Why Atlassian Stock Skyrocketed 92% Higher in August and Why There's Likely More to Come

Shares of Atlassian (NASDAQ:TEAM) skyrocketed in August, gaining 92.2%, according to data supplied by S&P Global Market Intelligence. That's orders of magnitude higher than the 2.6% gains of the S&P 500.

The enterprise software specialist helped dispel the popular narrative that artificial intelligence (AI) would eliminate the need for its popular software-as-a-service (SaaS) offerings, sending the stock on a blistering rebound.

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The numbers tell the tale

Atlassian helped calm shareholder fears when the company reported financial results that far exceeded expectations and offered robust guidance for the coming year. Strong demand for Atlassian's workplace collaboration software -- which includes Trello, Jira, and Confluence -- put a nail in the SaaS-pocalypse once and for all.

For Atlassian's fiscal 2026 fourth quarter (ended June 30), the company generated revenue that grew 28% year over year to $1.77 million. Expanding operating margins drove profitability higher, as adjusted earnings per share (EPS) soared 98% to $1.87.

For context, analysts' consensus estimates called for revenue of $1.66 billion and EPS of $1.50, so to say Atlassian beat expectations was an understatement.

The results were driven by strength across the company's business. Cloud revenue grew 31% to $1.2 billion. Subscription annual recurring revenue (ARR) rose 23% to $6.6 billion, putting a floor under the company's future results. Moreover, Atlassian's remaining performance obligation (RPO) -- or contractually obligated revenue that hasn't yet been recognized -- jumped 44% to $4.8 billion. This provides insight into the company's future trajectory, which looks decidedly positive.

Atlassian also reported an all-time record quarter for deals worth $1 million, $3 million, and $5 million or more in annual contract value (ACV). In fact, ARR from $3 million customers grew more than 50% year over year, while $5 million deals jumped 70%.

While some investors feared AI would scuttle Atlassian's progress, it actually accelerated it. The company's Rovo AI helps customers find information, interact with data, and automate workflows, and customers are adopting the tool at a brisk pace. Rovo-assisted actions surged 50% quarter over quarter, with Rovo users completing 20% more work items in Jira than non-users, while also creating or editing 25% more Confluence pages than non-users.

More to come?

If there were any doubts that the good times would continue, Atlassian left little doubt. For fiscal 2027, the company forecast total revenue growth of 13%, cloud growth of 25.5%, and subscription ARR growth of 18%. While those benchmarks might seem modest compared to the current quarter, it was ahead of Wall Street's expectations.

Speaking of Wall Street, on the heels of Atlassian’s blockbuster quarter, analysts rushed to revise their financial models, resulting in a wave of upgrades, positive initiations, and price target increases, helping fuel the stock's momentum.

Investor enthusiasm pushed the stock skyward, with a corresponding increase in Atlassian's valuation. The stock is no longer a screaming bargain, but at 28 times next year's expected earnings, the price is reasonable.

Now that fears of the SaaS-pocalypse have been put to rest, Atlassian's track record of growth, strong backlog, and increasing subscription base make the stock a buy.

Danny Vena, CPA has positions in Atlassian. The Motley Fool has positions in and recommends Atlassian. The Motley Fool has a disclosure policy.