Atlassian Corporation (NASDAQ:TEAM) closed at $207.75 on October 12. The stock has returned approximately 239% over the past six months, compared to a 21.25% return for the Insider Monkey Billionaire Index and 14% for State Street SPDR S&P 500 ETF Trust.
Atlassian has built a pretty good business. Its software is used by companies around the world, its customers are spending more on its products, and it is generating plenty of cash. Now AI gives it another way to grow. The question is whether that growth will be enough to justify what investors are paying for the stock.
On July 2nd, we published an article about the best SaaS stocks to buy according to Reddit. The #1 stock in that list returned almost 40% since the article was published. Atlassian ranked ninth on that list
Atlassian Wants to Be More Than a Developer Tools Company
Most people associate Atlassian with Jira and Confluence, products that help software teams manage projects and collaborate. But the company has been trying to get beyond that market for a while. It wants finance teams, HR departments, legal teams, and other parts of large organizations to use its software, too.
There is a good reason for that ambition. Selling more products to a company that already uses Atlassian can be easier than winning an entirely new customer. And the more teams that rely on its products, the more useful those products can become across the organization.
Of course, Atlassian is not the only company trying to win that spending. Microsoft and ServiceNow are competing for their share of enterprise software budgets. Atlassian needs to give customers a reason to keep adding its products rather than simply sticking with tools they already have.
TEAM ranked 7th in our list of the 8 Undervalued Software Stocks to Buy Now. To see which stocks outranked it, click HERE.
Rovo Could Make a Difference, But It Has to Show Up in the Numbers
AI could help Atlassian make that case. Its Rovo platform lets employees search for information and work across different tools, using the context spread throughout an organization. If it works well, it could make Atlassian useful to people who have never had much reason to use Jira or Confluence.
Management says more than 80% of Fortune 500 companies are using Rovo. It also says customers adopting Rovo are growing their annual recurring revenue at more than twice the rate of customers who have not adopted it.
Those numbers are encouraging, but there is a catch. Customers who spend more with Atlassian may be more likely to adopt Rovo in the first place. The real test is whether AI gets customers to spend more, buy additional products, and stay with Atlassian longer. Until that happens, the opportunity is there, but the financial payoff still needs to be demonstrated.
TEAM ranked 7th in our list of the 8 Undervalued Software Stocks to Buy Now. To see which stocks outranked it, click HERE.
Valuation: The Market Is Paying for Future Profits
At 36.23x forward earnings, Atlassian is not a cheap stock. Investors are counting on earnings to improve, even though the company lost $54 million on a GAAP basis in fiscal 2026. That leaves little room for things to go wrong if profits take longer than expected to materialize.
There is plenty to like about the business. Revenue grew 26% to $6.57 billion in fiscal 2026, and free cash flow reached $1.32 billion. Atlassian clearly has a business capable of generating cash. But that is only part of the picture.
Management expects a GAAP operating margin of 4.5% in fiscal 2027, compared with a non-GAAP target of 25%. A large part of that difference comes from stock-based compensation. It is easy to focus on adjusted earnings when the numbers look better, but compensation paid in shares still comes at a cost to shareholders.
Growth is also expected to slow. Atlassian is guiding for revenue growth of around 13% in fiscal 2027, down from 26% last year. That is a meaningful change, particularly for a stock trading at this multiple.
Atlassian seems to have a credible opportunity to grow its business with AI. But the stock needs more than a good AI story. Rovo has to help drive growth, and the company needs to turn that growth into stronger GAAP profits. If it can do both, today’s valuation may look more reasonable. If not, investors could end up paying a lot for a business that is doing well but not well enough to meet expectations.
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Market Sentiment
Hedge fund interest in Atlassian increased in Q2 2026. The number of hedge funds holding TEAM rose from 44 in Q1 to 48 in Q2, while the combined value of their positions increased from approximately $1.43 billion to $2.42 billion. The increase in both figures suggests that institutional investors were adding to their exposure to the stock.
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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This article is originally published at Insider Monkey.
