We recently scanned investment communities on Reddit — subreddits like value investing and stocks — to see what Redditors are buying. Atlassian (NASDAQ:TEAM) came up as one of the most popular picks, with many Redditors convinced the stock is undervalued. TEAM is down about 32% so far this year. So what’s behind retail investors’ optimism about the stock that’s getting decimated on AI fears?
Many Redditors think major companies are still using Jira for metrics tracking and workflow management. The platform is so embedded in how companies operate that switching away would be extremely difficult. One Redditor sold the stock in the early $70s range and now regrets the decision. The company’s new AI integrations are gaining traction, like auto-explaining company jargon to users, which adds real value to the platform.
Redditors are not entirely wrong about the disconnect. The SaaSpocalypse crushed software valuations across the board, and Atlassian got caught in the panic. The stock plummeted 70% from January 2025 through mid-2026. Despite the carnage, the company delivered 32% year-over-year revenue growth in its most recent quarter and 800 basis points of non-GAAP operating margin expansion. Management said directly it isn’t seeing seat compression from AI — if anything, the opposite — and pointed to record competitive wins against major providers. Management is also signaling a push toward GAAP profitability starting in fiscal 2027. The stock now trades at around 3x next year’s sales, a steep drop from the 12x multiple it commanded before the selloff.
The Bull Case: Growth Numbers
The most recent quarter came in well above guidance. Revenue hit $1.787 billion, accelerating to 32% year over year. Cloud revenue grew 29% year over year, and data center revenue jumped roughly 44% year over year as customers migrate off older on-premise products.
Atlassian’s Service Collection product, an AI-powered suite for internal service management, passed $1 billion in annual recurring revenue. Management called it a milestone moment during the earnings call, framing it as a second growth engine beyond Jira and Confluence. Bulls point to this, along with the retention numbers, as evidence that AI agents are adding work for Atlassian’s platform to manage rather than replacing the platform itself.
The Bear Case
The bear case centers on GAAP profitability, not top-line growth. Atlassian has gone nine quarters without positive net income, and TTM revenue of $6.1 billion still comes with roughly $216 million in net losses. Cash and equivalents fell more than 40% to around $1.14 billion, even as the company avoided equity financing to fund that gap.
The AI threat itself centers on seat-based pricing. Atlassian charges per user, and if AI agents let one developer do the work that used to take five, a customer could need far fewer seats. Customer counts above $10,000 in annual recurring revenue haven’t shown signs of that yet, growing from 45,842 to 51,978 year over year, a 13% increase. Bears argue the seat-compression risk simply hasn’t had time to show up yet, since seat-based contracts typically run one to three years and the AI adoption wave is still recent.
Atlassian also laid off 10% of its workforce this year to fund investment in Rovo, its AI product line. Assuming an average salary near $50,000, that cut saves roughly $80 million annually — a small offset against operating expenses that ran $1.58 billion in a single recent quarter.
What To Watch Next
Atlassian reports fiscal Q4 2026 earnings on August 6. The key numbers to track are whether cloud and data center growth land near or above guidance, whether non-GAAP gross margins hold near the 88% guided level as Rovo usage scales, and whether management gives any update on the promised push toward GAAP profitability in fiscal 2027. Any sign of seat compression would be the clearest signal the bear case is starting to play out.
Night View Capital stated the following regarding Atlassian Corporation (NASDAQ:TEAM) in its Q2 2026 investor update:
“Atlassian Corporation (NASDAQ:TEAM) is a new position this quarter. It owns the tools that software teams use to plan and ship their work, which places it at an interesting spot in the AI story. The world is about to write a great deal more software, much of it with AI assistance, and all of that software still has to be organized, tracked, and shipped by human teams. We think the company that sits at the center of how software gets built is a fine place to own in a decade defined by building more of it.” [read the full letter here]
While we acknowledge the risk and potential of TEAM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TEAM and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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