Atlassian shares drop 16% despite Q1 profit beat and Q2 revenue outlook

Atlassian (TEAM) topped profit estimates for the first quarter of fiscal 2027, reporting non-GAAP earnings of $1.65 per share against the $1.45 consensus. Revenue of $1.77 billion beat the $1.75 billion estimate.

Shares fell 16.1% at 3:59 p.m. ET, from a $183.29 close.

Revenue rose 24% from $1.43 billion a year earlier. Cloud revenue was $1.30 billion, up 31%.

Here's how the company did:

• Revenue: $1.77 billion vs. $1.43 billion a year earlier, $1.75 billion expected
• Non-GAAP EPS: $1.65 vs. $1.04 a year earlier, $1.45 expected
• GAAP net income: $91 million vs. a net loss of $52 million a year earlier
• Non-GAAP operating margin: 32% vs. 23% a year earlier
• Free cash flow: $463 million vs. $114.6 million a year earlier

Subscription ARR was $6.81 billion, up 23%. Remaining performance obligations reached $4.75 billion, up 44%. Cash and cash equivalents totaled $1.12 billion at the end of the quarter.

Net income swung from a loss of $98.4 million in the third quarter of fiscal 2026 to a profit of $139.1 million in the fourth quarter.

Guidance

For the second quarter, the company expects total revenue of $1.83 billion to $1.84 billion. It expects GAAP operating margin of about 4.5% and non-GAAP operating margin of about 26.0%.

For fiscal 2027, the company expects subscription ARR growth of about 18.5% and total revenue growth of about 13.75%. It expects GAAP operating margin of about 5.0% and non-GAAP operating margin of about 25.5%.

Segment results

Data Center revenue was $390.7 million, up from $372.6 million a year earlier. The company expects Data Center revenue to decline about 14.0% in the second quarter and about 16.0% for the full year.

Marketplace and other revenue was $79.0 million, compared with $62.2 million a year earlier. Service Collection has more than $1 billion in ARR, growing north of 30%, and more than 70,000 customers.

Costs and charges

GAAP operating income was $189 million, against an operating loss of $96 million a year earlier. Stock-based compensation was $356.5 million in the quarter.

The quarter carried no restructuring charges, after $55.7 million a year earlier.

Chief accounting officer

Gene Liu will step down as Chief Accounting Officer and principal accounting officer effective Nov. 13, after more than 12 years with the company. His decision was not the result of any disagreement with the company.

Eli Berkovitch becomes Chief Accounting Officer effective Nov. 16. His offer letter provides a $475,000 annual base salary and a target bonus of 50% of base salary, along with an initial restricted stock unit grant with a $4.5 million target value that vests quarterly over four years.

Berkovitch also receives a $100,000 signing bonus, repayable if he resigns within 12 months of starting. He previously held senior financial roles at Box, Inc. from May 2015 to October 2026, including as Chief Accounting Officer from April 2021.