Atlassian Stock Surges 85% in 3 Months: Time to Hold or Book Profits?

Atlassian Corporation TEAM shares have surged 84.9% in the past three months, outperforming the Zacks Internet - Software industry’s return of 4.7%. The stock also outperformed its industry peers, including Monday.com MNDY, Freshworks FRSH and Salesforce CRM. In the past three months, shares of Monday.com, Freshworks and Salesforce have returned 8.1%, 37.5% and 36.8%, respectively.

The outperformance of Atlassian’s shares raises the question: Does it still have room to run, or is it time for investors to consider taking profits? Let’s find out.

3-Month Price Return Performance

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Rising AI Adoption Boosts Atlassian’s Prospects

Atlassian is seeing higher AI adoption help drive customer expansion. In the fourth quarter of fiscal 2026, revenues increased 28% year over year, while cloud revenues grew 31% year over year. Further, RPO increased 44% year over year, and subscription ARR grew 23% year over year.  Customers are signing larger deals, adding more seats and using more Atlassian products as they adopt AI.

Rovo is playing an important role in this trend. More than 80% of Fortune 500 companies now use Rovo, while Rovo-assisted actions increased 50% sequentially in the fourth quarter. Further, customers using Rovo are growing their ARR at more than twice the rate of customers that do not use Rovo. The strong adoption and higher usage suggest that Rovo is becoming an important part of Atlassian's efforts to increase spending within its existing customer base.

Rovo is also helping Atlassian increase revenues from existing customers. As Rovo usage rises, customers are buying more Rovo credits. Teamwork Collection offers about 10 times more Rovo credits and is encouraging customers to upgrade and add seats. Atlassian said these upgrades are helping increase average revenue per user. Teamwork Collection customers also have 4-5 times more paid seats per instance than stand-alone Jira or Confluence customers. This gives Atlassian an opportunity to convert higher Rovo usage into more seats, broader product adoption and higher revenue per customer.

The Teamwork Graph is another key part of Atlassian's AI strategy. The graph now spans more than 200 billion objects and connections and is designed to give AI agents better access to enterprise data and context. Management said AI and the Teamwork Graph are among the top two reasons customers upgrade to the cloud and Teamwork Collection. The company also reported record activity in large enterprise deals, with customers generating more than $3 million in ARR growing over 50% year over year and those with more than $5 million growing over 70%.

Higher AI adoption is also helping Atlassian's cloud business. Cloud revenues increased 31% year over year in the fourth quarter. Management said cross-selling and seat expansion were the main drivers behind the strong cloud momentum. The company also saw strong adoption of Teamwork Collection and Service Collection, while customers continued to add Jira and Confluence seats. As customers use AI across more teams and workflows, Atlassian could have more opportunities to expand its platform within large enterprise accounts. 

The above-mentioned factors show that rising AI adoption, cross-selling and seat expansion should help support Atlassian's growth prospects in the upcoming quarters. The Zacks Consensus Estimate for TEAM's fiscal 2027 and 2028 revenues indicates year-over-year growth of 13.01% and 14.78%, respectively.

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Key Technical Indicator Signals Bullish Trend for TEAM

Atlassian shares are trading above their 50-day and 200-day moving averages, a bullish technical signal that indicates the potential for continued upward momentum in the near term.

TEAM 50-Day & 200-Day Simple Moving Averages

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Rising AI Investments May Hurt TEAM’s Profitability

Atlassian's long-term AI strategy requires significant upfront investment, which may continue to weigh on GAAP profitability despite strong revenue growth. Atlassian expects a 6.5% GAAP operating margin in the first quarter of fiscal 2027 and 4.5% for fiscal 2027 compared with a 12% GAAP operating margin in the fourth quarter of fiscal 2026. This shows that Atlassian expects significantly lower profitability in fiscal 2027 than it achieved in the latest quarter.

The main reason is that Atlassian plans to keep spending on AI and expand its enterprise sales efforts. Management said it will continue to invest in AI and scale its enterprise go-to-market strategy because it sees strong demand in these areas. At the same time, the company plans to control costs through disciplined hiring, shifting resources toward higher-return opportunities and lower stock-based compensation. Even with these measures, the 4.5% fiscal 2027 operating margin target shows that higher investment is likely to weigh on the company's profitability.

Further, Atlassian also expects subscription annual recurring revenue (ARR) growth to slow to 18% in fiscal 2027, down from 23% in fiscal 2026. Management said the fiscal 2027 outlook reflects caution around the macro environment, fiscal policy and geopolitical conditions. While demand in the fourth quarter remained strong, the combination of slower ARR growth and a drop in GAAP operating margin could limit earnings growth and might weigh on Atlassian’s ability to turn its strong AI and enterprise demand into higher profits in fiscal 2027.

The Zacks Consensus Estimate for TEAM's fiscal 2027 earnings is pegged at $5.52 per share, revised down by 6.6% over the past 30 days, indicating a year-over year decline of 5.6%.

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TEAM's Premium Valuation Warrants a Cautious Approach

Atlassian is currently trading at a high price-to-sales (P/S) multiple, far above the Zacks Internet - Software industry. Atlassian’s forward 12-month P/S ratio sits at 6.23X, higher than the industry’s forward 12-month P/S ratio of 3.98X. The Zacks Value Score of F also suggests that TEAM stock is overvalued.

The stock trades at a premium valuation to other industry peers as well, including Monday.com, Freshworks and Salesforce. At present, Monday.com, Freshworks and Salesforce have P/S multiples of 2.98X, 3.26X and 4.34X, respectively.

Forward 12-Month P/S Ratio

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Conclusion: Hold TEAM Stock Right Now

Atlassian continues to benefit from strong AI adoption, higher cloud revenues, seat expansion and larger enterprise deals. Rovo is also helping customers use more Atlassian products, while the Teamwork Graph and agentic automation support further AI adoption across business functions.

However, higher AI spending, lower expected GAAP operating margins and slower ARR growth could pressure profitability in fiscal 2027. Further, the company’s premium valuation warrants a cautious approach to the stock.

Currently, Atlassian carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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