Conference Transcript - TEAM 2026-06-10

Greg, Conference Host / Interviewer

All right, so we're going to kick off our next session. So really pleased to have Martin Lam from Atlassian with us here today. Martin, as you know, runs IR for Atlassian, and thanks so much for being here with us.

Martin Lam, Head of Investor Relations

Yeah, of course. Good to be here, Greg.

Greg, Conference Host / Interviewer

Yeah, good to be here with you. And so, Martin, you're coming off of a tremendous Q3, which I would say really surprised a lot of folks, and yes, there were data center pull-flowers that you guys spoke about, but regardless, the cloud revenue upside was really strong, and some have asked how you were able to deliver such outperformance. So it'd be great if you could sort of talk about the key drivers of that strength.

Martin Lam, Head of Investor Relations

Yeah. So we had a really great quarter, as Greg mentioned. I think importantly, cloud revenue showed a lot of strengths this quarter. The driver of that cloud outperformance was driven by two primary factors. One was cross-sell into teamwork collection, as well as second factor being seed expansion within core Jira. So those are great things to see, especially, I think, in the face of people having doubts about the durability of seed expansion. We actually recently showed a chart about seed expansion at our investor forum at our user conference, Team 26 in Anaheim. We showed kind of that seed expansion or seed growth X migrations continues to grow, continues to compound over time. But then that really played out in Q3, right? So seeing that seed expansion across both developers as well as knowledge workers drove that outperformance. And then going back to teamwork collection, the other primary driver, the number one reason why customers are upgraded to teamwork collection where you get the whole Atlassian platform as well as 10x the amount of rovo credits with that. So you get a certain amount of rovo credits with the paid Jira subscription or any standard subscription. But when you upgrade a teamwork collection, you get 10x the amount of credits. And that's really resonating with customers as they value that predictability as they kind of go forward and see their increase of rovo usage.

Greg, Conference Host / Interviewer

Okay, that's great. And then any change, Martin, quarter over quarter in your SMB business and or your enterprise business? Or was that just like very steady on both counts?

Martin Lam, Head of Investor Relations

No, we continue to grow well across both. I would say we have traditionally known for our flywheel business. this. We have 350,000 customers and we have a growing enterprise segment. Our CRO Brian Duffy spoke at our investor forum recently. He continues to execute really well. And I think you see this on the enterprise side play out in RPO growth, growing 37% year over year. And we continue to see customers kind of voting for their wallets in this environment. They're signing larger dollar contracts than ever, signing larger duration contracts than ever. And so it's a great thing to see. And I think the value of that Atlassian platform, which I mentioned earlier, that that's what customers want us to sign up for, that strategic partnership with us is an important factor.

Greg, Conference Host / Interviewer

All right. Terrific. And then the teamwork graph seems to be an underappreciated asset as it relates to Atlassian differentiation. So I think it might be helpful if you could just walk through the key attributes of teamwork graph for everyone.

Martin Lam, Head of Investor Relations

Yeah. So our teamwork graph, as we call it, which is basically underlying knowledge graph, which provides the contextual relationships of who's working on what, what teams are using what tools, and the relationships between those. How do these workflows ladder up to the overall company strategy? It's this kind of connection point within an organization that provides that context. Because in this environment, not all AI is built equally. You need the intelligence, but you need the context to actually deliver good results. And so at our investor forum, we actually showed a side-by-side demo of Cloud Code, same prompt on both sides, one connected teamwork graph, one without, same repo that they had access to. and the one connected teamwork graph delivered 48 better 48 percent better results at 44 percent less token usage which i think resonates especially in this environment where people want to make sure that they're getting good results and of course being efficient with their token spend and so i think that really resonated that was a big part of our keynote presentation that mike delivered at the user conference in the morning and that really resonated with customers as well And as we spoke with our product teams, spoke with our sales teams after our conference, that seemed to really resonate with customers. And so when you think about it, you don't want to send AI just kind of blindly throughout your organization searching for things. You want to allow it, the guardrails to traverse with their instruction manual to understand how to pull things in a more efficient manner. And so I think that's going to be an important part as we kind of progress on. It's very early with AI as customers understand this, and as they get that additional context, they're going to be able to get better results, get at a better, more efficient rate.

Greg, Conference Host / Interviewer

Yeah, that's terrific. And I would back up just that demo because it did really resonate with investors as well and with me. And I would also say that when I was at Team 26 at your customer conference, one person was telling me that by seeing all of the, with teamwork graphs, seeing all the relationships, all the connections, et cetera, that it made it easier for practitioners to now be informed on how to build more effective agents. So I thought that was another interesting aspect as well. So let's talk about Robo. So your AI tech, because it now has over 5 million MAU. Usage is growing rapidly. And what I'm wondering, Martin, is if, like, were there any meaningful functional improvements to Rovo over the last six to 12 months that are helping to spark such an uptick in adoption? Or is this just, you know, there was just a period of time that we had to just kind of wade through and now you're really kind of seeing the fruits of your labor. So just kind of curious, again, if anything has changed technologically, if you will, more recently.

Martin Lam, Head of Investor Relations

Yeah, I don't think anything has changed technologically. I think it's the steady progress that we make across kind of all of our three priorities and especially in advancing rovo um when i think about rovo very early on when we introduced it several years ago it was centered around enterprise search and then of course then chat functionality and now there's more agentic usage um and that that of course is driving the increased rovo uh credit usage you're seeing rovo credits consumption grow 20% month over month, which is incredibly fast and really good to see. You're also seeing, interestingly, those customers that actively use Rovo versus those that don't actively use it or don't light it up, grow their ARR at about 2x the rate of those that don't. So that's a good proof point. I think that when customers utilize Rovo, they get incremental value. That delivers more workflows through the Atlassian platform, and that then leads over time to more usage, more users, and then more monetization opportunities down the line.

Greg, Conference Host / Interviewer

Okay. And then getting back to Teamwork Collection, which you mentioned earlier, so are the 10x AI credits for Rovo, is that the primary driver of Teamwork Collection adoption, or is it also just the additional products that can be attained at a more favorable unit price?

Martin Lam, Head of Investor Relations

Yeah, I think that that premise or that latter premise of this crude bundle is probably a misconception. So teamwork collection for everyone that's a little less familiar, you do get Jira, Confluence, Loom. But really, when we think about it, it's the value of the whole Atlassian platform. I think that's probably the biggest thing when I think about the evolution of our company over the past several years. It's we've built a unified platform with a unified data layer. And we talked about the teamwork graph underlying that. And you get the whole value of the platform with teamwork collection. And when we talk to customers, they do call out the increased AI credits as the number one driver. But they say, OK, what's resonating with me is I understand the value of the whole Atlassian platform, all the automation capability, of course, the teamwork graph, which we talked about, the analytics underlying it, and then kind of a unified AI layer underneath all that. And especially when I add additional users, add additional teams, then I get compounding effects to this because, again, you're adding more, enriching the teamwork graph over time as I add more users, more workflows, understanding their tools, their priorities. And that's, I think, what companies understand. And so when they adopt teamwork collection, you actually see them expand above and beyond even their initial JIRA footprint. So you tend to see them consolidate from other point solutions. They're adding about 10% more users when they do so. And then when you look at the teamwork collection kind of behavior, teamwork collection customer behavior, those customers are driving 2x more rovo credit consumption than those that are on standalone products and have 2x more active agents, not just built agents, but active agents versus those on standalone products.

Greg, Conference Host / Interviewer

Okay. Yeah, that's great. And then, Martin, if we take a step back, so it's very clear that many investors continue to worry about AI significantly disrupting Atlassian's business, even if it hasn't done so today. But maybe just sort of talk about why you believe Atlassian is a durable growth business.

Martin Lam, Head of Investor Relations

Yeah, I think certainly key three numbers kind of back up a lot of what we certainly have believed. And I think when you think about the complexity of the world and the speed in which AI evolves things, the need for collaboration, coordination raises more than ever, right? Like you need to coordinate more across what are we doing across the organization, especially as the speed and throughput increases. And certainly not just coordinating between humans, but also coordinating between humans and agents. Are we doing the right things? Are those agents actually delivering what we want them to? If Greg and I are on the same team, are we making sure that as we deploy agents, we're not overlapping, having kind of conflicting things that we're working on? Are we actually progressing against our strategic results as a company? And so that coordination aspect becomes more important than ever. I think we see more people needing to be added to that Lassian platform to coordinate that. And then you see things like our innovation of adding or being able to manage and orchestrate agents in GWF. That's a prime example. Jira today is already the orchestration workflow platform for work. Right now I can assign work to my colleagues and team, and now I can assign work to agents directly in Jira, and then the agents can take action directly from there. And again, so managing, what are our teams working on managing now? What are those agents working on? Are they delivering actual tangible results for us and advancing our strategic priorities as a company? because that's actually what matters, right? But not just the volume of work. Right.

Greg, Conference Host / Interviewer

Okay. Very helpful. Thanks, Martin. And then back in March, Atlassian, as I think all investors are aware, Atlassian announced a rift of approximately 10%. Maybe just sort of talk through the rationale for making this change at this time, as well as the magnitude of that change.

Martin Lam, Head of Investor Relations

Yeah. So we took out some action back in March. As Greg mentioned, I think we're still digesting some of that. I think we're very clear that the two primary objectives of that were, one, to help us be able to self-fund more quarter-carrying enterprise sales reps, where we're seeing a lot of traction, as well as being able to self-fund key AI talent. Obviously, that's going to be an important part in the years to come. But the other aspect is to accelerate gap profitability. We talked about in this past quarter, one of our key strategic priorities as a company have been serving enterprises, delivering AI to customers, and delivering our system of work, which we call it, to our customers. So those are our top three priorities. Then we elevated a fourth strategic priority of driving durable, profitable growth. So I think that profitability aspect has clearly come into focus. You hear that in our kind of shareholder letter as we talked about elevating this as a key strategic priority. And we do want to accelerate our path to gap probability and then, of course, grow that from there.

Greg, Conference Host / Interviewer

And, Martin, has there been any discernible impact on, you know, growth or pipeline generation since making it happen?

Martin Lam, Head of Investor Relations

No. I mean, I think Q3, we obviously executed well. We're tracking well from a Q4 perspective, but nothing to call out. I think we will measure it in terms of making sure that there's no business disruption. But of course, we're still digesting it. As I mentioned earlier, you want to obviously continue to make sure that you're executing well.

Greg, Conference Host / Interviewer

And then, perfect. And then you mentioned Brian Duffy a few moments ago, your CRO. So he seems to really be putting his stamp on the go-to-market, including a significant emphasis on driving more enterprise revenue. But how is this going from your perspective?

Martin Lam, Head of Investor Relations

Yeah, I think he's doing incredibly well. he continues to make changes. And I think of that as evolution of the business, right? So we've built an incredible business driven by our product-led growth kind of flywheel motion. And it's now about how do we supplement that motion with more of a higher touch motion, as we call it. How do we serve those customers that need a little more handholding? So we have 350,000 customers already. And it's now how do we better serve those enterprises that we are already in that existing customer base. So we've always shared the stat of 85% of the Fortune 500 as existing customers already, yet they only represent 10% of our overall business. And that's, I think, applies not only to the Fortune 500, but the mass of enterprise customers within that 350,000 customer base. And so it's how do we continue to better serve them? Brian continues to make changes, continues to grow that quarter carrying sales group, as I mentioned earlier, and I think we're delivering on what customers want because a lot of this is customer pull. It's not us pushing the Atlassian platform. I think a lot of our customers have said, like, I want more of a strategic relationship with Atlassian. Help me partner with you better. And so I think we're meeting customers where they want.

Greg, Conference Host / Interviewer

Great. Thanks. And then what's your confidence level, Martin, in continuing to drive strong cloud migrations over the next couple of years, including for large customers that operate in highly regulated environments?

Martin Lam, Head of Investor Relations

Yeah, I think we announced the end of life of our data center or on-premise platform, which will end of life in March of 2029. But even next to that, I think we feel really good about being able to serve those customers with our cloud platform. We obviously built an enterprise-grade unified cloud platform, as I mentioned earlier. feel good that a lot of that is behind us. And so we're now better able to serve these enterprises that are on our data center deployment. There's still some work that we have to do between now and March of 29, which is great because there's that long runway. And it's about having that open dialogue with customers that may not be able to move now and understanding our roadmap between now and then so that, hey, can we deliver what you need between now and then? when we think about migrations we've obviously had a lot of migration success and we've learned from the end of life of our server products several years ago and we continue to see that those migrations tick up in the more recent years more importantly you're seeing those data center customers when they migrate to cloud they're migrating to our cloud premium and cloud enterprise skews so 93 percent of those data center customers when they migrate they have to migrate to the higher level additions and then actually what's more important once they land in cloud we have significantly more products to cross-sell them to. We have higher level additions, which we can upgrade them to over time or upsell them to over time. And then it's significantly easier to add users in the cloud. I don't have to ping my IT admin and say, hey, can you add Greg into my instance? I can actually, with little friction, click and add Greg immediately, bring in more users. And again, you get the benefit of the whole platform underlying teamwork graph. So you get this compounding effect. And that's why I think you see such strong user growth continue on the Atlassian platform in spite of, I think, investor concerns. And we shared more recently at our investor forum another cut. Again, we serve all teams on the Atlassian platform. I think sometimes we have this misconception that we're just a developer company. And we showed two-thirds of the active users on our platform are knowledge workers, non-developers, non-engineers. And so that's an important aspect that we have the ability to serve increasingly non-technical teams, these knowledge workers, certainly that have to work in conjunction with those software developers that kind of are our heritage, but increasingly that's a big part of it. And I feel that's why we have a lot of confidence earlier to your question on how, why do you have so much confidence around kind of durability of things like user growth across all it's because first of all, it's really early on and we feel it's early on in our opportunity and we're seeing these proof points as we grow into those non-technical users over time.

Greg, Conference Host / Interviewer

Yeah, very interesting. And does Brian and, you know, Mike and the leadership team overall, I mean, is there a line of sight to, you know, some of these bigger customers that are really committed to the Atlassian platform going wall to wall, just to your point on more non-technical user adoption?

Martin Lam, Head of Investor Relations

Yeah, I think that's been one of our big strategic priorities. That's obviously the grand prize in terms of oftentimes we land in an organization with their technically oriented teams, whether it's their software team or their IT team. But the expansion opportunity then becomes, hey, how can we serve, more recently, the marketing team, the HR team? We see more and more of those teams, I think, added on that Atlassian platform. And that's a big play of ours, right? So we talked about our strategic priorities earlier in serving enterprises. is it's penetrating and reaching more of these knowledge workers. Absolutely.

Greg, Conference Host / Interviewer

And then at your investor forum about a month ago, in conjunction with Team 26, so you said that the three-year, 20% plus revenue CAGR through Fiscal 27, no longer a relevant target. You also disclosed subscription ARR for the first time, which encompasses both cloud and and data center, and also discuss high-level growth expectations for both FY27 and FY28. So maybe just kind of refresh everyone on that, if you wouldn't mind.

Martin Lam, Head of Investor Relations

Yeah, so as I mentioned earlier, with the announcement back in September when we announced the end of life of our data center product, I think that did a couple things, right? That drew a line in the sand for those data center customers of a timeline of when they need to migrate over to cloud. And with that, it also introduced ASC-606 changes of revenue recognition on the data center line, because now that kind of useful life of the data center product has shortened with that definitive end-of-life date. And with that, that brought forward a lot more upfront term license revenue into 26 is just mechanical math of more upfront term license revenue. This is all specific to the data center again. And therefore, that creates meaningfully tough comp for 27 as well. Again, just math, mechanical math. And so we do now expect data center to have negative growth next year as that business contracts, as more customers migrate over to cloud as well. And so that negative data center growth will be a drag on overall revenue growth next year. And so to help bridge investors through that, we thought it was important to introduce subscription ARR for you to understand the health of the overall book of business, right? That normalizes for all the 606 noise. It also helps investors kind of focus less on probably the migration economics in terms of like, hey, how much uplift on cloud is coming from migrations? How much of the headwind is on data center? Now you get a picture of the full book of business on a normalized ARR basis. And then you can understand the health, overall health of the business better.

Greg, Conference Host / Interviewer

And then to be specific about it, so, you know, we have three quarters of disclosure. Three quarters ago, which was, you know, your September quarter, the growth on subscription ARR, I believe, was 20%. And then in December, it was 22. And then this past March was 23%. So we've seen acceleration in that metric.

Martin Lam, Head of Investor Relations

Yeah, that's right.

Greg, Conference Host / Interviewer

Okay. Yeah. And then, you know, maybe switching gears a bit. So in early May, you guys introduced a flex program aimed towards large customers. And we had BirdPodBear CrowdStrike's CFO earlier today. And, you know, they a lot of people sort of associate them with kind of the genesis of flex. And we've seen a lot of companies that have adopted. And, you know, I would say it's been additive every time in terms of what we've seen for the software companies that we track, you know, to, to, but to varying degrees. And so I guess as it pertains to Atlassian, like what are your expectations in terms of, you know, what Flex will, will do for you?

Martin Lam, Head of Investor Relations

Yeah. So as Greg mentioned, we introduced Flex. It's very early on. We only have a handful of customers in a beta program that as we kind of work with them through this, but it's basically you think of it as better serving those enterprise customers. And the theme of what we discussed earlier of removing friction of how we can better serve and partner with those enterprise customers. And so with a fixed wallet kind of contract or value-based contract, then customers can add on another collection or add on additional products or SKUs over time without the friction of going back to procurement every single time you add a new SKU or add a new department into your mix. So I think it's kind of in the theme of meeting customers of where they're at, removing friction, helping them adopt more of that Lassian platform over time. And I think that theme of meeting customers where they're at is applicable, especially AI is so topical right now. And we touched on it very briefly earlier. Teamwork Collection with the 10x more credits just gives customers so much more predictability. in this environment, and you hear in the zeitgeist right now of token maxing and especially consumption-based pricing is a question we get quite a lot from investors. Customers value predictability. They want to understand, hey, how much am I spending with Atlassian? And Flex gives them that, right? Like a fixed wallet contract of understanding how much they're going to spend with Atlassian. And they can adopt over time without having to kind of burst through and be caught off guard.

Greg, Conference Host / Interviewer

Right. Okay. Great. And then with that, are there any questions in the room? If you do have a question, please raise your hand. Yes?

Martin Lam, Head of Investor Relations

Yeah, I mean, so I think the earliest one is probably what Greg mentioned earlier with the action that we took back in March. Number one thing, when you address headcount, I think that obviously has an impact on stock-based comp early on. But I think the other aspect is growing and maturing as a business as we moderate the pace of SBC. And so we've been, I think, quite open about that as a top priority for next year as we moderate that level of SBC, looking at different things within our overall comp program over time. And then beyond the immediate action in March, we have moderated the pace of hiring quite considerably. right? We talked about hiring, certainly in kind of enterprise sales and in AI, but beyond that, I would expect kind of overall headcount growth to be very, very modest overall. We talked more recently at our investor forum about that level of growth in R&D will grow significantly slower than overall top line growth. A big part of that is we went through a heavy investment cycle to build out this platform over the past several years that we talked about. had to build that to be able to facilitate the data center to cloud movement, better serve these enterprises in the cloud, and of course, build this unified AI platform. And with that kind of in the rear view, and us kind of kind of crested those investments now, we'll moderate the level of R&D investment that will grow slow and shrink over time as a percentage of revenue. And that structurally should help us as well, because in terms of SBC, normally R&D is a heavier kind and a command on that. Yes?

Speaker 4

Do you see a difference in, particularly AI or energetic engagement between customers in different regions, like West Coast versus the West, Europe, APAC?

Martin Lam, Head of Investor Relations

Interesting. I haven't drilled down too much, but I think one important thing that we've tried to look at it, of course, is like the more AI native kind of bleeding edge companies. So we tried to look at that non-subjective West, and so we won't talk to our data science team and said, here's the Forbes AI50. How many of these are our customers? And over two-thirds are our customers already, which is great to see. But then importantly, the ARR within these AI natives that are the fastest growing or most innovative companies in the world, they're growing their ARR significantly faster. I think 2x, the rate of kind of the overall book of business, growing over 100% year over year is what that cohort is growing. So that's good to see. And then Greg touched on it earlier, but rovo usage continues to increase. That's probably more broad-based across SMBs and enterprises. It's still very early on. I think people are wanting to identify the platforms that they want to run their agentic workflows on. The platform is so key to this because it offers the security, the governance that enterprises require to run their agentic workflows on. And so I don't think enterprises will have 20 platforms which they run their workflows on. But nor will they have one. And so I think they're working through, okay, which are the problems I want to standardize on? There'll be five or six kind of platforms that we kind of center on with our strategic, with our strategy, overall AI strategy. How do we kind of discern that? And I think Atlassian is really well positioned with the platform that we've built.

Greg, Conference Host / Interviewer

Other questions? So one thing to ask you, Martin, is that we've seen over the past several years, you know, a series of price increases from Atlassian in cloud, in data center, where do we stand today? How do you think about the value that your average customer is receiving at the current price points?

Martin Lam, Head of Investor Relations

Yeah, I think we take a lot of value in being a high value provider at a more attractive price point. So that we think of it as almost high value, high volume. Core to our pricing philosophy has always been, let's deliver value to the customer first and foremost. And then we can recuperate value through monetization over time. And so you've seen us at the price of Jira today is like $8 per user per month. It's incredibly affordable. But we've been very systematic with pricing. I think that speaks to the predictability aspect that we spoke about earlier. And again, we want to deliver that value. That's why we spend so much on R&Ds, because we can deliver incremental value to customers every single year. That affords us the ability to then take pricing over time because we are delivering more and more value to customers every single year. And again, I think that that's core to our overall monetization model. And we want to maintain that kind of high value, lower cost profile, especially because that's an enabler of being able to take share from customers or from other providers, I should say. Earlier, we talked about teamwork collection. when they adopt teamwork collection, we see a lot of consolidation off of other competing point solutions. That's going to be an important aspect, I think, in the years to come as you see more and more consolidation. And then especially when you think about the shift overall in the industry, I think that positions us really well as other companies also have to adjust to this landscape. Being a lower cost provider, I think will put us in a very advantageous position.

Greg, Conference Host / Interviewer

All right. Terrific. And then one last question that I just wanted to ask you from a product standpoint, because we've talked a lot about Jira. Of course, Confluence is a very popular Atlassian product as well. But I'd like to ask about JSM, Jira Service Management, because it just seems to be a freight train, quite honestly. Tremendous momentum at Atlassian. We hear it very consistently from all of our checks as well when we talk to folks in the field. And so when you look at the runway sort of associated with this product and the opportunity, how are you thinking about it? What's your confidence level in continued strong growth for JSM?

Martin Lam, Head of Investor Relations

Yeah. So Jira Service Management, or Service Collection now, as we call it, is a north of billion-dollar ARR business growing over 30% year over year, so doing incredibly well. I think sometimes people ask, like, hey, is there an inflection point with Jira Service Management? Not really. I think the compounding effects of all the investment that we've done over the past 10 years, really, continue to mature that product, better serve enterprises. We're seeing more taking share from, I think, competitors in that space. That does well in terms of displacements, competitive displacements. We continue to add functionality to better serve those enterprises and then reach more non-IT teams. So 60% of the jurorservice management instances are serving non-IT workflows, which is great to see. And then actually, really interesting, in terms of agentic invocations, as we call it, 40% of those are within service collection. So I think that speaks to Rovo's ability to be a first line of defense and kind of triage all the inbounds that a legal team is receiving, or that an HR team is receiving. That's a very applicable kind of agentic workflow that people can deploy early on out the gate. All right, fantastic.

Greg, Conference Host / Interviewer

Well, with that, We're out of time, but thank you, Martin, for a great discussion.