow recognition.
- Margin and Cash Flow Discipline: Operating margin guidance of 24% reflects reinvestment in AI and sales, with management reiterating FY27 25%+ target.
Risks
Execution risk remains elevated as Atlassian scales enterprise sales and navigates complex cloud migrations, with potential for quarterly variability in revenue and cash flow. Macro uncertainty and customer budget cycles could impact large deal timing. AI monetization is still nascent, and success depends on translating usage gains into durable upsell and cross-sell. Management’s conservative guidance helps manage expectations, but any missteps in go-to-market or migration execution could pressure near-term results.
Forward Outlook
For Q1 FY26, Atlassian guided to:
- Cloud revenue growth with mid-single-digit migration contribution
- Data center segment growth of approximately 8%, reflecting a seasonally smaller renewal base
For full-year FY26, management maintained guidance:
- 20% CAGR target through FY27
- Operating margin of 24%, with a path to 25%+ by FY27
Management highlighted:
- Conservative revenue guidance reflecting macro and go-to-market transition risk
- Continued investment in AI, enterprise sales, and customer success to drive long-term growth
Takeaways
Atlassian’s FY25 exit demonstrates a business compounding across multiple dimensions, with enterprise cloud deals, AI-driven usage, and business user expansion all reinforcing the platform’s network effect.
- Enterprise Cloud Momentum: Record $1M+ deals and RPO growth validate Atlassian’s system-of-work strategy and deepen revenue visibility.
- AI Tailwind Drives Engagement: Rapid AI adoption is translating into higher product usage and premium edition growth, setting up future monetization.
- Execution and Migration Remain Key Watchpoints: Investors should monitor progress on enterprise sales transformation, cloud migration pacing, and the translation of AI usage into revenue as FY26 unfolds.
Conclusion
Atlassian enters FY26 with strengthening enterprise momentum and a clear AI-driven platform tailwind, but near-term variability in migration and cash flow conversion warrant close attention. With foundational investments compounding, the company’s long-term growth thesis remains intact, and upside exists if execution continues to outpace conservative guidance.
Industry Read-Through
Atlassian’s results underscore a broader enterprise shift toward cloud consolidation and AI-powered collaboration, with large organizations seeking to standardize workflows and accelerate digital transformation. The success of bundled platforms and AI-driven features signals increasing customer preference for integrated, usage-based solutions. Vendors reliant on legacy, on-premise, or single-point solutions face mounting risk as customers migrate to comprehensive, cloud-native platforms. AI is becoming a core differentiator, but monetization will lag usage—platforms that drive engagement today are best positioned to capture future upsell and cross-sell as enterprise budgets evolve.