Summary
Atlassian reported revenue of $1.59 billion for the second quarter of fiscal 2026, up 23.3% from the prior-year quarter. Cloud revenue crossed $1 billion for the first time, reaching $1,067 million and growing 26% year over year. Gross profit of $1.35 billion rose 26.8%, and gross margin of 85.0% was up 2.4 percentage points. Better cloud gross margin more than offset the continuing mix shift toward cloud.
The GAAP bottom line stayed in the red. Operating loss narrowed to $47.7 million from $57.5 million a year earlier, and operating margin of -3.0% was up 1.5 percentage points. Net loss moved the other way, widening to $42.6 million from $38.2 million, and diluted loss per share came to $0.16 against $0.15 in the prior-year quarter. The non-GAAP picture is far brighter: the non-GAAP operating margin of 27% compared with 26% a year earlier. Stock-based compensation and amortization of acquired intangibles explain most of that gap.
Cash generation was the weak spot. Operating cash flow was $177.8 million, down 49.5%, and free cash flow was $168.5 million, down 51%. Management pointed to timing differences in cash collections and tax payments, along with higher severance and acquisition-related payments; a larger share of second-quarter billings landed in December and will be collected in the third quarter. Capital expenditures were $9.29 million. Deferred revenue of $2.43 billion was up 10.7%, and remaining performance obligations of $3.80 billion were up 40.7%, helped by a record number of deals above $1 million in annual contract value.
Customer metrics support the growth story. Atlassian ended the quarter with 55,369 customers above $10,000 in Cloud ARR, up 12% year over year, and more than 350,000 customers in total. Cloud net revenue retention was 120% or better, ticking up for a third consecutive quarter. Rovo passed 5 million monthly active users, and the Teamwork Collection passed 1 million seats and 1,000 customers. Two acquisitions closed in the quarter, DX and The Browser Company of New York, adding roughly 75 basis points to Cloud revenue growth and lifting headcount to 14,626. Atlassian also picked up leader placements in the 2025 Gartner Magic Quadrant for Collaborative Work Management and Marketing Work Management platforms, plus The Forrester Wave for Enterprise Service Management Platforms.
For the third quarter of fiscal 2026, Atlassian guides Cloud revenue growth of approximately 23.0%, Data Center growth of approximately 33.5% and Marketplace and other growth of approximately 5.0%, with a non-GAAP gross margin of about 88.0% and a non-GAAP operating margin of about 27.5%. For the full fiscal year, total revenue growth is guided to approximately 22.0%, with Cloud at approximately 24.3%, Data Center at approximately 20.0% and Marketplace and other at approximately 6.0%. The full-year non-GAAP operating margin target stays at 25.5%. The distance between the GAAP and non-GAAP margin targets comes down to stock-based compensation and amortization of acquired intangibles.
Risk sits in several places. The Data Center end-of-life plan is lifting near-term revenue through a change in revenue recognition timing, and management expects meaningful deceleration in fiscal 2027 once that benefit laps, with cloud migrations and moderating seat expansion adding further pressure. The DX acquisition is expected to be slightly dilutive to fiscal 2026 operating margin. Guidance also assumes headwinds to paid seat expansion, cross-sell, upsell and retention given macroeconomic uncertainty and the evolving enterprise sales motion. Management expects free cash flow margin to be significantly higher in the second half than in the first, and plans to accelerate share repurchases. Atlassian bought back 1.3 million Class A shares for $200.4 million in the quarter.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2026 | Q1 FY2026 | QoQ | Q2 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.59B | $1.43B | +10.7% | $1.29B | +23.3% |
| Gross profit | $1.35B | $1.17B | +14.8% | $1.06B | +26.8% |
| Gross margin | 85.0% | 82.0% | +3.0 pp | 82.7% | +2.4 pp |
| Research & development | $826.5M | $756.0M | +9.3% | $680.2M | +21.5% |
| Sales & marketing | $376.4M | $336.4M | +11.9% | $271.9M | +38.4% |
| General & administrative | $193.4M | $178.5M | +8.3% | $168.7M | +14.7% |
| Total operating expenses | $1.40B | $1.27B | +9.9% | $1.12B | +24.6% |
| Operating income (loss) | -$47.7M | -$96.3M | +50.4% | -$57.5M | +16.9% |
| Operating margin | -3.0% | -6.7% | +3.7 pp | -4.5% | +1.5 pp |
| Net income (loss) | -$42.6M | -$51.9M | +17.8% | -$38.2M | -11.6% |
| Net margin | -2.7% | -3.6% | +0.9 pp | -3.0% | +0.3 pp |
| Diluted EPS | -$0.16 | -$0.20 | +$0.04 | -$0.15 | -$0.01 |
| Customers | 350,000 | 300,000 | +16.7% | 300,000 | +16.7% |
Risks
The planned end-of-life of Data Center offerings through Atlassian Ascend creates execution risk: term licenses will stop being sold to new customers in March 2026, expansions stop in March 2028, and maintenance and support end in March 2029. Management also notes Cloud revenue is typically lower in the initial year than Data Center revenue, which may pressure near-term growth and margins.
Atlassian is investing heavily in AI apps, agents, and Rovo, and has made Rovo available at no additional cost to premium, enterprise, and standard edition customers across Jira, Confluence, Jira Service Management, and Teamwork Collection. The company expects these AI investments to continue to negatively impact operating margins in the near term, with no assurance of offsetting revenue or adoption.
The market is intensely competitive, and rivals may develop more effective AI products, incorporate AI into offerings and sales strategies more successfully, or have superior access to certain AI technologies. Failure to compete in AI could reduce sales, margins, or market acceptance.
Results depend on customers renewing subscriptions and expanding purchases, and most of the customer base is on annual or monthly terms. If customers do not renew, renew on less favorable terms, or fail to add users, revenue growth could slow or decline; over 90% of revenue in the six months ended December 31, 2025 came from customer accounts existing on or before June 30, 2025.
Leadership turnover is elevated: the former President stepped down effective December 2025, the CFO will step down effective June 2026, and the company recently hired a new Chief Revenue Officer and Chief Product and AI Officer. Competition for senior product engineering and AI talent is intense, and loss of key employees could disrupt strategy.
Global economic and geopolitical volatility, including trade policy changes, tariffs, inflation, and interest rate uncertainty, could reduce demand, cause customers to delay spending or request concessions, elongate sales cycles, and impair collections. Management continues to monitor these impacts on business and financial results.
Enterprise sales involve longer, multi-phased cycles with extended proof-of-concept evaluations and contract negotiations, and adverse macroeconomic conditions have caused delays in purchasing decisions. An increase in enterprise contracts may also raise the mix of multi-year sales, adding uncertainty to revenue cycles and seasonality.
In Q2 FY2026 Atlassian completed the acquisitions of The Browser Company and A Software Company (DX), after acquiring Loom in FY2024. Integration challenges, retention of acquired personnel, unknown liabilities, and accounting charges may disrupt operations or fail to deliver expected benefits.
A Q1 FY2026 resource rebalancing eliminated certain roles and led to $55.7 million of total restructuring charges for the six months ended December 31, 2025, including $27.9 million of severance and other termination benefits and $26.3 million of lease-related impairment. Reorganizations may harm the ability to attract and retain employees and disrupt execution.
A majority of revenue derives from Jira, Confluence, and Jira Service Management, and for fiscal year 2025 over 50% of revenue came from channel partners, with one solution partner at times representing more than 10% of total accounts receivable. Any decline in these products or partner channels could materially harm results.
Evolving data privacy, AI, cybersecurity, and cloud sovereignty regulations, including EU cloud sovereignty requirements, may increase costs, limit Cloud adoption in public sector and regulated industries, and reduce usage of Atlassian offerings.
SaaS KPIs
All quarters →Total customers
Non-GAAP Operating Margin
Free Cash Flow Margin
Non-GAAP Gross Margin
Jira Service Management customers
Remaining performance obligations (RPO)
Summary, forecast, risks and KPIs are extracted from Atlassian Corp's SEC filings for Q2 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.