After a torturous series of mixed-to-poor tech earnings that shook software values, fears over AI disruption and slowing enterprise software demand, dubbed the “SaaSpocalypse” at Wall Street, hit a fever pitch. Disappointing outlooks and post earnings-reactions from companies like Datadog, Figma, and HubSpot led investors to question whether corporate IT budgets had begun to shrink.
However, late-week earnings from Atlassian Corporation (NASDAQ:TEAM) and cloud infrastructure leader Cloudflare, Inc. (NYSE:NET) offered a solid antidote, showing that enterprise demand for mission-critical software remained relatively strong.
Atlassian: Record Backlog and Insider Buying Counter Margin Drag
Atlassian Corporation (NASDAQ:TEAM) led the software relief rally, with its fiscal fourth-quarter results easily blowing past Wall Street forecasts. The company delivered adjusted earnings per share of $1.87, beating the average expectations of $1.50, owing to solid operating margins and top-line growth.
Most significantly, Atlassian’s Remaining Performance Obligations (RPO) increased 44% year-over-year to $4.8 billion. To counteract industry-wide pessimism, Atlassian’s CEO announced plans to personally buy up to $250 million in company stock. While the fiscal 2027 operating margin projection of 25% was slightly lower than expected (28.6%), the significant RPO expansion and aggressive insider purchase activities provide a strong vote of confidence in the company’s long-term enterprise lock-in.
Cloudflare: Edge Security Expansion Powers Top-Line Growth
Cloudflare, Inc. (NYSE:NET) matched Atlassian’s momentum with a record-breaking quarter driven by significant enterprise adoption of its edge security, performance, and developer platforms. The company announced second-quarter revenue of $696.1 million, a 36% year-over-year increase that easily outperformed the Street expectation of $666 million.
Management increased its full-year revenue projection for 2026 to $2.864 billion-$2.870 billion (up from $2.805 billion-$2.813 billion). According to market experts, Cloudflare’s ability to maintain mid-30% revenue growth in a restrictive macro environment validates its position as the go-to architecture for enterprise online infrastructure and security.
Institutional Sentiment
Insider Monkey’s 13F tracking database shows that hedge fund holdings of Atlassian Corporation (NASDAQ:TEAM) fell from 57 funds in Q4 to 44 funds in Q1. This drop in smart-money backing coincided with an increase in short interest of 11.20% of the float, indicating that bearish traders aggressively targeted Atlassian Corporation (NASDAQ:TEAM) as a victim of enterprise spending cuts.
That said, Cloudflare, Inc. (NYSE:NET) experienced significant institutional accumulation, with hedge fund investors increasing from 70 funds in Q4 to 84 funds in Q1. Cloudflare’s short interest is only 3.09% of the float, indicating limited bearish positioning.
Insider Monkey’s Bottom Line
When taking the earning growth in tandem with institutional sentiment, investors can draw two conclusions.
Atlassian Corporation (NASDAQ:TEAM) has emerged as an attractive turnaround play with short-term upside potential. While hedge funds have reduced their interests, and short interest is at an elevated 11.20%, that pessimism is opposed by a vast $4.8 billion backlog and a $250 million vote of confidence from the CEO.
Meanwhile, Cloudflare, Inc. (NYSE:NET) sets itself apart as a solid long-term growth compounder. The company provides investors with a clearer, low-friction play on persistent enterprise software demand, backed by a 36% revenue growth, consistent hedge fund buying, and low short interest to defend against speculative selling.
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 this cheapest AI stock.
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