Atlassian Stock

Good afternoon, and thank you for joining Atlassian's earnings conference call for the first quarter of fiscal year 2027. As a reminder, this conference call is being recorded and will be available for replay on the Investor Relations section of Atlassian's website following this call. I will now hand the call over to Martin Lam, Atlassian's Head of Investor Relations.

Welcome to Atlassian's First Quarter Fiscal Year 2027 Earnings Call. Thank you for joining us today. On the call with me today, we have Atlassian's CEO and Co-Founder; Mike Cannon-Brookes; Sir James Chuong. Earlier today, we published the shareholder letter investor release with our financial results and commentary for the first quarter of fiscal year 2027. The shareholder letter is available on the Investor Relations section of our website, where you will also find our other earnings-related materials, including the earnings press release and supplemental investor data sheet. As always, our shareholder letter contains management's insight and commentary for the quarter.

So during the call today, we'll have brief opening remarks and then focus our time on Q&A. This call will include forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made. And we undertake no obligation to update or revise such statements, should they change or cease to be current.

Further information on these and other factors that could affect our business performance and financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled Risk Factors in our most recently filed annual and quarterly reports. During today's call, we will also discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and are not a substitute for or superior to measures of financial performance prepared in accordance with GAAP.

A reconciliation between GAAP and non-GAAP financial measures is available in our shareholder letter and earnings release on the Investor Relations section of our website. We'd like to allow as many of you to participate in Q&A as possible, so out of respect for others on the call, we'll take 1 question at a time.

With that, I'll turn the call over to Mike for opening remarks.

Thank you all for joining us today. As you've already read in our shareholder letter, we had a great start to fiscal 2027. Total revenue grew 24% to $1.8 billion, Cloud revenue grew 31% to $1.3 billion, and subscription ARR grew 23% to $6.8 billion. We also delivered GAAP operating margin of 11% and free cash flow of $463 million, an increase of 304% year-on-year, representing a free cash flow margin of 26%.

These results reflect strong customer demand and execution across our big strategic priorities of enterprise, AI and the system of work, our continued focus on driving durable, profitable growth. Customers are bringing more people, more agents and more workflows onto the Atlassian platform, and they're making larger and longer-term commitments. This quarter, Infosys, SAP, Workday and Westpac are just a few examples of global enterprises that expanded greatly with us, standardizing how their teams collaborate, operate and execute business processes on the Atlassian platform.

You can see that in our RPO, which grew 44% year-over-year to $4.7 billion, and customers spending more than $1 million a year, grew well north of 30% year-over-year. In the Cloud, we saw continued strong seat expansion in Jira and Confluence, along with strong cross-sell into our collections. More than 3,000 customers have now upgraded to the Teamwork Collection for expanded Rovo credits and platform capabilities. That's a 7x increase year-over-year.

The Service Collection has now surpassed 70,000 customers, with ARR continuing to grow over 30% as we continue to take market share. What makes our system of work valuable in the AI era is a combination -- a unique combination of context, collaboration and confidence. With context, yes, models are getting smarter, but to be effective at work, they need to understand an organization's goals, knowledge, people, decisions and history.

The Teamwork Graph now connects more than 250 billion objects and relationships, and extends across customers, third-party tools to more than 80 out-of-the-box connectors. That context translates into real value for our customers. Customers with a richer teamwork graph are twice as likely to become deep Rovo adopters, and deep adopters grow ARR more than twice as fast as customers would like Rovo usage.

Teamwork Collection customers are running twice as many agents while expanding the Jira Confluence seats much faster than stand-alone customers. Next to collaboration. At Team '26 Europe, we introduced our agentic multiplayer protocol or AMP, as a collaboration layer built across the Atlassian platform, not as a separate product that customers have to buy. It helps people and agents work together with shared context, clear identity, attribution and governed authority. More than 10 million human agent collaborations now happen on our platform every month, double the level of 6 months ago. To learn more about AMP, I just shared a loom on our Investor Relations website.

And finally, to customer confidence. As agents take on more work, enterprises need visibility, security and governance of where that work is happening. We continue to build those controls into our platform so customers can scale their AI responsibly. More than 87% of our enterprise cloud customers are now using Rovo, and our larger, longer commitments show how deeply customers are investing in this foundation.

Overall, we're executing extremely strongly our strategy from a position of strength. We're seeing this play out again in our results. I'm super excited about the year ahead. Connecting agents and humans on the Atlassian platform will continue to unlock huge value for our customers, and we're extremely proud to be building for that future.

With that, I'll pass the call to the operator for Q&A.

[Operator Instructions] Your first question comes from Ryan MacWilliams from Wells Fargo.

Really strong result on the data center side. But then I guess, like, the full year guide was pretty similar. We've talked to some of your customers at some of your largest customers and it seems like they're prioritizing the migration to cloud in the coming years due to coding and some of the new features that you're offering.

So I'd love to hear just kind of like what drove the strong data center result in the quarter and then maybe how your customers are thinking about migrations for the rest of this year and at this point?

Yes. Thanks for the question, Ryan. Yes, I think just starting on the overall performance on the data center side. As we continue to see customers migrate over to the cloud right now. We're now sort of seeing some of the largest, most complex customers. And one of the things that we're seeing in the quarter right now is really strong retention. And a big part of that is obviously the cloud road map that we have, but also the commitments that we're making, for example, in areas like the public sector opportunity, right? We talked about submitting for IL-5 or Impact Level 5 authorization 6 months early, ahead of schedule for July 2028.

Fed ramp high authorization submission in January '29 to follow that. And then submitting for Rovo and AI on our Atlassian government cloud platform in June 2027. So I think what we're seeing is that in that commitment that we're making to our customers here, we're really being rewarded by some of the high retention rates that we're seeing, and that's outpacing even our expectations here. So really pleased with what we're seeing on that side of it.

And I'll also note that right now, data center migrations to cloud contributed approximately mid- to high single digits to cloud revenue growth. But in terms of one of the areas where we want to make sure we meet our customers where they are commercially is to make available for them, hybrid deployments, right? In particular, in Q2. There were a number of very large customers in the quarter who as part of the migration journey, signed cloud migration commitments through these hybrid deployments that enable them to migrate to the data -- from data center to cloud over a multiyear period, right? So this is a great sign.

Customers are deepening their commitment to Atlassian. They see cloud as the final destination and because we don't charge customers twice on these hybrid deals. Hybrid deployments did split revenue between data center and cloud. And as a result, that meant slightly more revenue on data center, slightly less on cloud this quarter. But if you zoom out, the key takeaway here is that the largest, most complex customers are moving ahead with their multiyear journeys to cloud, where they can really unlock all the benefits of the Atlassian platform.

Yes, Ryan, I guess I'll just add on little customer color from my point of view. We've spent on a decade now managing these migrations between server and then data center to the cloud. Having had more than 100 customer conversations in the last quarter, well over 100, I would say, the customers are very excited about what we've built in the cloud, right? They continue to be so. They see the value of AI. It is a big catalyst beyond all of the enterprise and compliance and infrastructural improvements that James talked about to driving that momentum forward.

We landed some very big migrations during the quarter, and we continue to work on them for the quarters ahead. So I would say the customer feeling and drive towards the cloud remains incredibly strong as they see how powerful -- what a huge upgrade at the cloud platform is from where they are in data center.

Your next question comes from Fatima Boolani from Citi.

Mike, this one's for you. It's a little bit of a bigger picture question. As organizations shift to more of an AI software development life cycle away from the predecessor agile movement just based on agent decoding becoming the de facto standard on how software engineering is being done, can you talk about how Jira Confluence benefit from what is essentially I would argue becoming a diminished coordination or collaboration tax between human engineers and more presumably seen less collaboration between agents? And then just some of the commercial and monetization trajectory implications for these core products were the functional reason for their existence is to drive that collaboration. So would just love to hear your perspective on that.

Thanks, Fatima. Yes, great question. We've often agreed on things in the past. I'd have to say we disagree on this question personally. The value of Jira Confluence for coordination in the AI era is even stronger than it has been in the past. I think this is often mistaken, right? In fact, we shared an example at Team '26 Europe where Morgan Stanley somewhere on the call, announced they're moving the Jira Confluence to the cloud at large scale and rolling out Rovo to thousands of users.

And the main reason to turn even more so to the Atlassian platform than they have been before as a long-term customer is for their software development and to get a better view of what's happening across their teams and to connect their technology teams with their business teams, which is almost exactly out of our system of work playbook, right? I think there are multiple factors happening simultaneously when you talk about this.

Firstly, it's about bringing all of that agentic work into a collaboration platform. The human role is incredibly important and intent in applying intuition and understanding, in guiding and handling exceptions and initiating work. So we shipped a whole series of features about agentic sessions coming into Jira at Team '26 Europe, and they were incredibly positively received.

There's no doubt the amount of work happening is going to go up. precipitously so. The coordination tax of that then becomes even more so. If you're trying to understand 10x as much work, you need to understand more coordination, more connections than you have been beforehand. The context, the Jira Confluence provides of your history and your future are 2 of the most essential ingredients. We can see that. We know we're in the top handful of MCP servers of all of the major foundation labs. And not just for reading, but for writing as well as organizations continue to try to work out how to manage that across their systems.

And lastly, as I said, it's about connecting those technology teams to business teams. Increasingly, that code writing, which is incredibly exciting, is being done by people in finance, by employees in marketing and HR and other areas. And so you have even more of a coordination challenge, a larger opportunity for us to connect to Confluence business teams than we've ever seen before.

I believe you can see that showing up in our numbers today. Our customers would say that. You can see that in our fleet expansion numbers being incredibly strong this quarter. Our IPO number again accelerating to 44.5% this quarter, reflecting just increasing longer and larger commitments from customers going out multiple years as they see the value of the Atlassian platform, and the context we have in the Teamwork Graph and that collaboration happening across multiple teams, be that in the service question or be that in the Teamwork Collection or the software collection.

So we're incredibly bullish on our role in the AI future. And that's before we even get to AMP, which we've talked about and I recommend watching the Team '26 keynote or the one that I just shipped today.

Your next question comes from Matt Hedberg from RBC Capital Markets.

Great. One thing I noticed is you're expanding your forward deployed engineer motion. It was interesting. ServiceNow noted something similar last week. I guess I'm wondering, can you expand upon that motion? Is this indicative of kind of where customers are at in their kind of AI decision-making? Just kind of trying to plan things out here just kind of given how quickly technology is moving. Just color on that would be helpful.

Thanks, [ Matt ]. Look, I can talk to our FDE motion. Firstly, I would encourage, as I encourage all customers and encourage all investors, all FDEs are not built the same. Our FDEs are fully qualified AI and ML engineers who are writing full production customer code and product code at the customer site. So they are trying to help customers to get their AI motions moving to get workflows moving on to the platform.

We've had -- that's different to some other places where they're rebadged customer success staff, et cetera. It's extremely hard to scale that program fast as you can well appreciate, those are very rare individuals. RFD program, though, is going extremely well, a couple of quarters in now. We are working with many, many large customers on helping them get more value from AI, right? They bring processes and improvements that they want to see, and our FDEs help them connect the Teamwork Graph.

They help them explain to engineers and staff at the customer sites, how they can continue to roll the Atlassian platform out across more and more of their world, how they can continue to build out their ontology into the Teamwork Graph, and how that yields better results with Rovo with coating agents, with service agents, et cetera.

So still early in the program for us. The goal is delivering AI usage and leaving the customer with a trained group of people who can then continue that rollout by themselves, who have confidence in forges an extensibility platform and the Teamwork Graph in our connectors in everything that exists in the Atlassian platform. And it's been going very, very well.

Again, our goal is not building a service business. These aren't professional services folk. They are really ever charged for. So it's pretty different to what other people are doing in terms of professional services and customer success.

Lastly, I will say that philosophically, we are seeing great speedups in our ability to build product with FDEs. So increasingly, we are doing more and more core software engineering at the customer site. That is very unique. It's an ability of our platform and our really world-class R&D organization to be doing this. It helps us speed up the customer request to delivery look incredibly fast. It's something we're very bullish on. We'll probably talk more about that in the coming quarters as we keep accelerating that program.

Your next question comes from Adam Wood from Morgan Stanley.

Congrats on a good start of the year. And thanks for the shout out. Maybe I could ask about AMP. I think you're one of many companies that are claiming the right to execute against owning and managing aged identity submissions and audits. Could you just talk a little bit about why you have you think you have the right to win here? And then I think you said you're not monetizing this directly. Do you always see it being that way? And if so, where do we see that drive the revenues for you coming into the business, please?

Thanks, Adam. How would I answer that? Look, a couple of things. I think "the right to sort of orchestrate, manage compliance agents, et cetera," that's a very broad term. So the reason you're seeing a lot of companies kind of say things like this is it means a lot of different things to a lot of different customers. I can only talk about what it is that we are doing. If you talk about what, I don't know, an Okta or Workday or someone else is doing it, it's very, very different, even though the words may sound the same. And part of the problem is just everyone saying agents a lot.

We're trying to show it in 2 different places, I think, incredible differentiation unique. So the first I would point to is AMP. We are trying to bring agents into customers' workflows. Structured or unstructured workflows into their collaboration. That collaboration happens an awful lot on the Atlassian platform and in inside Confluence or inside service management. It happens an awful lot of the Atlassian platform. That may be in a partner app like Sigma, it may be in a command line tool like Codex.

All of that is contributing to your collaboration and your workflows. What we're doing in AMP is bringing you a set of experiences, really highly designed experiences, which are truly unique in the world today. as well as bringing all the technological standards, so your MCPs, your ATAs, all the technology standards that are underneath AMP, and bringing them that in a very human-centric way. So that you can quickly roll out the agentic use cases in ways that are understandable, and whether your staff are operating on or off the Atlassian platform, you have understanding about what is happening.

So when we talk about traceability and accountability is saying that people can see where a human has done something, where an agent has done something on behalf of a human and if so, who was on behalf of, if it's just agents operating by themselves, which does happen quite a lot. And if you need to pull other SaaS applications or other agents in, no matter whether that's on or off, the Atlassian platform is understandable. It was incredibly well received by customers at Team '26 because it's trying to bring the humanity, the design and experience and the power of the agentic world together into understandable experiences across Jira, Confluence, et cetera.

So we are super bullish about that. It's very, very unique and very different to what is happening elsewhere. We do have a lot of agentic governance features focused more on agents in the Atlassian platform. So when you're building Rovo agents, customers need to be very clear on the controls, the cost measures the permissioning and the compliance of those agents. We continue to improve that.

We shipped nonhuman identities, for example. And where those agents can get to our world with MCP servers in the COI. Again, there's a lot of controls, but that's not so much of a control at the orchestration layer overall. You can see that's going really well, I would say. More than 10 million human agent interactions. MCP service passed 2 million now, 15 million tool calls. So all of the numbers are going in incredibly a rapid pace in the right direction. But with our goal of helping you collaborate across those business processes everywhere that you speak to.

And we really think it expands our opportunity as we continue to win more and more workflows and business processes across all the types of teams from leadership teams to service teams and everyone in between. How that shows up and the experiences for users is going to be incredibly important, I believe. And we're letting us harness the best of all of those models. So it's a pretty unique viewpoint, I think, but it's very customer-centric and customer driven.

Your next question comes from Gregg Moskowitz from Mizuho.

Two related questions, if I may, because I think this is really affecting the share price right now with the investor concern being one of potentially slowing growth outlook at Atlassian. First, the cloud revenue guide, James, for Q2 reflects about 4 points of deceleration. That is quite a bit more than the guidance from 90 days ago, and it would just be helpful to understand why if we could.

And second, your Q1 subscription ARR growth was really strong, but you're forecasting a meaningful decline over the next 3 quarters. I know the compares get a little tougher certainly due to the data center pull forward and to DX in the back half of the year. But beyond that, are there any other factors we should be aware of that, that's way in the growth rate?

Yes. Thanks for the question, Greg. Yes, look, I think from the starting point of what we saw in Q1, we were really pleased with the performance that we saw across that cloud business. As I mentioned a little bit earlier, a sustained north of 30% year-over-year growth and really strong NRR sort of once again here, right?

So on what we're seeing here and what we're anticipating is the continued momentum on cross-sell, right? We saw that Service Collection in Q1 against across 70,000 customers at $1 billion of ARR growing north of 30%. And in terms of seat growth from competitive displacements, that was up over 40% year-over-year. So I think we feel really good about what we're seeing there.

And as it relates to the Teamwork Collection, right, over 3,000 customers, 7x year-over-year now. And again, still remains the best way for us to help customers adopt and unleash AI across the entire Atlassian platform. When it comes to the guide here, I think we're still early in the year, and we're going to continue to take a thoughtful and prudent approach here. Balancing the momentum that we're seeing in the business, with RPO at 44%, CRP at 28%. And balance that with the uncertainty around the evolving dynamics in the macro environment, the fiscal policy, geopolitical landscape.

So again, going to continue to take a prudent approach here. In Q2, we'll begin to lap the DX acquisition. And in the second half, we'll begin to face some tougher comps, given the acceleration that we saw in the second half of fiscal '26. And of course, we're still scaling our enterprise go-to-market sales motion to unlock the massive opportunity that we have here. We're in 85% of the Fortune 500, and that represents really just about 10% of revenue. So a ton of opportunities still ahead of us and for us to continue to invest and scale the capacity on the enterprise sales side.

If you look at our $1 million customer plus cohorts, it's continued to grow north of 30% year-over-year. And at the same time, as the business continues to mature, especially on the enterprise side, do you expect to see a little bit more predictability in the business and the forecast? And that's just a natural evolution as we mix shift towards more annual and multiyear deals. But all up, I feel really good about the state of the business, coming off a quarter where we posted really strong RPO subscription, ARR growth of 22.5% and cloud revenue growth still north of 30%.

Your next question comes from Allan Verkhovski from U.S. Bancorp BTIG.

Mike, you said you don't want Atlassian to be a centralized control tower, but rather a highly connected subway station. So as enterprises work through their broader AI strategy, what feedback are you getting on Atlassian's approach? What is resonating most with customers? What parts of that vision are maybe taking longer to land? And how is all of that affecting sales cycles and deployment decisions?

And then, James, just a quick follow-up for you because I think it's important. Can you quantify the downside impact to cloud revenue in the quarter from the hybrid deployments you mentioned relative to expectations?

Thanks, Allan. Great question. There are a lot of things I would say here. Let me try to put it into a concise answer for you. Overall, the feedback we're getting from customers is ranges from excitement to queries about how we are doing so well, which is a great question to get from customers. Rovo continues to massively outperform other AI systems or services that they are using. And we hear that consistently from customers, to credit to our engineering team, all of the layers from the platform through the Teamwork Graph, through the search and Rovo and chat capabilities and the integration into our products, our agent capabilities. So when you're building agents with Studio. These are truly, truly world-class and fantastic and deliver amazing results.

And we hear that over and over again from customers. When I say skepticism, the question is, well, like, how are you doing this when x can't or I tried y and it doesn't work as well as Rovo, why is that? I love those sort of questions. The answer is we have a kickass engineering team. We've invested very heavily in the fundamentals in the architecture. We have a great ability to use models and harness them and we have amazing organizational context, right?

We have the best enterprise context graph in the world, and it continues to grow and get stronger. As you saw, we just added assets and agentic sessions and more and more inference that we run on top of that graph to fundamentally get better answers to agents. I think we're seeing that in the pull-through from customers, right? Our AI numbers are fantastic growth. Agentic automation is up 9x year-on-year, now more than 10 million a month. 15 million tool calls from MCP a day. We just shipped only a few weeks ago, V2 of our MCP server, which greatly reduces token usage, has hundreds more tools and availability.

So the ability to create work, to manage work on the Atlassian platform, to handle business processes and workflows from incident management and service to HRSM, all the way through software teams and strategy, people managing their goals and processes. Agents are able to use the Atlassian platform, and humans are able to understand the agents that are using the Atlassian platform and interact back and forth with them. And that's what we want to be, right?

I totally think the subway station analogy or being part of the subway network, that's where Atlassian is philosophically done well in the past. It is where we build deep and meaningful customer relationships. Our goal is to help you get things done as a customer. It is not to be in control of your world, it's your world. And I think that's running really well. And you can see that in overall customers using Atlassian's AI technologies. The deep Rovo users are growing twice as fast as those that aren't. And obviously, we're adding to the pile of customers that are using AI heavily on a continued basis.

So part of the reason we feel incredibly bullish about the future. I will say it's very easy to claim these things about AI. So I tell every single customer, put us to the test. Take our Teamwork Graph, take our context graph, assess us against other people I'll send you FDEs, I'll send you people to help. We will win that head-to-head battle. Test us.

Secondly, don't believe everything you read in marketing and for many vendor at the moment. Test it. There's a lot of claims being made about agents and this and that. We're asking customers to prove to themselves that we can do what we say we can do, and we stand behind all the engineering and the deep architectural and R&D investments we've made.

This stuff is really hard. This stuff is not simple to build, certainly not to scale to incredibly high levels of throughput. When you add compliance and governance, hundreds of millions, if not billions of objects being processed simultaneously to try to go great answers. We have a truly unique AI platform, and it goes all the way up to the design experience of how users use it. So I will say, I feel incredibly bullish and I would tell every customer, test us. We'll stand up against anybody.

And Allan, just to answer your question there. We haven't broken out that color, but I would just characterize it as modestly less than what we had expected in terms of impact. And I will just point to you again to overall DC migrations to cloud contributed, that mid- to single -- mid- to high single digits to ad revenue growth this quarter.

Your next question comes from Keith Bachman from BMO Capital Markets.

I want to return to Gregg's question, James, to you. You actually had a reasonable beat on the quarter, maybe a little less cloud and a little more D.C. But you're raising the full year guide by less than the beat. That's unusual. And the message is you're less confident about the next 3 quarters. Is there anything that you can respond to that?

And in particular, was there any pull forward in the quarter? Or is there something on mix that we're not appreciating? But if you could just speak to why isn't the beat being passed into the year?

Yes. Thanks, Keith. So if you look at the cloud revenue beat of $20 million, right, we're flowing through slightly more than that through the entire year there. And the mix that you're seeing, marketplace is also flowing through as well. It's really the data center side. So if you recall, the data center beat in Q1 is $33 million.

But again, there's some timing effects related to the pull forward of ASC 606 on the rev rec. So that's why you're not seeing the full total revenue sort of flow through from the Q1 through the year, right? So it's really sort of timing mechanics related to that.

Your next question comes from Koji Ikeda from Bank of America.

With AMP, do you see the teamwork graph evolving from primarily a context layer into a broader coordination and interface layer for humans and agents? And how does that expand Atlassian's long-term opportunity?

I'm going to guess that I'm taking that one. I don't -- I see them as sort of 2 layers, it gets a little nuance in detail here. The Teamwork Graph is the fundamental context layer underneath AMP and the Atlassian platform and increasingly a lot of customer usage of the Atlassian platform. So that is taking all of your knowledge, your work. We're now semantically indexing the entire code base if you want us to, to give all of your agents fantastic answers and help them get the right information, getting higher-quality answers, significant token savings.

And we are continuing the Teamwork Graph to do more and more inference on your knowledge to pull out objects that exist so we can now infer things like projects and teams that aren't actually specified as objects, but we can see people working together. We are looking increasingly at inferring other things. So for example, we showed demonstrations of taking any agentic session that is in the Teamwork Graph and pulling out learnings to contribute to the very next session.

So that's all about helping any agentic use case, any search use case, whether that's human search or agent search, you want to think about it that way. The Teamwork Graph is a large-scale knowledge graph and ontology of everything your organization brings, highly customizable through forge, through assets, through lots of other technologies to get that data layer in a very AI-specific way with an incredible search engine and an incredible graph query engine, which are a little different, but both give great answers to agents and agents are able to use them.

And think about it as more at the interface level for humans. It's more about experiences and designs. How do we bring all the agents that you're using on and off the Atlassian platform into workflows in ways that humans can cooperate with? Now underneath AMP are a lot of technologies. So the Teamwork Graph, Yes, MCP, A2A, so agent protocols to other tools. We're trying to bring that all together into a package.

Again, maybe an interesting analogy. When you use the first iPhone, you didn't care about GPRS and GPS and 5G, third-generation, Wi-Fi, 2.4 gigahertz, all the technology standards were hidden inside the phone and just make a simple experience for you to use between Safari, between your phone between now, et cetera. AMP is about bringing all those agentic experiences into our products and off our products and dealing with the modalities of how agents and humans are going to come together.

So think about it more as an experience layer that is across the Atlassian platform but also helps inform third parties and how others will use our platform as well. So it's build on top of the Teamwork Graph. Long-term opportunity you asked about. I'm sorry about that. I think it continues to expand our long-term opportunity greatly. I think we are -- again, durable profitable growth is about continuing to deliver for customers in every single one of our teams.

Leadership teams, service teams, technology teams, business teams, product teams showing how we can deliver incredible value across more workflows, more business processes, structured and unstructured across the organization, and between the Atlassian platform and all of the other technology tools that you use. We have seen that in customers as they understand how to utilize agents.

Again, we have incredibly high AI usage on our platform because of things like AMP. Customers see that and then they bring more workflows onto our platform. Many of the customers I spoke to this quarter are massively increasing the number of workflows they run through the Atlassian platform, right?

In the Service Collection space, moving off legacy vendors onto the service collection, because of our AI features and not just sort of we'll run your service tickets cheaper, but the way your agents are going to interact with that platform, how it all flows through and how service is integrated into the broader Atlassian platform to connect your technology business teams and others. So I think it's -- obviously, we're investing very heavily in it, both the Teamwork Graph because I think it shows a large and multiyear expansion opportunity for us.

Your next question comes from Rob Owens from Piper Sandler.

Great. Wanted to ask on Rovo pricing and some of the thought process with the changes that are coming in December. And if we look at current consumption rates, is there any way you can somehow quantify what could be incremental here?

Rob, yes, let me talk to that. Look, the headline I would say is, as we've said repeatedly, and I hope it's coming through, the Teamwork Collection and slightly less the Service Collection, are the primary ways that we think about monetizing AI today. We are -- you get a largely increased token usage or credit usage. So you get 10x as many credits in the Teamwork Collection. It's now over 3,000 customers, up 7x year-on-year. And those customers are running twice as many agents. They're growing their seats significantly faster than non-Teamwork Collection and non-AI deep usage customers.

So that is our major motion, we believe, for delivering customer value and then getting that value back for Atlassian in terms of monetization. That is really, really important that is understood that continues to be our way. We are shipping a bunch of usage-based pricing or UVP features with enforcement bringing -- beginning in early December. We were talking to customers about that for a long time. That's about aligning value delivered, especially for extreme customer usage. It is not a near-term revenue driver. We've been very clear about that. That's in our guidance. We do not expect that to be a large revenue generation activity.

We are focusing our monetization efforts will continue to grow to -- the previous question to Koji's question, bringing growing your long-term opportunity of more and more workflows running on the Atlassian platform through Teamwork Collection and Service Collection.

UVP is about meeting customers where they're at. We get increasing questions around pricing and packaging, around controls, around understanding what that usage is how they understand their credit usage, who's using it, which agents, which staff members, how that's flowing through and where they're getting value for that. And we continue to see that in lots of different places in automation, in Rovo credits, index objects and Teamwork Graph queries. So there's a lot of different meters inside usage-based pricing.

But again, we're not assuming any meaningful UBP revenue in FY '27 at the moment. We're obviously continuing to work with customers, help them with their understanding. We've been very happy with the controls and offerings that we're showing today. And again, our goal is to have very generous credit usage. Two other things I wanted to say on the back of that. I think I'd give huge credit to our finance and engineering teams.

Our gross margin is continuing to grow despite massively increased AI usage. That's a non mean feat. That's an incredible achievement from those teams, up to 85.2%, 3% year-on-year with AI usage greatly expanding. That is our platform investments paying off. That is very strong collaboration between our finance and engineering teams, our infrastructure teams on how we are blending models, how we're helping improve the token efficiency of AI features that we are delivering to customers, improving quality and cost simultaneously.

Gateway continues to be there. We continue to show incredibly high quality in Rovo chat despite cost per chat coming down on a continual and ongoing basis. So that's a huge credit to the team to do both of those things simultaneously, having the long-term opportunity to grow customers and their workflows while expanding gross margins and delivering a significant AI value to customers in the core packages of Teamwork Collection, Service Collection, et cetera. And those customers continue to grow really strongly, as I said.

And Rob, I would just maybe add to that, as Mike mentioned a little bit earlier, from an AI monetization perspective, what we hear from our customers is that they're looking for predictability they're looking for the ability to load balance those tokens. And I think we sort of see this in the customer journey, right, as they upgrade from standard to premium to enterprise additions. They're receiving 2 to 3x more Rovo credits at each turn. And ultimately, as they upgrade to Teamwork Collection, getting 10x more Rovo credits, right?

So we're seeing that in our ARPU uplift. We're seeing that in the seat expansions as well. as customers continue to consolidate on that platform. So again, important to meet customers where they are, but we really like the traction that we're seeing here.

Your next question comes from Arjun Bhatia from William Blair.

Mike a restructure question for you, in terms of just how you think about growth going forward. Obviously, you've kind of delivered a lot of innovation on the platform. And I remember, I think in the past in the enterprise, there used to be some maybe holdouts that wouldn't move to Jira kind of custom-built systems. And I'm curious how you're seeing that evolve with how quickly AI is moving and how that's changing sort of the DevOps landscape? And just how do you think about the net new customer opportunity from here versus sort of expanding with the customers that you already have?

Thanks, Arjun. How would I think about that? Look, I would say at the headline -- there's a lot of parts to that question. Let me talk to the headline. I think demand is extremely healthy. So we're seeing strong demand at the SMB level and at the enterprise level. We continue to see strong seat expansion that's a very broad-based business team, software teams, service teams which is, I think, excellent and reflects the -- maybe not the thinking about growth as you asked, but the -- where that demand and growth is coming from.

Again, we're a very patient and durable company in terms of building out real deep customer value over time. You can see that subscription ARR at 22.5%, cloud growing north of 30%. As James mentioned, net retention, again, staying extremely strong, well over sort of the 120% mark. And obviously, RPO at 44%. So very strong future growth indicators, I would say, and demand continues to be healthy.

I think we're seeing extremely strong -- I'm not sure when we talk about net new customers. Again, we have an awful lot of customers that our 10-K customer number and overall customer numbers continue to grow strongly. We're seeing very strong momentum, for example, in both collections. So we talked about Teamwork Collection, over 3,000 customers up 7x. And Service Collection now passed 70,000 customers, with ARR growing north of 30% and strongly taking share.

So not necessarily net new customer opportunities, but existing customers continue to grow strongly. There are many, many, many, workflows and processes within our existing customer base that are not currently on the Atlassian platform. And that's where those customers are expanding and bringing more workflows onto the platform. That continues to be an extremely healthy demand flywheel that we continue to deliver on features to bring in there.

Customers north of $3 million, growing at over 50% year-on-year rate. And those at $5 million level, growing at 70% year-on-year rate. So certainly, at the enterprise end, I think you can see very strong healthy customer growth resulting in monetization as they bring more and more workflows on. And we continue to improve. I will say, like how we do that. So you're seeing all of that in lots of different places.

I think Jira's role is incredibly important in that world going ahead. Structural workflows are very important. I think you're seeing more and more customers adopting a Teamwork Collection to get loan and confluence to get projects and goals in some of the platform applications as those workflows increasingly become unstructured as well as they bring agents into those workflows. So I'm incredibly bullish on our opportunity for growth going forward. I hope you can feel that and hear that.

Your next question comes from Ittai Kidron from Oklahoma.

Guys, I wanted to ask about the data center. James, you kind of listed before earlier in your comments. The time line for government certifications Impact 5, FedRAMP, Rovo. And those kind of seem like carrying to late '27, '28, even touching on '29. So I guess it's obviously at this point that you're going to have an insignificant part of your data center customer base remain in data center beyond the March '29 end-of-life notice.

So I guess my question is, one, can you -- is there a way for you to roughly quantify what percent of your data center business right here right now? Do you expect will remain "longer term" beyond the deadline of March '29, number one?

And number two, is that figure greater than what you have potentially expected a year or 2 ago? I'm just trying to think if the conversion, the data center to cloud conversion opportunity might be smaller in so far, what's remaining here given that a not insignificant part of the data center business is just likely to stay on that platform for longer beyond March '29. I appreciate it.

Yes. Thanks, Ittai. No, I would just say that -- and reiterate that our migrations continue to be on pace. Our customers are incredibly excited about the value they can unlock there, right? We talked about it earlier. Rovo threaded throughout, Teamwork Graph, all of the collections, and we see that in customers that move from data center to cloud, right? 3 years hence, they're increasing their spend, 1.75x. And so we feel really good about the pace that we're seeing right now.

But again, it's important to make sure that we're meeting our customers where they are. And I also reiterated earlier that for the quarter, mid- to high single digits in terms of contribution to that cloud revenue. So all up, I think the announcements that we're making around the public sector side is just a recommitment to our customers and making sure that they have the visibility that we're going to be able to unlock all of that value for them as they continue to migrate.

If I might just add, and thank you to the amazing people asking have got me the numbers. I've seen more than 100 customers in the last quarter in more than 11 different countries. In 4 different continents. So I have a lot of customer detail and knowledge about these types of questions, right? I think pne of the things that give me the most strength on data center.

We talk a lot about customers talking about when and not if. I also think our history of delivery is incredibly impressive for those customers. Many customers who I saw a year ago or 2 years ago, see the progress we've made in isolated cloud, in government cloud, in European data residency in various ways. I've been in Singapore, I've been in India, lots of countries in Europe and in America, lots of countries in Europe. And whether that's in financial organizations, IT, telecommunications, large-scale automotive, all of those customers see the progress we've made, our delivery on the platform.

And it's great that they see that. It's great that they're heading in the right direction. I think Importantly, it's the faith in the delivery going forward that is important and the realization of how difficult that is to do, delivering large-scale AI solutions that are European data resident with amazing design and experience on top, connected to the best Teamwork Graph and doing that all with bring your own key encryption, for example, and meeting various different standards, that's incredibly hard.

I think that's a big moat for us. It's a big challenge for others to build at that scale and delivering a set of workflows that we're delivering, that's why customers are adopting more and more of the platform as they move more and more workflows onto that. So that's all coming through. And fundamentally, you can see it. Look, the 44% RPO number is incredibly strong, continued to grow from last quarter. And we've had a series of strong quarters there. And 28% in current RPO as well. So that doesn't happen without recognizing the value of that overall platform to continue to deliver for all of those customers around the globe. It's very exciting.

Thank you. And that concludes our question-answer session. I will now turn the call over to Mike for closing remarks.

Thanks, everyone, for joining the call today. Thanks for those who came to Team '26 Europe a couple of weeks ago. I appreciate all the thoughtful questions and continued support. We'll continue, get cracking through fiscal 2027. So thanks to all the Atlassians out there. And everyone else, have a kickass day and kickass weekend.

We are putting a close to day 2 of Citi's TMT Conference today. I'm Fatima Boolani. I jointly head up our software equity research team here. And I'm very happy to end the day with James Chuong, CFO of Atlassian. Thank you so much for being here and joining me.

Yes. Thanks for having me, Fatima.

Excellent. Well, before we get into kind of the meat and potatoes of our discussion, 5.5 months in the seat, almost 6. Biggest surprises, James, in the last 5 months as CFO of Atlassian.

Yes, 5.5 months, so I must have all the answers at this point. But in terms of the biggest surprises, honestly, I would say that a lot of it is more about reinforcing the thesis as I came into Atlassian. When we really thought about the opportunity that AI presents, I think there was a lot of questions, a lot of noise in the market about whether that was going to be a headwind or a tailwind for Atlassian. And I think we've proven over the last couple of quarters and really even before that as well, right, with our strategy that AI is going to be a tailwind for Atlassian as customers look to really drive more and more value out of AI, understanding that Atlassian delivers an incredible graph, our Teamwork Graph, that's what's really going to be powering AI across the enterprise. And I'm excited to get into that today. But again, I would say not a lot of major surprises, but pleasantly surprised at the reaction that we're seeing right now over the last couple of quarters...

And the other question I did want to ask you is areas that you feel you've been able to influence the most change. I know you talked a lot about, hey, there is a little bit of an evolution. Is this just tweaking the machinery of metrics, guidance philosophy and things of that nature. But any areas that you feel you've influenced the kind of change that's worthwhile getting some light on with investors?

Yes. Like we said, the strategy largely hasn't changed, right? When we talk about the strategic priorities at the company, it starts with AI, system of work, enterprise. And I think one of the areas that Mike and I added was around driving durable, profitable growth. And so all of that is continuing to work together and come together over the last couple of quarters here. So I think that's one of the areas I would highlight.

Good segue into the next question I wanted to ask you, a year in review, you just ended fiscal '26. reported results about 6 weeks ago. Just 2 to 3 most important highlights that are worthwhile for folks to kind of refresh on.

Yes. Q4 is actually a great place to start with that, right? We posted $1.8 billion in revenue growth, 28% year-over-year. We posted ARR growth of 23% year-over-year with RPO growing 44% year-on-year. So again, this -- we got a question around what changed overnight, what changed in the quarter. And the reality is it was really a lot of consistent innovation and execution across our product teams, our engineering teams, our go-to-market teams to really deliver and drive those types of results. And 2 of the areas that really outperformed our expectations was stand-alone seat growth in our core products like Jira, Confluence and JSM. We saw revenue reaccelerate in our service collection in the quarter as well. So a lot of opportunities still ahead of us here. And so in terms of highlights, I shared a couple of these stats earlier here. But in terms of AI being a driver for us, the growth that we continue to see across our teamwork collection, one of the things that has made Atlassian incredibly special over the last 2-plus decades is we put the customer first. We want to make sure that we're driving value, number one. And we're seeing that. Teamwork collection is the best way for customers to buy AI with us. We have 10x credits, Rovo credits as part of that. And we want to remove that friction, that ability for customers to adopt and use AI with more and more depth -- and we're beginning to see that. 80% of the Fortune 500 use Rovo right now. And as we continue to focus on the depth side of it, we're also seeing Rovo-assisted actions increase 50% quarter-over-quarter. That's really important because it's not just a simple AI search, it's not simple AI chat, users asking Rovo to take action. That's how you begin to unlock the power of AI across teams and across...

James, I want to focus the conversation on the cloud ARR and the cloud revenue. There's been a pretty visible acceleration in your cloud growth as one of the things that we've seen in the last 4 quarters, cloud growth going -- cloud revenue growth growing from 26% to 31% in the fourth quarter. Can you unpack for us some of the factors that we should expect to be repeatable and durable in terms of growth drivers for fiscal '27? And then conversely, factors and inputs that will lap out or aren't necessarily going to be a durable inputs to fiscal '27 cloud revenue growth?

Yes. So really pleased with the momentum that we continue to see on the cloud side of the world. And some of our biggest drivers remains expansion as well as that cross-sell motion that we talked about, right? So I know there was some concern about cannibalization as it relates to our collection business. But as we saw in the last couple of quarters, the outperformance was driven by stand-alone seat growth that we saw in our applications as well as continued growth in teamwork collection. Teamwork collection is still relatively early. We only introduced that over the last year. So I believe that's going to continue to compound. If you look at also the data center side, right, as we continue to migrate customers over to the cloud, that continues to be a multiyear expansion pipeline. When we look at cohorts of customers that have since moved from data center to cloud, 3 years on, they've spent 1.75x on average more than before. So that makes sense because you've got a whole suite of applications and collections that's available in the cloud. You've got Rovo, you've got AI, you've got the teamwork graph a ton of opportunity to drive more value as customers continue to migrate to the...

You brought this up 2 times now, and I think it's really worth expanding and expounding on this notion, seat growth. I think there's been a pervasive fear or there had been anyway, pervasive fear in the investor community around there is a seat-based monetization orientation to the business. The frontier labs and a lot of the innovation out of the labs had been perceived or misperceived in cannibalizing your opportunity by way of, hey, you're not going to need to hire as many developers or software engineers. In retrospect, that has not turned out to be true. But I want to ask you, what are your current observations in your conversations with customers and customer behavior around just headcount growth, technical headcount growth, just so we can put that matter to bed. Why or why not should we see continued growth in software developer headcount and engineering headcount?

Yes. So I think as you see the intelligence in the models continue to grow and make progress and compound over time and also seeing how competitive it's becoming from a pricing perspective, that's going to benefit the market, right? There's more value being driven to the market, to our customers, that's going to benefit Atlassian as well. And in terms of the seat-based growth, what that really means is the cost of coding, cost of building is coming down. And so we're seeing more innovation in our customers. We're seeing more software being built. We're seeing more seats being added and that's true across developers as well as nondevelopers. I think one of the things that is most underappreciated about Atlassian is how diversified the set of business is. I came into Atlassian sort of thinking that it was a tool-based company simply for software engineers called Jira. And the reality is 65% of Jira users are knowledge workers, non-software engineers, Confluence is even higher, closer to 70%. And JSM service collection, north of 70%. So incredibly diversified base of business. And I think as customers really think about how they're going to get value out of AI, it's one thing to have a point solution product that is going to drive individual productivity. How do you actually get value and productivity across team? Well, that's exactly where Atlassian is, right? We've spent 20-plus years helping teams collaborate, orchestrate, and that's becoming more important now, not just with people, but through people and agents together. And so as customers realize that they're adopting more of our teamwork collection, they want to be able to go wall-to-wall with Atlassian to be able to unlock the value of the teamwork graph because the more teams and more individuals that they can get onto the Atlassian platform, the more context that they're creating, right? The workflows that are being built across Jira Service Collection and all the context that's being captured in Confluence that are attached to those workflows, that's really creating the intelligence and IP within the enterprise that they can begin to unlock.

Historically, our frame of reference in terms of product exposure, what tool-based, right? So Jira and Confluence, JSM and then kind of everything else. So Jira Work, the artist formerly known as Jira Work. I know there has been a pretty meaningful reconstitution of a lot of those capabilities, especially from the standpoint of looking at your portfolio in the cloud. And that has manifested in the effort to build collections, right? So teamwork and service. Can you give us a little bit of a refresher on how many collections you have today? What type of KPIs and metrics can you share around levels of penetration with teamwork, maybe the type of ACV or ASP uplift you can realize when a singular Jira user goes on to add Confluence, goes on to add other capabilities.

So broadly, we have 5 collections across the company, Teamwork Collection, Service Collection, Software Collection, Product Collection as well. And so if you think about the collection space, it's really about jobs to be done across different parts of the organization. Jira is our largest business. It's a $2.5 billion ARR business with roughly 150,000 customers today. You've got our service collection business, which just crossed $1 billion in ARR, growing north of 30% year-over-year. And so that's one of our largest and fastest-growing enterprise wedges today across the Atlassian platform. In Confluence, we really talk about Confluence, but that's a $1.5 billion business with 100,000 customers. So when I think about the footprint of 150,000 customers in Jira and 65,000 customers in service collection. There's a massive opportunity to cross-sell. And we're still so early stages on the enterprise side of the world. When you think about our customer base right now, our $3 million ARR cohort is growing 50% year-over-year, about 164 customers, right? Our $5 million ARR cohort, that's growing 70% year-over-year. That's roughly 69 customers. Think about that against a base, $6.6 billion in ARR. There's a ton of headroom to continue to grow on that enterprise side of the world and the cross-sell and expansion opportunity.

One of the other meaningful efforts beyond the reconstitution and the packaging has been around the go-to-market motion. Historically, we've all been familiar with Jira kind of selling itself. It was a product-led motion, right? But there has been a graduation into this more classic enterprise-focused sales approach. You've had a new CRO, I think, who's now been in the seat years. -- and so what have been some of the most dramatic outputs from the changes that have been instituted in the go-to-market process and institution? And where should we continue to see that envelope move? And where should that show the most yield?

Yes. I think -- so Brian, who joined about 1.5 years ago, Brian Duffy, our CRO, he brings 18 years of experience from SAP. And Atlassian being -- the heritage was product-led growth, right, the product selling itself. And so there was a ton of opportunity to continue to evolve and mature that go-to-market enterprise motion. We're already beginning to -- it wasn't that long ago, really 2, 3 years that we only had about 115 reps selling, right? And we're continuing to grow that towards 400. And even then, I think that's well behind the demand that we're seeing in the market right now. So you're seeing that in terms of the capacity that we're building out to be able to deliver against that demand across our customer base. You're also seeing the evolution across our partner programs as well to make sure that we're moving from what historically had been more volume discount tiers into a much more strategically aligned approach with the Atlassian priorities, which is to drive cloud adoption and over time, more and more drive AI adoption.

Part and parcel to the relationship that you've had with partners, historically, that's involved the data center business and the migration thereof, right? As we enter 2028, as we enter 2029, those are the stated milestone years you've put on the board where there's going to be end of support, end of life. So just by extension of that, how does that change some of your relationships in the partner community for whom the migration business is inevitably going to dry up, right? And how should investors generally think about and partners' ability to recapture and actually expand the value on the back of those migrations to build more enduring cloud practices.

Yes. I think this really speaks to the evolution of that partner program. They're an incredibly important part of our ecosystem here. As customers, especially the ones that remain on data center, they're some of our largest, most committed customers, but they also have some of the largest customizations across the platform as well. So it's going to take deep partnership with our solutions partners, with GSIs globally to make sure that we help our customers change management as they migrate over to the cloud. So that's really one aspect of it, and they remain incredibly important part of our ecosystem. The other piece is the marketplace, right? Many of these customers on the data center side rely on the marketplace vendors, the third-party parts of our ecosystem that drive tremendous value for both Atlassian as well as our customers. And so making sure that we move and incentivize these marketplace providers, not just to build on the legacy Connect system, but on our next-generation Forge platform. And so that our data center customers are able to take advantage of those capabilities as they move to the cloud. So whether it's the marketplace, whether it's the solutions providers, they're an incredible part -- an important part of our ecosystem. That's an area that we...

James, as you migrate sort of this last cohort of data center customers over by your commentary, they're more complex by nature and by design. That's why they live in data center right now, and they didn't move in the prior migration iteration going from server. How should we think about the handholding process from you? And then relatedly, what their wallet potential looks like in the cloud? And how that could that be expressed from a net retention rate perspective potential?

Yes. It's a great question. For our data center customers, they really do know that cloud is ultimately the destination, right? Today, they have a limited set of products and capabilities when it's on data center. They've built robust incredible capabilities around that, but they know that cloud is ultimately the destination. That's where you can unlock all of our different applications. You can unlock our collections, can unlock AI, Rovo and Teamwork Graph. None of that's available on our data center right now. So as customers continue to move towards the cloud, we want to make sure that we partner deeply with them over these next couple of years. And once they get to the cloud, I shared a little bit earlier, 3 years on, they're increasing their spend by 1.75x. That's on average. But if you look at even our NRR on the cloud revenue side, I think that's indicative, right? It's north of 120% year-over-year growth right now on cloud NRR. And that's indicative, I think, of the opportunity that we have in I mentioned marketplace a little bit earlier. We're continuing to incentivize marketplace providers moving to the Forge and building on that platform by making sure that we've got some very attractive rates across that. Again, I think that will be, over time, tailwinds for the business.

On the AI monetization side, and we talked about this a little bit earlier, but I think it's worthwhile getting into a little bit more nuanced conversation about -- I generally feel that there is some misunderstanding or some noise around what your opportunity set looks like and your relevance looks like in an AI-first world, right? We talked a little bit about Rovo, but maybe you'll take me there. But how do you -- how does Atlassian intend to monetize AI over time? And what products will be the financial manifestation of that success that you're actually seeing in AI such that you are an AI winner?

The #1 way that our customers want to buy AI today from Atlassian and deploy AI is through our collection, teamwork collection. And that's very intentional. As we bring together Teamwork Collection, which is Confluent, Loom and Jira, we also provide 10x more Rovo credits. And if you look in the market today, whether it's our stand-alone apps or in our collection, the amount of credits that we allocate out is fairly generous. And that is to reduce the friction as it relates to adoption and usage across our customer base. This really gets back to, number one, keeping the customer first; number two, driving value and ultimately making sure that we're being really thoughtful about the pricing advantage that we occupy today to be able to take share in this. If you look at Jira today, it's roughly $7 per month. That will be some of the best B2B enterprise value in the market today. So that gives us a lot of opportunity from a headroom perspective. if you put yourself in the customer's shoes, they have to think about the cost of seats and they're having to think about the cost of tokens and deploy. But over time, more and more, they're going to have to think about that holistically. When you think about the pricing advantage that Atlassian has bringing together the seats, the AI agentic value that we're going to bring today, we're already starting to see that, and our customers are reacting, and you're seeing that in our results.

And just to be clear, the $7 per seat for Jira, is that after the compounding price increases that you've put into place in the last couple of years?

Yes. We always think about driving value out. And to the extent that we're continuing to drive more incremental value for our customers, we want to make sure our pricing also reflects that. And I think when you look at the cloud NRR growth of north of 120%, I think that is indicative of the value that we're driving and how sticky the value is across our entire...

There's also been some consideration around your ability to take price in the last several years. That is part and parcel to it being an idiosyncratic dynamic to you in that you had 5 years ago, customers on server and you were approaching -- you were using the carrot and stick approach to get mostly a carrot approach to get folks on to the cloud, right? So there were pricing increases pursuant to that. And same thing with the data center migration journey, right? So again, the pricing increases have been somewhat idiosyncratic to you versus your ability to just generally take price. But I want to ask you, what do you feel is your scope and ability to take more price in the installed base? Because I think as a financial analyst, I see, on average, it's been 15% to 20% price increases for the data center customer in the last couple of years. And those numbers can get big after compounding for 5 years, right? So does that still leave you with optionality on price?

Yes. Listen, I think when we go back to the core values of driving value for our customers, some of the ARPU -- actually, a large part of the ARPU lift that we see across our business is actually not necessarily driven by those list price that we're talking about here. It is customers opting to expand the opportunity set across Atlassian is customers increasing their seat count. It's upgrading their additions from premium to enterprise. It's actually going from single SKUs to collections and then multiple collections over time. So I think that, again, gives us a lot of permission and room from a pricing perspective, but we also think this is a moment to take share. right? As the more and more customers think about how to get value out of AI, it is to make sure that their employee base are coming on to these platforms and systems of work and systems of record, right? If you look across large enterprises today, it's typically not 20, 22, 25 massive platforms of scale and ecosystems that they operate in, nor is it. But it's typically 3 or 5, right? These ecosystems and Atlassian is one of those ecosystems. So as more customers put their employee base, whether it's software developers, whether it's HR teams, finance teams, sales teams on to Jira, Confluence, Loom and more and more collections like service collection, we're seeing more AI value -- and it's not just me sitting up here saying that if you look at the stats that we've shared, right, Teamwork collection customers are driving 2x more agent development, right? They're deploying 2x more agents. They're using 2x more credits. Customers that use Rovo, we're seeing their ARR growth grow 2x higher than like-for-like customers that don't use Rovo, right? So we're seeing that broad-based strategy of driving breadth of adoption, depth of use and over time, being able to monetize that.

We talked a lot about seat count, but we actually talked about human seat count. So what I want to ask you is as more agentic systems take on the roles and personas of a human user to undertake tasks and touch systems, they would necessarily need to knock on the door of Jira for tracking and workflow information and Confluence from standpoint. So how are you -- it might be early days, but how are you thinking about agents touching your system and the teamwork graph? And how are you monetizing that? Because as far as the eye can see, agents are going to be multiplicative, if not orders of magnitude more in volume than human users and seats. So what's kind of the philosophy and thought process there? And what are you seeing customers do there?

That's a great question. When we think about Rovo and the teamwork graph and customers using agents and agent use cases across the Atlassian platform, we see a couple of things. I shared some of the stats a little bit earlier, but Rovo-assisted actions are up 50% quarter-over -- so what does that mean? That means folks are actually using tasks using Rovo and the Atlassian platform to complete tasks and drive more productivity. And if you think about also the service collection side of the world, we've seen Agentic automations grow 3x over the last 6 months in our service collection business. But if you also think about what has made Atlassian incredibly valuable to enterprises, we're an open system, right? It's not just the Atlassian platform. It's all the APIs and connectors into the other platforms and ecosystems that I mentioned a little bit earlier. So when we look at MCP servers and CLI, the monthly active users has crossed 1 million right now. We're seeing MCP calls grow 400% quarter-over-quarter right? And MCP-driven Jira growth, these are items in Jira, new pages being created in Confluence. That's growing 4x right now. And so that's important because what we're seeing is, as we open up the platform, customers are taking advantage of the teamwork graph. We're seeing right back into the system. It's not just an extraction, right? So last week, we also announced that we're beginning to -- we will begin to enforce consumptions on those meters starting in December. Now in large part, customers continue to buy AI through the collection because of the generous credits that we provide, but it also puts into a mechanism in place for us to make sure that we're driving value for our customers, but also sharing in those.

I wanted to shift gears to service collection. You talked about JSM service collections being a $1 billion product franchise for you. How should we think about some of the technological debate brewing in ITSM where agents are on track and on pace to take end-to-end action, right? How does that impact maybe the pricing model where are customers clamoring more for usage and outcomes-based modality there? How does that maybe create opportunities, but also challenges for the growth trajectory of the service collections franchise?

Yes. We're seeing a mix. I think right now, I mentioned earlier the 3x agentic automations that we're seeing within service collection right now. I think there's going to be different workloads that lend itself really well to outcome-based results, and we already have some of them in our CSM product. But I think the -- I think, advantage that Atlassian has as a horizontal platform is the ability to stand up different types of agents to be able to tackle different types of workloads and work that happens across organizations. And right now, we see that through teamwork collection in terms of the ability to monetize and folks choosing Atlassian to be able to deploy their AI. The other way, as I mentioned, is through some of the CLI and MCP use cases that we're seeing across the system as well. Now for simple queries into the teamwork graph, we don't charge for that, right? So if you're writing a ticket, if you're trying to resolve a quick ticket. But if you're tapping into the teamwork graph with much more long horizon or complex use cases that draw on that teamwork graph, we do burn down those credits for customers. Again, it's building habits, like we said, across our customer base first, driving that adoption, that depth of usage and over time...

Which, as a reminder, you're metering as of December.

Yes, that's right.

I want to move down the P&L and then talk to you about the gross margin and gross profit trajectory. You talked about being extremely generous with Rovo credits, but you're eating the cost on that, right? And yet we continue to see you keep a pretty strong toehold in kind of the low 80s gross margin ZIP code. Can you talk to me about some of the puts and takes on your ability to kind of maintain that very high watermark while you're still providing the type of value you are providing to customers?

Yes. Martin is back there staring at me. He's saying mid-80s, mid-80s on the margin side of the world.

At the end of the day.

Yes. Look, Atlassian has gone through a pretty heavy investment cycle over the last couple of years on the R&D side, right? If you think about the investments required to stand up an enterprise-grade cloud, to be able to build an AI architecture and platform that can deliver teamwork graph today. We're cresting some of that investment right now, and we're able to reallocate some of those resources. We also have an incredible engineering team that's great at optimizing against a lot of the platform that we're seeing. And also one of the advantages is to be able to look at the 7 model makers that we work with, the over 70 models that we use across the platform on behalf of our customers and be able to optimize against that as well. So driving leverage across gross margin. Now as customers continue to use more and more and find value in our Rovo credits, we're going to continue to see some of that pressure show up on the gross margin side, but that's also why we focus more and more on GAAP operating margin profitability. We saw some of that flow through in Q4. You've seen us positive 4.5% GAAP operating margin for FY '27. And as we drive more value to our customers, having that accrue to the top line, being incredibly disciplined on the investment side of the world, we're going to continue to see that margin.

Speaking of which managing that operating expense envelope with the very assiduous mindset on GAAP profitability and durable growth with profitable -- GAAP profitability. Where are the toggles inside the operating expense envelope between R&D and sales and marketing? And anything you can express in terms of headcount growth generally, I think you've been very judicious there as well.

Yes. I think that's largely reflected in the FY '27 guide at the moment. We talked about some of the levers on the COGS and gross margin side of the world. And then from a headcount perspective, something that Mike and I talked a lot about was around reallocating investments across the board. We continue to see a lot of opportunity on the enterprise side. So you'll continue to see us fund the AE side of the world and continue to grow there and grow the capacity to kind of follow the demand that we're seeing right now. AI will be another area that we continue to invest in certainly. But if you think about also the leverage that we're getting, 99% of Atlassians internally use Rovo today. We've got 15,000 agents stood up, completing roughly 40 tasks every single day. And so driving a lot more with the resources that we...

And then rounding it back up to the top line, one of the things that you introduced as CFO at the Atlassian user event in May was subscription ARR. If you abstract away a lot of the noise that is prevalent in the model because there have been shifts in the idiosyncratic changes around migration that we talked about. Subscription ARR has been accelerating. You're guiding towards a deceleration in fiscal '27. What's on the either side of the ledger that you're accounting for in terms of assumptions that you can help us? And then -- we'll have you back here at the conference a year from now. What are the 2 things that you feel are going to be most potent in your ability to upside surprise on your subscription ARR performance after you put a capstone on fiscal '27?

Yes. So subscription ARR was introduced back at our Investor Forum in May, really to help, to your point, sort of reduce some of the noise, right? It's the best indicator in terms of the momentum that we're seeing in the business right now across cloud and DC 23% year-over-year in Q4. As we think about what also contributed to that 23% in Q4, there was a point of growth driven by DX acquisition that we did in our fiscal Q2 as part of that. And as we look out into FY '27, number one, ARR is a new metric, as you mentioned that we're introducing for the first time and making sure that we're being prudent around that as well as some of the macro uncertainty, the fiscal policy that I think we wake up to every single day right now, and it's still early in the year. In terms of the growth drivers going into the rest of '27, it's about execution. As I think about the capacity that we're continuing to build on the sales side of the world, the adoption that we're seeing across our customers on teamwork collection, service collection, I think those will all be -- continue to be upside drivers for us.

James, I've been asking all my presenting companies at the conference this year, this question. I gave you a magic wand and had you wave away one major salient investor misconception or an element of your investment story that's underappreciated by investors. What would that one wave away point be?

Yes. I think as I reflect on the last 5 months and the last couple of quarters for Atlassian, it really is that AI is a tailwind for the company, right? I think enterprises organizations, they are realizing how incredibly challenging and hard it is to be able to drive AI value throughout the enterprise, right? It's -- the days of talking about vibe coding, your own CRM, your own Jira, et cetera, I'm not hearing that. We're not seeing that in our results. We're not seeing that in our seat expansion, the adoption across our collections as well. But really, as companies think about where to drive value, it is in that graph. It is in that teamwork graph that we have. And that's what's actually opening up a lot of the discussions with the C-suite right now and driving a lot of the results.

Thank you so much, James. It's been a very eventful 5 months. So we're looking forward to see what the next year. Thank you.

Thank you

All right. We can go ahead and get started since we're starting a little late. Most of you know me. My name is Jason Celino. I'm one of the software analysts here at KeyBanc. Great pleasure welcoming back Martin Lam, Head of IR for Atlassian.

First, big congrats on the quarter. Excellent Q4 full year results. There seems to be some significant momentum in the business right now. It's great to see the numbers reflect that. So on the cloud side, specifically, you've seen 5 straight quarters of acceleration. You're consistently pointing to paid seat expansion and cross-sells, the primary drivers of the growth.

Maybe can you just unpack those elements and explain, like, what's driving this consistency?

Yes. Thanks for having me, Jason. Yes, we're really pleased with the strong Q4 results to end our fiscal '26. I think what you're seeing is customers really value and understand the value of the overall Atlassian platform with the Teamwork Graph, which is a living contextual layer underlying the platform as well as our overall system of work, basically living system of record and system of work to actually drive those workflows for organizations.

To Jason's point, we had a really strong quarter on the cloud side of things. And that outperformance was really driven by 2 things. It's actually consistent with what we saw in Q3. So it's good to see that consistency carry through. But it's driven by strong upgrades and cross-sell to our Teamwork Collection, which is basically customers being able to purchase the entire Atlassian platform and primarily for additional Rovo credits. We get 10x the amount of Rovo credits with the Teamwork Collection. So customers are upgrading for that additional AI capability as well as cross-sell motion into our Service Collection. So that was really great to see. All the while, we're starting to see -- continue to see strong seat expansion across our core products of Jira and Confluence, which I think highlights the importance of collaboration and teamwork and coordination in this AI era, right? Like, we've talked about for quite some time.

In the AI era, the need to track, manage, plan all your work across the organization that doesn't change. And I think you're starting to see that continue to play out with strong cross-sell momentum, AI purchasing on Teamwork Collection with that strong seat expansion on our core products with Jira and Confluence. And I think it's notable that the strong seat expansion was across both software development and knowledge workers. So at our investor forum, we recently shared about 2/3 of users on Jira and over 2/3, more like 70% on Confluence are knowledge workers and non-software developers. That trend continued across this quarter where that net new seat expansion happened across both those sectors. So that continues to be really healthy across both segments.

Okay. Excellent. I do want to touch on that, but maybe just following up on some of the numbers stuff first. But margins for the coming year, you're modeling a little bit of contraction. There's some moving pieces here. Maybe can you just talk about some of the headwinds and some of the views on hiring?

Sure. Actually, I would point you to probably GAAP operating margins. I think that's where we're increasingly focused. We talked about one of our strategic priorities, along with enterprise AI and our system of work, is to drive durable profitable growth. And part of that is to accelerate our path to GAAP profitability and expand on GAAP operating margins over time.

I think you actually saw that in this past quarter where we delivered GAAP profitability in Q4 and had strong GAAP operating margins. So for next fiscal year, we're guiding to 4.5% GAAP operating margins, which is an expansion relative to how we ended fiscal '26, which was basically flat or 0% operating margin. So that's great to see that progress and, kind of, reflective of the discipline that we're having on that side as we charge and accelerate that path towards GAAP profitability and margin expansion. I think you're quoting non-GAAP operating margins, and there's a couple of different dynamics for you to consider on the non-GAAP side of things. So earlier in fiscal '26, we announced the end of life of our data center product. With that comes pretty significant 606 changes where we're recognizing more upfront revenue on the sales of our data center subscriptions. And that drove approximately 4 points of margin benefit in fiscal '26. So we're recognizing significantly more upfront. That basically fell to the bottom line immediately, but just all timing of revenue recognition. And so that was a tailwind to fiscal '26 non-GAAP operating margin by about 4 points.

So I think if you compare that to fiscal '27 and kind of normalize for those effects, plus I spoke earlier about trying to be more disciplined, not only from a headcount perspective, but also how we think and issue equity to our employees. And so we're changing the compensation mix between cash and equity for certain employees and certain roles. And that presents, like, a 3-point headwind on fiscal '27 non-GAAP operating margins. Again, it's just moving compensation mix between cash and equity. So normalizing for those 2 effects, you actually see non-GAAP operating margins increase. Again, it's a lot of moving pieces. So I actually would probably steer you more towards the GAAP operating margin expansion that I pointed to because that's simpler. It just helps you, kind of, cut through the noise. And GAAP is frankly where we're focused now as a company.

Yes. That's a good reminder. As, like, a software analyst, that's new to me. New concept. So maybe if we go back to kind of your explanation on the paid seat expansion. So one thing that investors have been focusing a lot with a lot of the AI worries has been like developer growth and developer headcount and knowledge worker growth and knowledge worker headcount.

If we look at different data sources like Indeed job data, we do a CIO survey, and hiring intentions are up. There's a number of other data sources that are also pointing to near-term positive indicators for developers and knowledge workers. What do you think is really catalyzing this? Do you think AI is catalyzing near-term activity? And that this is maybe just a flash in the pan before we eventually see some contraction. We have some members of our KeyBanc IT organization here, and they talked about labor arbitrage with offshore and AI potentially. So help me understand maybe what you think around this.

Yes. I think it's important to note, as I mentioned earlier, that, that strong seat expansion or strong seat growth that we saw in Jira and Confluence is actually across both software development and importantly, non-software development or knowledge workers. So teams like HR, marketing, legal, finance. So really good traction there, and that continues to be an area of focus as we focus on penetrating more of the enterprise customers that we have and reaching and serving more of those users.

But on the software development side, I think it's an indication of ability to create software now with AI is becoming greater than ever. And you're seeing that ability for companies to become software companies, whether you're a traditional nontech company, you now -- all of these companies have to drive more digital transformation, create more software, create more digital services as part of their overall strategy. And AI is lowering that cost, you're able to drive a lot more software development. Now the next part of that challenge is how do you actually make this -- all this increased software move in the direction for value for your customers or for the enterprise customers. And that requires a different level of coordination, right? Like a lot of the AI capabilities we've seen to date have been focused on personal productivity or individual productivity.

Our ticker symbol is TEAM. We've always been focused on teamwork. How do you, again, I mentioned earlier, coordinate across your organization. How do you manage, track and plan work to make sure that we're all moving in unison towards the organization's strategic goals and delivering value to your customers because that's actually what ultimately matters as opposed to, again, all these disparate individual tracks happening. And I think that highlights what you're seeing in play.

Okay. Interesting. Yes, it's like the narrative changes every quarter. It's like every conversation I have, I feel good or feel bad. But at the end of the day, the numbers have been pretty good. So one thing that you introduced this year is subscription ARR to, kind of, hopefully smooth out how to view growth at the business given the model changes with the data center. So maybe just how often do you plan on providing the metric? Do you plan on guiding to it, just philosophy around some of the forward-leading indicators.

Yes. So we introduced subscription ARR back in May at our Investor Forum for the first time to help investors understand, kind of, the underlying health and strength of the business and our subscription base. We are, as I mentioned earlier, going through a cloud transition as we sunset our data center offering and migrate customers to the cloud in the coming years. And so to help normalize for some of the 606 noise that I mentioned earlier because we now have greater upfront term license revenue recognition on the sale of data center subscriptions and cut through all that accounting noise and timing noise, we've introduced subscription ARR, which, again, smooth things out and helps give you a better read on the underlying strength and momentum in the business.

That continues to track incredibly well. We are guiding to that for the first time. We came off a quarter where we grew subscription ARR 23% year-over-year. And we're guiding initially for fiscal '27 to end fiscal '27 at 18% growth year-over-year. And so that's our initial guide. Obviously, we want to take a prudent approach with that guide. It is a new muscle for us. But again, I think it helps investors understand the entire subscription base, so both data center and cloud, cut through the ASC 606 noise and help you identify or I guess, cut through the noise of the migrations of people going from data center to cloud because I think historically, investors have had outsized focus on, say, how much of the cloud revenue growth is coming from migrations. Subscription ARR helps normalize for that because if someone moves from data center to cloud, you kind of just see that all within the overall ARR results.

Okay. I will take some questions at some point. I do want to keep this interactive. But I'm not that great of a mathematician, but some other people have noticed that your ARR growth, again, new motion, new muscle memory, but it decelerated a little bit versus the prior quarter, but then your cloud revenue accelerated. Anything specific on why that might have happened?

Yes. I would say 2 things. There is quarter-to-quarter variability in ARR. We are going through an enterprise go-to-market evolution as we continue to scale up our enterprise sales motion. Today, we only have about 400 quota-carrying enterprise sales reps, which is an incredibly low number, and I think it highlights the opportunity ahead of us as we continue to grow that team. Alongside, we have the cloud migration. So with these 2 dynamics, we're always intentionally or thoughtfully introducing changes into how do you align partners or how do you incentivize those salespeople. When you introduce sales compensation changes and/or motions associated with our cloud transition that can influence customer purchasing quarter-to-quarter. So there's quarter-to-quarter variability.

So I encourage you to look at some of the full year dynamics. A perfect example of this was Q3. We spoke about this on our Q3 earnings call. We saw some pull-forward activity from customer purchasing behavior from Q4 into Q3 as a result of us changing pricing on data center, right? So we do things like data center pricing changes or stop selling data center subscriptions to new customers. All these things are in the vein of moving customers to the cloud and accelerating the cloud migration, but those motions also can shift customer purchasing behavior from quarter-to-quarter. So again, I think what you're actually pointing to is some of that pull-forward behavior that we pointed out on our Q3 call coming from Q4 into Q3 and again, creating some variability in the Q3 growth rate versus Q4.

Okay. Yes. No, that makes sense. Any questions from the audience? Yes. Sure.

[indiscernible].

Yes. Can you paraphrase the question?

Yes. So the question, I think, is around really the context and data that lives within our systems. I think earlier, I talked about a lot of the AI tools out there today are geared towards personal productivity. What our advantage, I think, is in the Teamwork Graph and the context that lives within all the different workflows and our system of work. So we have the data -- you're talking specifically about engineering. And in that, people document the requirements of what you're trying to build or what you're trying to accomplish. Did the team actually build and accomplish that? What is the customer feedback? How do you iterate on that development? All that context lives within our products like Jira, like Confluence.

And I think that's an incredibly important asset for us, especially as an organization like KeyBanc tries to deliver for your customers or your employees internally. And so I think that's a very valuable asset. That's a very important value proposition of the overall Atlassian platform. So we talked more recently about the Teamwork Graph. It's a living contextual layer that understands relationships and what tools and what people are working on and again, what they're trying to accomplish as an organization. But more importantly, with that context, it delivers better results for people as they utilize AI tools. So we've talked about the Teamwork Graph delivers 48% more efficient token usage because then you're not having to have AI kind of blindly search across the organization. You have to understand the contextual relationships across KeyBanc.

And then secondly, it delivers better results. So 44% better results because you have that understanding of what are your different teams working on, what is the context within Jira, context within Confluence, the decisions made that were previously made, what steps we're trying to drive as an organization. Understanding all that delivers the better, more efficient token results.

Maybe that's a good segue. Maybe can you just highlight like how you plan on monetizing AI? I know there's Rovo, MCP, CLI, maybe just go into that.

Yes. So the primary AI monetization motion or the primary purchasing motion for customers today is upgrading to Teamwork Collection, where you get 10x the amount of Rovo credits. We made the strategic decision about 2 years ago to thread Rovo our AI capabilities throughout the entire platform. And so with each base subscription, you get a certain allotted number of Rovo credits. And then as you approach those limits, then you upgrade to the Teamwork Collection where you get 10x the amount. And that's much more customer-friendly in this moment in time where I think customers want that predictability or value that predictability of.

I get 10x the amount of credits across my entire user base at a higher price point, so we realize higher ARPU as a result instead of worrying about Jason is going to chew through x amount of credits and I have to worry about this power user. It's a fungible pool of Rovo credits spread across my entire organization at 10x the amount. So it's much more predictable and customer-friendly, and we're just meeting customers where they're at today. I think over time, consumption-based pricing or usage-based pricing becomes a bigger part of the story. We'll actually begin to enforce Rovo credit limits this year. But again, I think the primary motion you're going to see is customers choosing to adopt Teamwork Collections. So I would continue to pay attention to that because that's probably the primary monetization motion today.

Customers are also -- when they adopt Rovo, they, of course, realize significantly more value. And we're seeing Rovo customers grow their ARR at 2x the rate of those that don't adopt Rovo. So actually the concept of delivering value first and foremost to customers, then we'll recoup that value back over time. That's via increased stickiness, faster seat expansion and higher up-tiering to higher value editions. Actually, what's also really interesting is we shared a bunch of MCP stats. So even if customers are using third-party agents, and tapping into the Atlassian platform via MCP, we're seeing significant growth there. So we have over 1 million monthly active users of our MCP server and Teamwork Graph CLI. So again, wanting to tap into the value of the Teamwork Graph, even if you're using a third-party agent. That's delivering significantly more value to the customer. You're seeing that in their output.

So they're driving 4x the amount of Jira issued or Jira Work items created via MCP server and Confluence pages created 4x the amount via MCP server. So they're driving significantly more workflows through the Atlassian platform, which is what we want to see. And ultimately, that increased value to customers comes back to us. So exact same number. Those customers utilizing the MCP server are growing their ARR at 2x the rate of those that don't utilize MCP. So I think it highlights the mission criticality of the Atlassian platform, and it shows that it's complementary to even if you're using a third-party agent like Claude agent.

As you think about making the switch over to [indiscernible]. How flexible are you going to be if customers like KeyBanc say my bill is going way up, and I'm not sure if I love this consumption model.

Yes. I think that's where we're -- we try to meet customers where they're at, and that's why I think something like Teamwork Collection and that model of bundling 10x the amount of Rovo credits per user gives customers like that you're pointing out, a much more predictable model. You're paying a higher ARPU on a per seat basis, and then I get a much more predictable kind of load balance across my user base.

Okay. Interesting. I did want to bring up service collections a little bit. It is growing really nicely. I think in third quarter, I think it surpassed $1 billion in ARR. I think in Q4, you noted that it accelerated. So really impressive. Maybe can you just talk about what's driving kind of all the momentum there?

Yes. So you're right. Like in Q3, we disclosed or shared that it had crossed the -- Service Collection had crossed $1 billion of ARR, growing north of 30% year-over-year. In Q4, we actually saw that accelerate as people continue to consolidate, continue to adopt Service Collection across not only their IT workflows, but also their non-IT workflows. So what's interesting, I think, it's -- is over 60% of the Service Collection use cases are outside of IT. So that's marketing teams or HR teams taking in service requests from the employees and helping drive outcomes for their employees.

At the same time, we're seeing 3x increase in Rovo agentic automation in service collections specifically over a 6-month period. So all the while you're seeing customers increasingly adopt Service Collection across the organization, they're deploying Rovo agents to help triage those service requests. So when you think about an HR team, getting a ton of inbound requests from their employees, asking questions about X, Y or Z, you're able to deploy Rovo agent to be that first line of defense and triage and kind of cut out that noise, respond to employees, give them faster customer service, if you will. And then also for the more critical items that require human judgment, route those to the right expert to be able to address those questions. And so whether that's in customer service or employee service, I think we're seeing really strong Rovo adoption across those workflows.

Okay. And I did want to touch on some of the go-to-market changes. Brian Duffy has been there for 18 months. He's up-leveled the organization. He's adding quota-carrying reps. What's another sales catalyst or something that he is working on this year that we should be thinking about?

Yes. Brian and the team have done an incredible job over the past year. It's almost -- he's only been here a little over 18 months, as you noted. Yet we only have 400 quota-carrying sales reps today. We're going to continue to scale that. We shared a couple of different stats at Q4 earnings that highlight the momentum his team has been building over the past year. So one is RPO growth grew 44% year-over-year, incredible to see that kind of strong growth. And that's indicative of the customer demand of the Atlassian platform and realizing the criticality of Atlassian platform in this moment in time, especially for our system of work and the Teamwork Graph. And that also speaks to the sales execution that his team is driving in terms of helping customers understand the value of the overall Atlassian platform.

At the same time, we're seeing really strong growth in customers spending north of $3 million, north of $5 million. So the cohort of customers that grew -- that spends over $3 million with us annually grew over 50% year-over-year. Customers spending $3 million with us annually grew over 70% year-over-year. So really strong traction with those larger enterprises. I mentioned earlier a couple of different times, we'll continue to scale up our enterprise sales team, especially as we try to drive more of that platform sale into our customer base and try to reach more of these non-software teams within these enterprises because we have 350,000 customers already today. So we have a significant opportunity to expand that Atlassian footprint in the same manner that you just saw happen in Q4 of people upgrading to that overall adoption of the Teamwork Collection and the overall adoption of the Atlassian platform and more -- all the while driving more user expansion across our key products.

Okay. Perfect. I have 1 more question, but we'll take this one.

What's the high end of your [indiscernible]? Like would you [indiscernible]?

So we actually typically land quite small. So our land -- we have a very differentiated go-to-market motion where we've land with a relatively small team, sometimes it's 20 or 50-person teams within an organization and then expand from there. So I would say, actually, our lands tend to be quite small. It's a department choosing Jira, choosing Confluence on their own. And so the opportunity is really via expansion. I mentioned we have 350,000 customers already today. So the opportunity is really expanding within those organizations and helping them realize the value of, again, the Atlassian platform that they may not realize.

Okay. And then I do like to end it with a fun question. Last night at dinner with the tomato carving station, that was a big hit, but it made me think, what's Martin's favorite food?

I like Mexican food [indiscernible].

Okay. Good thing we're having Mexican for lunch. Anyway, perfect. Thanks for everyone. Thanks, Martin, and have a good rest of the time.

Good afternoon, and thank you for joining Atlassian's Earnings Conference Call for the Fourth Quarter of Fiscal Year 2026. As a reminder, this conference call is being recorded and will be available for replay on the Investor Relations section of Atlassian's website following this call.

I will now hand the call over to Martin Lam, Atlassian's Head of Investor Relations.

Welcome to Atlassian's Fourth Quarter Fiscal Year 2026 Earnings Call. Thank you for joining us today. On the call with me today, we have Atlassian's CEO and Co-Founder, Mike Cannon-Brookes; and Chief Financial Officer, James Chuong.

Earlier today, we published a shareholder letter and press release with our financial results and commentary for our fourth quarter of fiscal year 2026. The shareholder letter is available on the Investor Relations section of our website, where you will also find other earnings-related materials, including the earnings press release and supplemental investor data sheet. As always, our shareholder letter contains management's insight and commentary for the quarter. So during the call today, we'll have a brief opening remarks and then focus our time on Q&A.

This call will include forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made, and we undertake no obligation to update or revise such statements should they change or cease to be current. Further information on these and other factors that could affect our business performance and financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled Risk Factors and our most recently filed annual and quarterly reports.

During today's call, we will also discuss non-GAAP financial metrics. These non-GAAP financial measures are in addition to and are not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is available in our shareholder letter, earnings release and investor data sheet on the Investor Relations section of our website.

We'd like to allow as many of you to participate in Q&A as possible. Out of respect for others on the call, we'll take 1 question at a time.

With that, I'll turn the call over to Mike for opening remarks.

Thank you all for joining us today. As you've already read in our shareholder letter, Q4 was another outstanding quarter, capping off an incredible fiscal year for Atlassian. Total revenue grew 28% to $1.8 billion. Cloud revenue surged to $1.2 billion as growth accelerated again, up 31% year-over-year. RPO grew 44% year-over-year to $4.8 billion, and we delivered a GAAP operating margin of 12%.

We are firing across all of our strategic priorities, enterprise the system of work and AI, all while driving durable profitable growth. In the enterprise, we had an all-time record quarter at the $1 million level, the $3 million level and the $5 million level of deals. With our $3 million ARR customers growing over 50% year-on-year and our $5 million ARR customers growing over 70%.

In the Atlassian system of work, leading enterprises like Google Cloud are using our platform to power the way their teams collaborate. And in AI, Rovo is now used by over 80% of the Fortune 500. Rovo assisted actions grew 50% over the prior quarter and Rovo adopters that is customers using Rovo continue to grow their ARR at more than twice the rate of non-adopters.

When we think about what AI is doing for Atlassian, the results speak for themselves. Customers are getting real value from the AI embedded directly into their workflows, and it's translating into direct growth in our business. Customers are committing more deeply to the Atlassian platform because of the value delivered. We're seeing longer customer commitments, larger deals, stronger seat expansion, great cross-sell momentum and higher NRR.

Last quarter, we recognized customers like NVIDIA and ResMed at Team '26 for how they're putting the Atlassian platform to work in the AI era to drive their businesses using the Teamwork Graph. The reason customers like these and many more are getting so much value from Atlassian comes down to a key structural advantage and that advantage is context. We believe models will keep improving and organizations will hire that intelligence by the token. A context, their internal knowledge, experience and memory is much harder for organizations to build and it cannot be hired. With the Teamwork Graph, we have 25 years of deep data about work. That's enabled us to build 1 of the best context graphs that exist for enterprise knowledge, now spanning over 200 billion objects and connections. For agents grounded in the Teamwork Graph, organizations can see up to 44% more accurate answers while consuming 48% fewer tokens.

In short, it enables to get customers' results from their AI that are cheaper better and faster. Context is a clear compounding differentiator. I shared more on this in my investor [ letter ].

As you read in our shareholder letter, we're executing well on our long-term strategy from a position of strength and we're seeing this play out each quarter in our strong results. And the best is truly yet to come for Atlassian.

With that, I'll pass the call to the operator for Q&A.

[Operator Instructions] Your first question comes from Adam Wood from Morgan Stanley.

Congratulations on an amazing -- amazingly strong end to the year. I just wanted to ask about the subscription ARR framework. Obviously, it's kind of newer framework to us. And you again had another way down to year 23% growth for the fiscal year '27 guide is down to 18%. Could you maybe just help us out around the difference between par and data center within that and how much of this is kind of some moderation around new seed expansion, et cetera? And how much of it is around prudent surrounding macro and continued scaling of the enterprise go-to-market engine?

Thanks, Adam, for the question, and welcome to the coverage. First, I would highlight that we're really pleased to see the strength that we saw in the quarter, printing ARR growth, sub-ARR growth of 23% year-over-year. When it comes to the guide, we'll continue to take a thoughtful and prudent approach here, really balancing the momentum that we're seeing in the business, the demand signals that we're getting from our customers with the uncertainty as you look out in the macro environment, fiscal policy and geopolitical landscape. And as you mentioned, this is the first time we'll be issuing ARR guidance for the full fiscal year. We're also still early in the fiscal year here. So taking a bit more of a prudent approach in that second half of FY '27. It's also worth noting that in FY '26, the ARR year-over-year growth rate benefited by approximately 1 point from the acquisition of DX at the close of November in 2025. That's our fiscal Q2. And so we'll be lapping that DX acquisition and the healthy acceleration that we saw in the second half of FY '26. And of course, we're going to still continue to scale our enterprise go-to-market sales motion as we unlock the opportunities that we see in front of us. So all I feel really good about the state of the business here. And coming off a quarter where RPO landed at 44% year-on-year NRR was north of 120%. So you're just taking a balanced and prudent approach to the guide.

Your next question comes from Allan Verkhovski from U.S. Bancorp.

Congrats from me as well on another blowout quarter. You've been highlighting that the Teamwork Graph is driving a 44% improvement in task efficiency and a 48% reduction in token usage. Can you elaborate on how these gains are showing up in your customers' deployments and how they're influencing customer conversations, buying behavior and overall sales cycle dynamics?

I'm sure I can take that one. Look, I can tell you I've met more than 60 customers over the last 6 weeks and 5 different countries around the world and the Teamwork Graph and AI comp in every single conversation I've had. You can see from our results, those customers are continuing to expand their use of the Teamwork Collection, either upgrading to it if they're buying single applications or adding to the seats as they move into more of their knowledge workers and across the organization. And AI and the Teamwork Graph is 1 of the biggest reasons -- it's 1 of the top 2 reasons quoted by our customers for their reason to upgrade to the cloud and to upgrade the Teamwork Collection.

Now the question is why and where those results come from. Again, our applications have a lot of connections to other applications around the world, right, whether that's their CRM system, whether that's their documentation knowledge systems, we have, for about 8 years, been building the Teamwork Graph as the best way to get answers across all of those applications for their users or for their agents, which increasingly ask a lot of questions in a very short period of time. The quality of those answers is directly related to the [ clearability ] by graph. The density of that graph or the amount of information and the connections we have between it the quality of the social and collaboration group, the people information that we have. And fundamentally, the breadth of information, a number of contexts you have. We outlined a little bit of this in the shareholder letter, and there's a number of videos that show direct examples of where that gain comes from.

Fundamentally, the better answers, the quality of information across all those applications we can give to your agents, the less token they consume and the less time it takes them to get to an equivalent quality enter. Customers are seeing that. It's based on all of the structured and unstructured workflows we have from those customers over the last 25 years. And for all those customers that are adopting the Teamwork Collection and the Teamwork Graph coming inside that. I frequently get asked to ask to buy the Teamwork Graph, and the answer is no, you already have it. I can often go and say you have 150 million objects and connections in your Teamwork Graph today and they're like, I do? And then we can do live demos. We can show them in real time their own graph, how it works using the CLI. It's an amazingly powerful story, especially in an age where all of the customers are asking about token costs and AI spend. It's an incredibly powerful story about how we can actually connect their organizational knowledge, their history, directly to those AI agents and give them a cost and performance, better quality answers and cheaper answers. So it's a very powerful story, 1 we've been building for a long time and very customer isn't in all those conversations.

The next question comes from Ryan MacWilliams from Wells Fargo.

For James, I'd love to hear about the components of what drove cloud strength in the fourth quarter beyond the guidance? Like was it more customer seat additions or more Teamwork Collection? And have you thought about approaching this full year cloud guide in this uncertain environment? Was there any changes to guidance philosophy overall?

Thanks, Ryan. No, the philosophy remains -- really remains the same here. And on the cloud revenue drivers here on the $49 million beat, maybe I'll start with the fact that and highlight the fact that the DC migrations to cloud were really in line with expectations and not a contributor to the $49 million beat. It's progressing well and in line with our expectations for FY '26 contributing approximately mid- to high single digits to the cloud growth revenue. So the 2 primary drivers here of the outperformance were really the cross-sell and seat expansion that we were seeing similar to what we saw in the cross sell side, we continue to see strong uptake in our collections across Service Collection and Teamwork Collection. Service Collection revenue growth accelerated in Q4, just a strong signal of the AI adoption that we're seeing and that Mike mentioned a little bit earlier here. In fact, we're seeing over 3x increase in Agentic automation in Service collection as customers are continuing to deploy more agents beyond IT teams in HR and legal and finance and marketing teams. So again, also great to see the recognition here being named a leader in Gartner's Magic Quadrant for conversational AI platforms for employee services. We also continue to see a lot of strong performance on the Teamwork Collection side. A good reminder that Teamwork collection is still the best vehicle for customers to adopt and unleash AI on the Atlassian platform. This is where customers are upgrading to increased Rovo credits, it's giving customers what they want in terms of the predictability as well as the ability to really load balance those tokens across their organizations, and we're seeing that drive our strong ARPU uplift here as well. So really, I think what this shows is that the customers are consolidating their collaboration stack onto the Atlassian platform, recognizing the value that the Teamwork Graph really brings here. And we do see that in the results with Teamwork customers having 4 to 5x more paid seats per instance than stand-alone Jira or Confluence customers.

Your next question comes from Karl Keirstead from UBS.

A number of software stocks this week have been clocked on weaker-than-expected margin performance as their AI use goes up and their AI mix goes up and yet I'm looking at the Atlassian results and your margins despite you guys also experiencing an uptick in AI usage holding in there very well. And I'm wondering if you can explain that difference what you guys might be doing? Cost structure might be different. That might be helpful.

I'll Start with that. Again, on the margin guide here, as Mike and I stated back in the Q3 shareholder letter, we're committed to driving durable profitable growth here and a positive GAAP operating margin target for FY '27 really sets us on that path to accelerate and expand GAAP profitability over time. And in terms of drivers, look, the big part of that is disciplined hiring approach, right? We talked about that as well as reallocating resources against some of the biggest opportunities and ROI that we see right now as well as moderating the stock-based compensation here. At the same time, we're going to continue to judiciously invest in AI and scale our enterprise sales motion where we do see a lot of customer demand right now and our ability to really kind of capture that sustained opportunity in front of us. So that goes to really help inform the 6.5% GAAP operating margin guide for Q1 and a 4.5% GAAP operating margin for FY '27 as we continue to focus on driving that profitability and growing that over time.

Yes. Look, Karl, I can add on from the gross margin in the COGS side. I would say it's a classic Atlassian story of being thoughtful and long-term thinking -- long-term orientation. We've talked for 3 years now around our AI gateway and how we think about AI. We've been blending multiple models for a multiyear period, and we're getting really, really good at it. It's a nontrivial challenge. I'll give a huge shout out to all of our R&D teams who have been working on that cost to serve question for a long time in terms of getting the best quality at the best price and the best speed. People want front fast answers from their AI across Teamwork Graph, across our enterprise search architecture, which is now the best in the world in terms of giving you answers across your knowledge estate, whether that's to a person or human or whether that's to an agent or something clearing in that manner from an AI perspective. Our ability to blend models, our ability to manage traffic costs over time is truly phenomenal. We get better at it every quarter. And you can see that we had a huge continued growth in AI usage. Again, Rovo assisted actions are up 50% quarter-on-quarter. And we've continued to do that and focus on the durable profitable growth that we've talked about for a while now. So it's a huge credit to everyone and the Atlassian tend to be able to do that. It's a lot of hard work. It's a lot of long-term thinking about the architecture that we built underneath our AI to be able to give those answers in a -- in an incredibly competitive value way to our customers as well. So not only do we give them the best answers, we give them the best answers at an incredible price, which is part of the reason you're seeing the growth in the service question, the growth in the Teamwork Collection, again, as James mentioned service question, again accelerating AI being a huge driver of that service space. Again, hearing record numbers for customer conversions from legacy service providers, et cetera. So -- and you see that with our MCP calls as well as an example, that's also nontrivial to serve cheaply to manage that over time. MCP calls were up 400% in the quarter with daily blip and people actually using the applications through the label through a mobile client. So really happy where we sit from a technological perspective of being able to deliver this and more improvements to come.

Your next question comes from Gregg Moskowitz from Mizuho.

All right. Great. Congratulations on another tremendous result. It does seem that the Teamwork Graph, the functional improvements to Rovo, some of the other innovations to Jira, JSM, et cetera, are really resonating with your customers. In terms of my question, we've seen some market data that have indicated somewhat of a resurgence in developer hiring. Does that align with what you're seeing and hearing across your clients? And secondly, how does the rate of total paid seat expansion this quarter spanning technical users and knowledge workers? How does that compare to what you've been seeing in recent periods?

Thanks, Gregg. I can start with that and maybe throw it over to Mike. To Ryan's question a little bit earlier about some of the cloud outperformance drivers that we saw. I talked about the cross-sell side of it, and we are seeing customers continue to go wall to wall with Atlassian here and continue to adopt higher additions and move towards Teamwork Collection, Service Collection. But I think importantly, we're seeing that growth in Teamwork Collection while also seeing continued strong seat expansion in our core Jira and Confluence offerings here. And this expansion is broad-based. Recall that roughly 2/3 of users across Jira and Confluence or knowledge workers, right? So these are non-software development teams, really sitting in HR, legal, finance and really speaks to that diversified user base that we're seeing here. And I think this growth does demonstrate that in AI-driven world, the need for collaboration at the enterprise scale, tracking, planning, managing work, it's actually increasing. And Atlassian is a mission-critical platform here, helping our customers orchestrate their teams, their agents, their workflows to really unlock that value in AI and driving real ROI and real outcomes here. And that really was the other primary driver of the outperformance that we saw in cloud, including the cross-sell that I talked about a little bit earlier.

Look, I can talk about it from a developer or engineering front in a number of different angles, Gregg. I know we've talked about this before. We've been long on record. You can look at the receipts I think there's getting more developers in the world in 5 years' time than there are today. The cost of building technology is going down. The amount of technology we're going to build is going to go up. I believe that will continue to be a good trend. We've said this for a number of years. Those are the signals we see in our customers, the ability to grow that is huge.

I think secondly, the number of people building technology that we don't necessarily call developers is also growing. So we're seeing people in finance and in HR and in marketing, using a lot of these tools to build technology of various different forms. Again, we see that in our MCP server usage and our CLI usage coming across the board in lots of different functional areas, not just inside the engineering fraternity. And I think that's really important.

From our perspective, again, the system of work is about helping companies to connect their technology teams with their business teams to have a single platform that allows both sides of the organization in a technology-driven organization, an organization where software is their key competitive advantage. It doesn't make them a technology company. It can be a bank, an insurance company, a health care company, a university. There are lots of companies for whom. Many organizations in the world, technology is a key competitive advantage. That is -- I believe that is a big growth cycle that we are continuing to participate in. Our strength is in connecting the technology team through the business team and I do believe that the developer hiring will continue to grow as we see in our customer signals.

Next question comes from DJ Hynes from Canaccord.

Mike, you gave us some data points around Rovo and the customers who have adopted complete more of Jira work, they create more Confluence content, they grow ARR twice as fast. How do you separate kind of the incremental impact of Rovo from the possibility that your most engaged customers are simply the earliest adopters? I'm trying to think about the durability of those trends as we get further along into the Rovo penetration story.

DJ, think about how to answer that one. I would say we see signals that is only going to be a durable trend. I don't think it's anything to do with early adopters, to be honest. This is a technology that's been adopted incredibly fast. Again, over 80% of the Fortune 500 are using Rovo. All of the customer meetings that I walk into and it's a lot, they have Rovo usage, AI usage, they're looking to expand their usage. They're looking to understand. This is a massive sort of super cycle, right? They are customers inevitably trying to work out how can I apply AI and smart and the Teamwork Graphs and agents to this workflow or that workflow, structured workflows like in Jira or a service cushion or unstructured workflows like Balloon and Confluence and Trello, and other areas where they have unstructured workflow that they believe they can make more efficient or importantly, higher quality, right? The results of that workflow can be better than they were before. I don't see that as being an early adopter problem. And every single customer I walk into, they're all learning, adopting, moving and trying. What they are also seeing is the quality of Rovo is incredibly high, right? It outperforms almost every chat tool on the market across their data, the more they connect into the Teamwork Graph, the better those results get because of our context, because of a lot of great work in R&D. So I don't think these are sort of early adopter challenges. I think it's a signal of the more people lean in, the better results they get, the better value they feel like they're getting, they're then expanding across more of their business teams, more areas of their organization or understanding that when they add Strategy Collection or they add DX or they add the Service Collection the platform, the Teamwork Graph they've built just compounds in value for them. One of the reasons Service Collection continues to grow so strongly is because of the compounding effect between the Teamwork Collection and the Service Collection. And that's a really important thing for them to understand. And I think there's as we've shown in our addressable market figures of $14 billion within the existing customer base without changing any products or pricing, et cetera, that there is a huge amount of upside opportunity still for us to go out and capture. And that's our challenge to do on a weekly basis.

Your next question comes from Koji Ikeda from Bank of America.

I wanted to ask about kind of the long-term strategy here. And so clearly, the long-term Atlassian share gain thesis is really hinged on owning the enterprise context. And so what evidence are you hearing or seeing from your customers, especially the largest ones that you have that even if they increasingly centralized context inside other AI data layers, the Atlassian Teamwork Graph is still the moat versus potentially becoming a feature.

Koji, I can talk to that one. I think context is obviously very hard to build. This is a nontrivial problem. It's a unique differentiator that we have, and we continue to improve on. We made massive improvements in the last quarter in the Teamwork Graph. The quality of connectors and the information that we have, how we continue to correlate cross-reference and infer across that data, for example skills we can now infer in the talent app inside the Strategy Collection across all the information in the Teamwork Graph on which are inferring the skills and AI inactivity of your employees, for example. The quality of our net results is up markedly in the last quarter and was already at all-time highs. We've seen it in a number of true fans of chat growing up and up and up, right? The quality of our search, the semantic indexing of code that we showed, there is a lot of hard work to continue to do to make that context to make the Teamwork Graph better and better every quarter. We have more coming Team EU is in October in Amsterdam. No doubt there will be further improvements shown there.

I don't think it's as simple as every organization will have 1 graph and we're done. I think most organizations will have 3 to 5 large-scale knowledge graphs, and we intend to be 1 of those 3. We believe we have a significant advantage at the moment and continue to invest, as James said, in our AI and R&D teams to continue to make that accessible and to make that value and quality continue to improve. The Teamwork Graph, importantly, we opened up at Team '26 US, which is a really important step with our MCP server, with our command line [ unified ] so CLI, the ability to put the Teamwork Graph to access its information in any Agentic harness that you're using either chat applications, agents running on other platforms is really important. This is about being an interconnected part of a customer's technology estate. It's about the Atlassian platform being a strategic piece in the puzzle of how it is that they run their business. And I think that integration is a really important point. We're seeing that the reason we talk about the MCP server, MCP and CLI users in the quarter, passing 1 million now. We don't know where that puts us in a world scale, but I think it's 1 of the biggest MCP servers that exist, more than doubling in the quarter is because of people getting to the Teamwork Graph getting to that context from their agents wherever they're deployed. Again, we also signed and increased our partnerships with all of the Foundation Labs. During the quarter, we released Cursor and Claude and GitHub agents within Jira to again bring our interfaces, those agents into our interfaces, so you can use them as natively as possible so that we are part of the network of tools that help an integral part, the strategic part of the network of tools that helps those companies to do what they need to do. I think the Teamwork Graph has incredible long for promise, and we continue to invest heavily to ensure that it remains best source of context and enterprise commit.

Your next question comes from Alex Zukin from Wolfe Search.

Just a few. I guess what -- like if you had to think about what really happened this quarter that seemingly unlocked and unblocked the enterprise motion because it did seem like there was a meaningful inflection in large deal activity and consequently, our RPO. So just great to get maybe an extra lens on like what was the unlock or the unlock that you saw?

Thanks, Alex. I would say the most important thing is there was no unblock. So I would say this is a continued delivery of the activity we've seen over the last 2 quarters, 3 quarters, 4 quarters. We've talked for 3 or 4 years about how we continue to improve our enterprise motion that is on the technology side. Compliance, we should hit a compliance, for example, for Rovo during the quarter. So the enterprise group is doing a fantastic job on the technology side about making these tools technologies, applications, collections available to companies at scale at incredible scale now in the cloud in different geographies with different compliance requirements. So technology-wise, we're doing a great job. We've continued to improve over the last few years, the human side of our enterprise connectivity as we become more of a strategic partner from sales to customer success to all of the groups that have to interact with our customers at the enterprise level. We've continued to do a better and better job every week for the last multiple years, and you see those results coming through. The customer adoption is a continued trend, right? The RPO acceleration that we have seen again is about customers simply understanding our platform seeing more value across multiple collections in the strategic platform sense of Atlassian and then signing temps, longer deals, larger deals and then expanding their footprint. That's why you see the strong NRR numbers and the strong RPO numbers. So the most important thing I would say is it's not a singular unlock. It is many years of hard work, continual work across lots of areas of the business behind a deep belief in the strength we have in the enterprise segment. James?

And just maybe to add to that, I do want to reiterate what Mike said that it's not an overnight thing. We've got sort of similar questions last quarter about Service Collection when we had announced the $1 billion ARR growing north of 30% year-on-year. Those are quarters and years of investment that we're making here. And if you take a look at the enterprise go-to-market motion that we're continuing to evolve here, we really are still early stages when you think about the fact that we're in 85% of the Fortune 500, but really that only represents roughly 10% or so of our total revenue. There's still a lot of headroom there. And sure some of these stats a little bit earlier, but our $3 million cohort, that's 164 customers growing 50% year-over-year. Our $5 million and greater cohort of customers, that's 69, and that's on 70% year-over-year. But again, on a base of $6.6 billion of ARR, it really just highlights how early we are here in terms of the opportunity.

Overnight success, 3 years in the making. I guess maybe just on the initial ARR guide, James, I think it implies roughly flat organic net new ARR in fiscal '27. And you said you're reflecting the same level of prudence that you have historic -- last historically in this outlook. Is there anything different exiting fiscal '26 that increases the confidence in those numbers given some of those dynamics that you guys just went over? Or just maybe just help level set that a little bit?

Yes. No. Again, I'll just say again, you're really pleased with the momentum that we're carrying into FY '27 against subs ARR growth of 23%, RPO growth of 44% year-over-year. So we do really feel good about the state of the business and the healthy broad-based customer demand signals that we're seeing. And as I mentioned a little bit earlier, worth noting the FY '26 ARR year-over-year growth rate did benefit from approximately 1 point from the DX acquisition. So when it comes to that initial guide of 18% for subs growth for FY '27, again taking a balanced and thoughtful approach here, and it's still early in the year. So just adding a bit more prudence in that second half of FY '27. So hopefully that gives you some color there.

Your next question comes from Rob Owens from Piper Sandler. Is Rob on the line? We will move to our next questions instead.

Sorry about that. Can you hear me?

Please go ahead.

Yes, my apologies. So the question was around increased Rovo credits with customers and how that's in very strong ARPU uplift. I'm just curious, at what point might we start to contemplate a more consumptive elements to the model? And within the Rovo installed base of customers using it, can you give us any increased color on how often they're coming back? Have you seen multiple increases in just what that's doing to ARPU overall?

Rob, look, as we said, we continue to see a great increase in Rovo assisted actions, which is probably a rough proxy for credit usage. It's not directly linear, but the 50% quarter-on-quarter growth gives you a sense of the customer adoption of Rovo across the areas.

Secondly, as we've said that the Teamwork Collection with approximately 10x as many Rovo credits included is a great motivator inducement for upgrade in terms of hitting those limits and looking at upgrading the Teamwork Collection, both in terms of moving to the Teamwork Collection, but also expanding the number of seats, the reps of deployment. Again, as we talked about, as I see the Teamwork Graph working in most different types of teams, you see seat increases, right, which is, again, driving that ARPU number, if you're looking at it at a really macro level, that is happening there.

We have a series of consumptive elements today. We continue to work on how we judiciously and prudently roll out consumption-based offerings. We talked about both the direct consumption-based offering for overages. And secondly, the Flex model, which we continue to work on to allow customers to opt in to the entire Atlassian platform with a sort of dollar-based commitment that they can use across various different collections and consumptive elements in a singular package, both of which are early in their cycle holds great promise for the future. But as always, we maintain our sort of long-term thinking position and working through there. Right now, the simplest thing I would say is that the Teamwork Collection and the Service Collection are the vehicles for AI monetization, right? Customers adopting those, driving the usage within those. That is as we've said, that's the vehicle to measure AI monetization and adoption and both are going very, very strongly.

Thank you, and that concludes our question-and-answer session. I will now turn the call over to Mike for closing remarks.

Look, thank you, everyone, for joining the call today. As always, we appreciate the thoughtful questions and continued support. A huge shout out to everyone across the Atlassian team, another great quarter into the books and continued long-term thinking and hard work to deliver for our customers. I hope to see as many of those customers and as many of you on the investment community at Team '26 Europe, which is coming up in October. Other than that, have a kickass day.

Alright, we are really pleased to have Martin Lam from Atlassian with us here today. Martin, as you know, runs IR for Atlassian, and thanks so much for being here with us.

Yes, of course. Good to be here, Gregg.

Yes. Good to be here with you. And so Martin, you're coming off of a tremendous Q3, which I would say really surprised a lot of folks. And yes, there were data center pull forward that you guys spoke about. But regardless, the cloud revenue upside was really strong. And some have asked how you were able to deliver such outperformance. So it would be great if you could sort of talk about the key drivers of that strength.

Yes. So we had a really great quarter. As Gregg mentioned, I think importantly, cloud revenue showed a lot of strength this quarter. The driver of that cloud outperformance was driven by 2 primary factors. One was cross-sell into Teamwork Collection as well as the second factor being seat expansion within core Jira. So those are great things to see, especially, I think, in the face of people having doubts about the durability of seat expansion. We actually recently showed a chart about seat expansion at our user -- or investor forum at our user conference, Team '26 in Anaheim. We showed kind of that seat expansion or seat growth ex migrations continues to grow, continues to compound over time. But -- and that really played out in Q3, right?

So seeing that seat expansion across both developers as well as knowledge workers drove that outperformance. And then going back to Teamwork Collection, the other primary driver, the #1 reason why customers are upgraded to Teamwork Collection where you get the whole Atlassian platform as well as 10x the amount of Rovo credits with that. So you get a certain amount of Rovo credits with the paid Jira subscription or any standard subscription. But when you upgrade to Teamwork Collection, you get 10x the amount of credits. And that's really resonating with customers as they value that predictability as they kind of go forward and see their increase of Rovo usage.

Okay. That's great. And then any change, Martin, quarter-over-quarter in your SMB business and/or your enterprise business? Or was that just like very steady on both counts?

No, we continue to grow well across both. I would say we are traditionally known for our flywheel business. We have 350,000 customers, and we have a growing enterprise segment, right? Our CRO, Brian Duffy, spoke at our investor forum recently. He continues to execute really well. And I think you see this on the enterprise side play out in RPO growth, growing 37% year-over-year, and we continue to see customers kind of voting with their wallets in this environment, right? They're signing larger dollar contracts than ever, signing larger duration contracts than ever. And so it's a great thing to see. And I think the value of the Atlassian platform, which I mentioned earlier that, that's what customers want to sign up for that strategic partnership with us is an important factor.

All right. Terrific. And then the Teamwork Graph seems to be an underappreciated asset as it relates to Atlassian's differentiation. So I think it might be helpful if you could just walk through the key attributes of Teamwork Graph for everyone.

Yes. So our teamwork graph, as we call it, which is basically underlying Knowledge Graph, which provides the contextual relationships of who's working on what. What teams are using, what tools and the relationships between those -- how do these workflows ladder up to the overall company strategy. It's this kind of connection point within an organization that provides that context because in this environment, not all AI is built equally.

You need the intelligence, but you need the context to actually deliver good results. And so at our investor forum, we actually showed a side-by-side demo of Cloud code, same prompt on both sides, one connected Teamwork Graph, one without same repo that they had access to. And the one connected Teamwork Graph delivered better -- 48% better results at 44% less token usage, which I think resonates, especially in this environment where people want to make sure that they're getting good results and, of course, being efficient with their token spend. And so I think that really resonated. That was a big part of our keynote presentation that Mike delivered at the user conference in the morning, and that really resonated with customers as well. And as we spoke with our product teams, spoke with our sales teams after our conference, that seemed to really resonate with customers. And so when you think about it, it's -- you don't want to send AI just kind of blindly throughout your organization searching for things. You want to allow it the guardrails to traverse with the instruction manual to understand how to pull things in a more efficient manner. And so I think that's going to be an important part as we kind of progress on. It's very early with AI as customers understand this and as they get that additional context, they're going to be able to get better results, at a better, more efficient rate.

Yes, that's terrific. And I would back up just the -- like that demo because it did really resonate with investors as well and with me. And I would also say that when I was at Team '26 at your customer conference, one person was telling me that by seeing all of the -- with Teamwork Graph, seeing all the relationships, all the connections, et cetera, that it made it easier for practitioners to now be informed on how to build more effective agents.

So I thought that was another interesting aspect as well. Interesting. Yes. So let's talk about Rovo. So your AI tech because it now has over 5 million MAU. Usage is growing rapidly. And what I'm wondering, Martin, is if -- like were there any meaningful functional improvements to Rovo over the last 6 to 12 months that are helping to spark such an uptick in adoption? Or is this just -- there was just a period of time that we had to just kind of wade through and now you're really kind of seeing the fruits of your labor. So just kind of curious, again, if anything has changed technologically, if you will, more recently.

Yes. I don't think anything has changed technologically. I think it's the steady progress that we make across kind of all of our 3 priorities and especially in advancing Rovo. When I think about Rovo, very early on when we introduced it several years ago, it was centered around enterprise search. And then, of course, then chat functionality. And now there's more agentic usage. And that, of course, is driving the increased Rovo credit usage. You're seeing Rovo credit consumption grow 20% month-over-month, which is incredibly fast and really good to see.

We're also seeing, interestingly, those customers that actively use Rovo versus those that don't actively use it or don't light it up, grow their ARR at about 2x the rate of those that don't. So that's a good proof point. I think that when customers utilize Rovo, they get incremental value that delivers more workflows through the Atlassian platform and that then leads over time to more usage, more users and then more monetization opportunities down the line.

Okay. And then getting back to teamwork collection, which you mentioned earlier. So are the 10x AI credits for Rovo, is that the primary driver of teamwork collection adoption? Or is it also just the additional products that can be attained at a more favorable unit price?

Yes. I think that premise is -- or that latter premise of this crude bundle is probably a misconception. So Teamwork Collection for everyone that's a little less familiar, you do get Jira, Confluence, Loom. But really, when we think about it, it's the value of the whole Atlassian platform. I think that's probably the biggest thing when I think about the evolution of our company over the past several years, it's -- we've built a unified platform with a unified data layer, and we talked about the teamwork graph underlying that, and you get the whole value of the platform with Teamwork Collection.

And when we talk to customers, they do call out the increased AI credits as the #1 driver, but they say, okay, like what's resonating with me is I understand the value of the whole Atlassian platform, all the automation capability, of course, the Teamwork Graph, which we talked about, the analytics underlying it and then the kind of a unified AI layer underneath all that. And especially when I add additional users, add additional teams, then I get compounding effects to this because, again, you're adding more enriching the Teamwork Graph over time as I add more users, more workflows, understanding their tools, their priorities. And that's, I think, what companies understand.

And so when they adopt Teamwork Collection, you actually see them expand above and beyond even their initial Jira footprint. So you tend to see them consolidate from other point solutions -- they're adding about 10% more users when they do so. And then when you look at the Teamwork Collection kind of behavior -- Teamwork Collection customer behavior, those customers are driving 2x more Rovo credit consumption than those that are in stand-alone products and have 2x more active agents, not just built agents, but active agents versus those on stand-alone products.

Okay. Yes, that's great. And then, Martin, if we take a step back, so it's very clear that many investors continue to worry about AI significantly disrupting Atlassian's business, even if it hasn't done so today. But maybe just sort of talk about why you believe Atlassian is a durable growth business.

Yes. I think certainly, Q3 numbers kind of back up a lot of what we certainly have believed. And I think when you think about the complexity of the world and the speed in which AI evolves things, that -- the need for collaboration, coordination raises more than ever, right? Like you need to coordinate more across what are we doing across the organization, especially as the speed and throughput increases and certainly, not just coordinating between humans, but also coordinating between humans and agents. Are we doing the right things? Are those agents actually delivering what we want them to?

If Gregg and I are on the same team, we're making sure that as we deploy agents, we're not overlapping, having kind of conflicting things that we're working on. Are we actually progressing against our strategic results as a company. And so that coordination aspect becomes more important than ever. I think we see more people needing to be added to the Atlassian platform to coordinate that. And then you see things like our innovation of adding or being able to manage and orchestrate agents in Jira. That's a prime example. Jira today is already the orchestration workflow platform for work. Right now, I can assign work to my colleagues and team, and now I can assign work to agents directly in Jira and then the agents can take action directly from there. And again, so managing what are our teams working on, managing now, what are those agents working on? Are they delivering actual tangible results for us and advancing our strategic priorities as a company because that's actually what matters, right, and not just the volume of work.

Right. Okay. Very helpful. And then back in March, Atlassian, as I think all investors are aware, Atlassian announced a RIF of approximately 10%. Maybe just sort of talk through the rationale for making this change at this time as well as the magnitude of that change.

Yes. So we took out some action back in March. As Gregg mentioned, I think we're still digesting some of that. I think we're very clear that the 2 primary objectives of that were, one, to help us be able to self-fund more quota-carrying enterprise sales reps where we're seeing a lot of traction as well as being able to self-fund key AI talent. Obviously, that's going to be an important part in the years to come. But the other aspect is to accelerate GAAP profitability. We talked about in this past quarter, one of our key strategic priorities as a company have been serving enterprises, delivering AI to customers and delivering our system of work, which we call it to our customers.

So those are our top 3 priorities. But then we elevated a fourth strategic priority of driving durable profitable growth. So I think that profitability aspect has clearly come into focus. You hear that in our kind of shareholder letter as we talked about bringing -- elevating this as a key strategic priority. And we do want to accelerate our path to GAAP profitability and then, of course, grow that from there.

And Martin, has there been any discernible impact on growth or pipeline generation since making?

No. I mean I think Q3, we obviously executed well. We're tracking well from a Q4 perspective, but nothing to call out. I think we were measured in terms of making sure that there's no business disruption. But of course, we're still digesting it, as I mentioned earlier, you want to obviously continue to make sure that you're executing well.

Yes. And then -- perfect. And then you mentioned Brian Duffy. A few moments ago, your CRO. So he seems to really be putting his stamp on the go-to-market, including a significant emphasis on driving more enterprise revenue. But how is this going from your perspective?

Yes. I think he's doing incredibly well. He continues to make changes. And I think of that as evolution of the business, right? So we've built an incredible business driven by our product-led growth kind of flywheel motion. And it's now about how do we supplement that motion with more of a higher touch motion as we call it. How do we serve those customers that need a little more handholding. So we have 350,000 customers already and it's now how do we better serve those enterprises that we are already in that existing customer base. So we've always shared the stat of -- we have 85% of the Fortune 500 as existing customers already, yet they only represent 10% of our overall business.

And that's, I think, applies not only to the Fortune 500, but the massive enterprise customers within that 350,000 customer base. And so it's how do we continue to better serve them. Brian continues to make -- changes continues to grow that quota-carrying sales group, as I mentioned earlier. And I think we're delivering on what customers want because a lot of this is customer pull. It's not us pushing the Atlassian platform. I think a lot of our customers say, like I want more of a strategic relationship with Atlassian help me partner with you better. And so I think we're meeting customers where they want.

Great. And then what's your confidence level, Martin, in continuing to drive strong cloud migrations over the next couple of years, including for large customers that operate in highly regulated environments.

Yes. I think -- so we announced the end of life of our data center or on-premise platform, which will end of life in March of 2029. But even at that, I think we feel really good about being able to serve those customers with our cloud platform. We obviously have built an enterprise-grade unified cloud platform, as I mentioned earlier.

We feel good that a lot of that is behind us, and we're now better able to serve these enterprises that are on our data center deployment. There's still some work that we have to do between now and March of '29, which is great because there's that long runway. And it's about having that open dialogue with customers that may not be able to move now and understanding our road map between now and then so that are we -- can we deliver what you need between now and then. When we think about migrations, we've obviously had a lot of migration success, and we've learned from the end of life of our server product several years ago. And we continue to see that those migrations tick up in the more recent years.

More importantly, you're seeing those data center customers when they migrate to cloud, they're migrating to our cloud premium and cloud enterprise SKUs. So 93% of those data center customers, when they migrate, they migrate to the higher-level additions. And then actually, what's more important, once they land in cloud, we have significantly more products to cross-sell them to. We have higher-level additions, which we can kind of upgrade them to over time or upsell them to over time.

And then it's significantly easier to add users in the cloud, right? I don't have to ping my IT admin and say, "Hey, can you add Gregg into my instance?" I can actually with little friction, click and add, Gregg immediately, bring in more users. And again, you get the benefit of the whole platform, underlying teamwork graph. So you get this compounding effect. And that's why I think you see such strong user growth continue on the Atlassian platform in spite of, I think, investor concerns. And we shared more recently at our Investor Forum another cut.

Again, we serve all teams on the Atlassian platform. I think sometimes we have this misconception that we're just a developer company. And we showed 2/3 of the active users on our platform are knowledge workers, nondevelopers, non-engineers. And so that's an important aspect that we have the ability to serve increasingly nontechnical teams, these knowledge workers, certainly, that have to work in conjunction with those software developers that kind of are our heritage. But increasingly, that's a big part of it. And I feel that's why we have a lot of confidence earlier to your question on how -- why do you have so much confidence around kind of durability of things like user growth, cross-sell because, first of all, it's really early on, and we feel it's early on in our opportunity. And we're seeing these proof points as we grow into those nontechnical users over time.

Yes, very interesting. And does Brian and Mike and the leadership team overall, I mean, is there a line of sight to some of these bigger customers that are really committed to the Atlassian platform going wall-to-wall, just to your point on more nontechnical user adoption?

Yes. I think that's been one of our big strategic priorities. That's obviously the grand prize in terms of -- oftentimes, we land in an organization with their technically oriented teams, whether it's their software team or their IT team, but the expansion opportunity then becomes, hey, how can we serve increasingly, the marketing team, the HR team. We're seeing more and more of those teams, I think, added on the Atlassian platform, and that's a big play of ours, right? So we talked about our strategic priorities earlier in serving enterprises, it's penetrating and reaching more of these knowledge workers.

Absolutely. And then at your investor forum about a month ago in conjunction with Team '26. So you said that the 3-year 20% plus revenue CAGR through fiscal '27, no longer a relevant target. You also disclosed subscription ARR for the first time, which encompasses both cloud and data center and also discussed high-level growth expectations for both FY '27 and FY '28. So maybe just kind of refresh everyone on that, if you wouldn't mind.

Yes. So as I mentioned earlier, with the announcement back in September when we announced the end of life of our data center product, I think that did a couple of things, right? Like that drew a line in the sand for those data center customers of a time line of when they need to migrate over to cloud. And with that, it also introduced ASC 606 changes of revenue recognition on the data center line because now that kind of useful life of the data center product has shortened with that definitive end-of-life date.

And with that, that brought forward a lot more upfront term license revenue into '26 is just mechanical math of more upfront term license revenue. This is all specific to data center again. And therefore, that creates a meaningfully tough comp for '27 as well, again, just math, mechanical math. And so we do now expect data center to have negative growth next year as that business contracts as more customers migrate over to cloud as well.

And so that negative data center growth will be a drag on overall revenue growth next year. And so to help bridge investors through that, we thought it was important to introduce subscription ARR for you to understand the health of the overall book of business, right? That normalizes for all the 606 noise. It also helps investors kind of focus less on probably the migration economics in terms of like, hey, how much uplift on cloud is coming from migrations? How much of the headwind is on data center. Now you get a picture of the full book of business on a normalized ARR basis, and then you can understand the health -- overall health of the business better.

And then to be specific about it, so we have 3 quarters of disclosure 3 quarters ago, which was your September quarter, the growth on subscription ARR, I believe, was 20%. And then in December, it was 22% and then this past March was 23%. So we've seen acceleration in that metric.

Yes, that's right.

Okay. And then maybe switching gears a bit. So in early May, you guys introduced a Flex program aimed towards large customers. And we had Burt Podbere, CrowdStrike's CFO earlier today, and they -- a lot of people sort of associate them with kind of the genesis of Flex. And we've seen a lot of companies that have adopted. And I would say it's been additive every time in terms of what we've seen for the software companies that we track, but to varying degrees. And so I guess as it pertains to Atlassian, like what are your expectations in terms of what Flex will do for you?

Yes. So as Gregg mentioned, we introduced Flex. It's very early on. We only have a handful of customers in a beta program as we kind of work with them through this. But it's basically think of it as better serving those enterprise customers. And the theme of what we discussed earlier of removing friction of how we can better serve and partner with those enterprise customers.

And so with a fixed wallet kind of contract or value-based contract, then customers can add on another collection or add on additional products or SKUs over time without the friction of going back to procurement every single time you add a new SKU or add a new department into your mix. So I think it's kind of in the theme of meeting customers of where they're at and removing friction, helping them adopt more of that Atlassian platform over time. And I think that theme of meeting customers where they're at is applicable, especially AI is so topical right now, and we touched on it very briefly earlier. Teamwork Collection with a 10x more credit just gives customers so much more predictability.

And in this environment, and you hear it in the zeitgeist right now of token maxing and especially consumption-based pricing is a question we get quite a lot from investors. Customers value predictability. They want to understand, hey, how much am I spending with Atlassian? And Flex gives them that, right, like a fixed wallet contract of understanding how much they're going to spend with Atlassian and they can adopt over time without having to kind of burst through and be caught off guard.

Right. Okay. Great. And then with that, are there any questions in the room? If you do have a question, please raise your hand. Yes

Great operating business craftsmanship, but [indiscernible]

Yes. I mean -- so I think the earliest one is probably what Gregg mentioned earlier with the action that we took back in March. Number one thing, when you address headcount, I think that obviously has an impact on stock-based comp early on. But I think the other aspect is growing and maturing as a business as we moderate the pace of SBC. And so we've been, I think, quite open about that as a top priority for next year as we moderate that level of SBC, looking at different things within our overall comp program over time.

And then beyond the immediate action in March, we have moderated the pace of hiring quite considerably, right? We talked about hiring certainly in kind of enterprise sales and in AI. But beyond that, I would expect kind of overall headcount growth to be very, very modest overall. We talked more recently at our investor forum about that level of growth in R&D will grow significantly slower than overall top line growth. A big part of that is we went through a heavy investment cycle to build out this platform over the past several years that we talked about, had to build that to be able to facilitate the data center to cloud movement, better serve these enterprises in the cloud and, of course, build this unified AI platform.

And with that kind of in the rearview and us kind of crested those investments now, we'll moderate the level of R&D investment. That will grow slow and shrink over time as a percentage of revenue. And that structurally should help us as well because in terms of SBC, normally R&D is a heavier kind of command on that.

Do you see a difference in particularly AI Agentic engagement between customers in different regions like West Coast versus the rest of the U.S., Europe, or APAC?

Interesting. I haven't drilled down too much, but I think one important thing that we tried to look at, of course, is like the more AI native kind of bleeding edge companies. So we tried to look at the nonsubjective list, and so we talk to our data science and said, here's the Forbes AI 50. How much -- how many of these are our customers? And over 2/3 are our customers already, which is great to see. But then importantly, the ARR within these AI natives that are the fastest growing and most innovative companies in the world, they're growing their ARR significantly faster. I think 2x the rate of kind of the overall book of business growing over 100% year-over-year is what that cohort is growing. So that's good to see.

And then Gregg touched on it earlier, but Rovo usage continues to increase. That's probably more broad-based across SMBs and enterprises. It's still very early on. I think people are wanting to identify the platforms that they want to run their Agentic workflows on. the platform is so key to this because it offers the security, the governance that enterprises require to run their Agentic workflows on. And so I don't think enterprises will have 20 platforms which they run their workflows on but nor will they have one. And so I think they're working through, okay, which are the platforms I want to standardize on. There will be 5 or 6 kind of platforms that we kind of center on with our strategic -- with our strategy, overall AI strategy, how do we kind of discern that? And I think Atlassian is really well positioned with the platform that we've built.

Other questions? So one thing to ask you, Martin, is that we've seen over the past several years, a series of price increases from Atlassian in cloud, in data center. Where do we stand today? How do you think about the value that your average customer is receiving at the current price points?

Yes. I think we take a lot of value in being a high-value provider at a more attractive price point. So that we think of it as almost high value, high volume. Core to our pricing philosophy has always been let's deliver value to the customer first and foremost. And then we can recuperate value through monetization over time. And so you've seen us at the price of Jira today is like $8 per user per month. It's incredibly affordable. But we've been very systematic with pricing. I think that speaks to the predictability aspect that we spoke about earlier.

And again, we want to deliver that value. That's why we spend so much on R&D because we can deliver incremental value to customers every single year that affords us the ability to then take pricing over time because we are delivering more and more value to customers every single year. And again, I think that's core to our overall monetization model. And we want to maintain that kind of high-value, lower cost profile, especially because that's an enabler of being able to take share from customers or from other providers, I should say. Earlier, we talked about Teamwork Collection. When they adopt Teamwork Collection, we see a lot of consolidation off of other competing point solutions. That's going to be an important aspect, I think, in the years to come as you see more and more consolidation.

And then especially when you think about the shift overall in the industry, I think that positions us really well as other companies also have to adjust to this landscape. Being a lower-cost provider, I think, will put us in a very advantageous position.

All right. Terrific. And then one last question that I just wanted to ask you from a product standpoint because we've talked a lot about Jira. Of course, Confluence is a very popular Atlassian product as well. But I'd like to ask about JSM, Jira Service Management because it just seems to be a freight train, quite honestly, tremendous momentum at Atlassian. We hear it very consistently from all of our checks as well when we talk to folks in the field. And so when you look at the runway sort of associated with this product and the opportunity, how are you thinking about it? What's your confidence level in continued strong growth for JSM?

Yes. So Jira Service Management or Service Collection now, as we call it, is a north of $1 billion ARR business, growing over 30% year-over-year, so doing incredibly well. I think sometimes people ask like, "Hey, is there an inflection point with Jira Service Management?" Not really. It's -- I think the compounding effects of all the investment that we've done over the past 10 years really continue to mature that product, better serve enterprises. You're seeing more taking share from, I think, competitors in that space. It does well in terms of displacements, competitive displacements. We continue to add functionality to better serve those enterprises and then reach more non-IT teams.

So 60% of the Jira Service Management instances are serving non-IT workflows, which is great to see. And then actually, we're really interesting. In terms of Agentic invocations, as we call it, 40% of those are within service collection. So I think that speaks to Rovo's ability to be a first line of defense and kind of triage all the inbounds that a legal team is receiving or that HR team is receiving. And that's a very applicable kind of Agentic workflow that people can deploy early on out the gate.

All right. Fantastic. Well, with that, we're out of time, but thank you, Martin, for a great discussion.

Yes.

Thanks, everyone, for being here. We are super thrilled to have James Chuong from -- CFO of Atlassian. We have Martin Lam, Head of IR in the back.

And so I guess to kind of kick it off, James, you recently joined Atlassian. I know you get this question a lot, but maybe for those folks in the room that are new to Atlassian, tell us a little bit about yourself and maybe the reasons why you joined Atlassian?

Yes. Well, first, thanks for having me, Koji, and thanks, everyone, for attending today. When I was thinking about the next opportunity, really at the core of it was trying to understand which opportunity, which companies were really going to be a net beneficiary of AI. And when I looked across the board, Atlassian really jumped to the top of that list. And a couple of things really stood out for me. One was just how diversified and durable I felt the businesses were. And I think it's an area that I really sort of underappreciated coming into it because it's easy if you don't follow the company to think about it as the Jira company. It's a software tool only for developers and engineers. But what I soon discovered was that it was much more diversified than that.

If you look at our Jira customer base right now, the usage is 65% nondevelopers. So these are nonengineers, nondevelopers. These are teams that are sitting in marketing teams, business teams, finance teams and HR, and that number is even higher for Confluence users at 70% and 75% for JSM, our Service Collection. And these are skilled businesses. This past quarter, we shared that JSM was a $1 billion ARR business, growing 30% year-on-year. Confluence, which no one really talks about, it's a $1.5 billion business, and Jira at $2.5 billion. So these are scaled businesses that are incredibly diverse and allows us to play in these expansive TAMs across multiple domains within the enterprise. That was an area that really stood out for me, Koji.

And then I would say the other one is, if you think about fundamentally the types of companies that are going to benefit from AI and what's going to be an AI accelerant, it was going to be around context, right, which companies really have and harness context around enterprises and organizations. And when I think about the System of Work that Atlassian is developing and has sort of that center of gravity across different enterprises and where they sit in that tech stack across multiple, multiple teams, that context becomes incredibly important to be able to build the rails on top of which workflow sit, agents it. And so it just felt it was incredibly well positioned as part of that.

Yes. No, I got you. So you just had your big conference. Congratulations. I was there. It was an awesome event and you guys hosted a really, really nice investors session. I thought it was very well attended, nice presentations all around. So maybe could you give us a quick recap of Team '26? I have a couple of questions on the investor session, but from a product perspective, what were the key highlights, key announcements?

Yes. So I think, thematically, if you take a step back, I would say there's acceleration in the innovation that we're driving right now across the product set and especially with AI. And I think central to that really was the Teamwork Graph. That's the area where I think we got a ton of incredible feedback from our customers, from our partners and from investors as well. And really what that is, is we showed a demo as an example, where we had a Claude using -- going through a prompt, same repo, one with and one without Teamwork Graph. And the one with Teamwork Graph showed 44% higher quality results at 48% fewer tokens. And so that really resonated and I think that really kind of jumped out in terms of the value that is coming out of the Atlassian platform. That's one area.

The acceleration, like I mentioned, expanding our MCP gallery, Rovo Dev Jira agents, right? This is all being able -- this is acceleration in innovation that we're seeing coming off building a unified AI platform, an enterprise-grade cloud-ready platform as well.

The other area I would say that really jumped out at Team '26 was the fact that collections is really resonating, right? This is the best way for customers to buy AI right now with Atlassian. So whether that's Service Collection, whether that's Teamwork Collection, and big part of that is as the customers go through a journey of buying single stand-alone SKUs, they see more and more value in the set of products that we have in applications, and they buy into Teamwork Collection that also gives them 10x more Rovo credits. And so that's the best way for them to buy into AI right now.

And maybe lastly on that side is that the System of Work and this journey that we see customers go on from single SKUs to a Teamwork or a Service Collection and then cross-sell into multiple collections, they're seeing more and more value compound to their enterprises and that writes back to a richer Graph, that Teamwork Graph. And so that's really resonating with C-suite as well as we go talk to customers, and as they think about who's going to be the long-term partner for them as it relates to AI. So all of those areas, I think, stood out as it relates to Team '26.

On the investor presentation side, I would maybe highlight 3 areas. One is introducing ARR as a strong signal and metric for the health of the underlying business, right? So back in September when we introduced the end-of-life for Data Center, that caused some lumpiness in the revenue recognition that we saw. And so introducing ARR, showing that we're growing north of 20% ARR and reaccelerating on that metric, I think, was well received in terms of just the clarity of seeing the underlying health in the business.

The other area I would call out on the investor side is the go-to-market opportunity that still remains. We've talked about being in 85% of the Fortune 500, and that only representing roughly 10% of our revenue. But one of the things that Brian Duffy, our CRO, shared, was the scale at which we're continuing to grow there. The $1 million cohort of customers, that's grown 6x over the last 4 years, growing at 39% year-over-year. The customer cohorts of $3 million plus, that's grown 10x over that same time frame over the last 4 years, and that's growing roughly 54% year-over-year, so seeing early and tremendous momentum on the go-to-market side. So that really stood out.

And then a commitment to driving durable profitable growth, accelerating GAAP profitability beginning in FY '27, I think all of those areas really resonated and stood out.

Yes. Yes. So I want to take a huge step back on Atlassian and it's been a very topical stock, very topical business. What's the core value proposition as we think about what Atlassian can do for the enterprise in total, the System of Work? Because I know great legacy, great history, you guys are still very disruptive in software development, but you guys are much bigger than that. And so when you're out there talking with the customers, the big enterprises, how are they thinking about the System of Work from their perspective? And how are you presenting Atlassian as a solution for that?

Yes. So I think maybe the first thing to recognize is that enterprises have long operated in an ecosystem of multiple systems and multiple platforms. And Atlassian is one of those core platforms that sit within enterprises. So a couple of things really stand out when we talk to CIOs and C-suite customers here is that the System of Work, it is this journey. At the Investor Forum, we actually shared a couple of examples, whether it was a financial institution or an automotive company that's been an Atlassian customer for well over a decade, and as soon as they moved over to the cloud, they had roughly, call it, 3 products. This is 2022, 2023.

When you fast forward 3 years later to where we are today, they're up to 9 products. They've tripled or quadrupled their spend with Atlassian. And what they're seeing is that as they moved from single SKU and moving into collections, right, again, the best way to adopt AI and unlock AI with those 10x Rovo credits is to actually purchase through Teamwork Collection. And so as they think about the platform and partners that they want to build long-term relationships with over time, Atlassian stands out as one of those.

And another part of why that is, is because we are open by design, right? So it's not just the Atlassian platform that they're building on, but recognizing that large and strategic enterprises will build on top of multiple platforms. And the fact that we're open by nature, right, being able to connect to all the different platforms and applications that other -- that enterprises and customers have is a key differentiator for us. Because as the applications and workflows are being built on top of both Atlassian and others, it's writing back to the Teamwork Graph as well. So there's compounding value to customers, and they're seeing that as they go through their journey with Atlassian.

Before talking about the Teamwork Graph, you did talk about being an open platform. And when I look at a lot of the software platforms out there, a lot of them say, open platform. And so what specifically about Atlassian and the open platform truly makes Atlassian defensible, I guess, maybe for the next 5 to 10 years? And maybe the answer is the Teamwork Graph. So help me understand that a little bit more.

Yes. So I think one thing that I've really kind of grown to appreciate Atlassian for is the fact that they took the time to invest in a unified platform, right? It's not just a bunch of applications or acquisitions being bolted on tool by tool, it really is a unified platform from the ground up. The pace of innovation and acceleration that I shared a little bit earlier, that's possible because we've built that unified platform. As customers are adopting more and more of our collections and more and more of our products, they're seeing the value in the overall platform across their enterprise.

If you think about a workflow, that, let's say, an HR team will want to deploy around onboarding an employee that's coming on board, it is incredibly helpful to have that same system sit within finance, within legal to be able to connect all of that context for that employee to onboard during that life cycle. And that goes on to other examples such as legal teams as well. Think about a legal team that will set up a first line of defense of agents across the Teamwork Graph and being able to be a first line of defense for all the contract questions that may come in from a sales team, different function, different domain, but being able to sit on that same platform is incredibly powerful and writes back to that Teamwork Graph, makes it richer and richer. So as customers take a step back and think about where they want to invest long term with AI partners, that becomes a very defensible moat.

The other piece that I think I want to call out here is that proximity of work that happens, right? That proximity of work is where when HR teams, finance teams, marketing teams, they're already building in a ton of workflows, right? We have hundreds and millions of workflows across our customers across our current product set today. And AI is an accelerant on top of that. And so when we think about all of that coming together, it becomes an incredible moat for Atlassian. The other area is the orchestration, right? So if you believe that AI is going to drive down the barrier to entry, drive down the barrier to entry for coding, that's going to create more innovation, more software, more applications, not just in engineers and developing teams, but across business teams as well.

We're seeing that across our customer set already. As a result of that, more collaboration is needed, more planning, more tracking, the governance, the permissions, the administrative ability to think and look across the -- all the different workflows and applications that are happening right now, all of that already exists and sits within Atlassian's platform. And we've got 20 years of history here, connecting technology teams to business teams and applications. And so all of that helps build that defensible moat.

Teamwork Graph. So I was at the keynote. You guys announced it. There is, I don't know, 10,000 people in that room. There's a lot. There are thousands of people in that room, and it sounded like everybody liked it. People were cheering. I went to go talk to customers, hey, what do you guys think about this? And they're like, this sounds great. I asked them, could you explain to me what this is, and they really couldn't, but they thought it was going to be good for them. So help me understand what exactly is the Teamwork Graph? And why is that so important? It feels like this is core to the strategy. You just mentioned feedback loop. How has that enabled? I mean, how do we understand Teamwork Graph here quite simply?

Yes. So I would really kind of think about Teamwork Graph as a couple of things. It's the relationships that happen across an organization that's captured within the platform, right? So it's one thing to be a system of record or a system of, call it, static record, right? Input goes in and -- but there's not an understanding of the relationships across those areas. And maybe an example of this is, today, you can use your IDE and invoke a Jira ticket as an example. But when you invoke that Jira ticket, it's not necessarily going to have the context behind that ticket. On that ticket, there may have been a Confluence page that's created as part of explaining why that ticket or why that workflow was created the way it was. On top of that, there may be another Confluence page that was connected to it that has all the different permissions, policies, rationale of why that particular product build was made the way it was.

There may have been a loom, a video recording that happened as part of that and attached to that particular Jira ticket. All of that is context. All of that is the brains behind an organization, right? It's institutional knowledge that's being captured within these workflows. And that's really what we call the Teamwork Graph. It's not just a system of records, it's a System of Work. And that System of Work will help be the rails as companies build agents on top of that to drive more autonomous work.

Now one of the keys to that is that, that's going to create again, more planning, more ticketing, more tracking that's going to be needed. And that's exactly where Atlassian sits right now with our existing platform.

So throughout this conversation, you mentioned orchestration a couple of times, you mentioned context a couple of times. Thinking into -- in those 2 lanes, which one do you think is the most defensible for Atlassian? Is one better than the other, or do both come together? I mean how do we think about context and orchestration?

Yes. It really does come down to context. I think that context is going to be the key differentiator for Atlassian and as we think about like what will accelerate AI for all the reasons I just mentioned. But one of the areas that we want to make sure that we land and help customers understand is that as they build out more and more agentic workflows, as they build out more and more opportunities across different domains within their enterprises, that context really is that sort of brain behind the enterprise, right? It's those relationships between those objects. It's the rationale and reason behind why companies are building what they're building, why those workflows are being created. And that piece is incredibly differentiated.

If you think about what accelerates growth and what accelerates innovation across an enterprise, it's going to come down to intelligence and context. And that intelligence side, really, if you think about the LLMs that are out there right now, they're continuously leapfrogging each other. The progress is fantastic. We're seeing better and better results as part of that. But what differentiates that intelligence is going to be the context that sits within an organization. And if you think about that context, whether it sits in one silo of one organization, one function, one team, or if it sits across multiple teams across different parts of the enterprises, it becomes much more valuable to an enterprise when it sits across more and more teams and functions. And I think that's what we're seeing, that's what customers are starting to realize as well as we see them across that journey.

Now orchestration is going to be important, and that's exactly where Atlassian sits today. And I think that's partly why we're incredibly well positioned. That orchestration across collaboration, planning, the governance that happens across different workflows, that's exactly where Jira, Confluence, JSM and our applications and our collections sit today. So hopefully, that answers some of that.

No, that's great. I'm going to ask one more question, and I do want to open it up to the audience to see if there's any questions from the investors in the room. But before that, so during the investor session, you guys mentioned cost as a factor that is driving enterprises to maybe not completely rethink their AI strategy, but it is a consideration. And so how are you guys helping enterprises manage their AI cost, which is an interesting topic because everyone says AI is so early in the enterprise, we're already running into, hey, let's try and figure out how to manage these budgets. So how does Atlassian help with that?

Yes. I mean, one of the things that really jumped out was the demo that we showed with Claude with and without Teamwork Graph, again, 44% better result, 48% fewer tokens. And certainly, every CFO is thinking about making sure they're maximizing the value that they're getting out of their investments in AI right now. And so Atlassian then becomes a layer to think about what is the most effective and efficient way to drive AI and value for our customers, right? And it really does come back to that Teamwork Graph that I mentioned earlier, all the relationships that we can help pull together, all the context that we can help pull together for customers, that becomes an advantage.

The other area I would call out then is the fact that we're, again, open by nature, right, open by design, open intentionally as a platform, not just in terms of the different applications and platforms that we plug into across the enterprise, but also the fact that we're model agnostic, right? We recognize that there's going to be different models better suited for different purposes. That will change and evolve over time. Our ability to take that and adapt that for ourselves and our ability to adapt that for our customers ends up being an efficiency play as well. And so that's another area that we've developed, invested in, and we're hearing really good feedback from our customers on that as well.

Got it. Questions from the audience, please raise your hand, we'll get a mic over to you if you have any questions.

In terms of your customer discussions about pricing going forward, when we went from an on-premise world to a SaaS world, the conversations changed for the on-premise companies about what they could charge. I think the question that everyone seems to be asking is, what pricing power do you have now compared to, say, 5 years ago? And how do you think through that? And addendum to that is, if you think of the new pricing models that need to come up, can you give us, clearly nothing set, your thought process and how you think through this?

Yes. Good question. I think I heard maybe 2 questions in that, first around sort of pricing positioning, pricing power around that. Historically, Atlassian has been very transparent with regards to our pricing. And we've always felt really good about the ROI that we drive for our customers. We consistently hear that from our customer base. And I think that's partly what's driven the ability to take share over time and be able to expand across the enterprises as well. It's one of the #1 things that we hear when it comes to the displacements that we've seen over the last several years here as well.

One thing that -- I think, again, that I'm going to really appreciate is the ability for Atlassian to take the feedback from customers in terms of product, product parity, features, et cetera, be able to iterate on that quickly and still have really compelling price points to make sure that we're driving that adoption across enterprises and customers. So feel really good about the position that we have across that.

And if you think about, again, the -- 85% of the Fortune 500 are customers of Atlassian, but that's only 10% of our revenue. It gives us a ton of room to continue to grow.

The other area, maybe to your question here around like how that evolves over time. As it relates to commercial models, right, whether it is a per seat model, whether it's a consumption-based model, I don't think it's one size fits all. I mentioned earlier that Teamwork Collection is one of the best ways that our customers want to buy. And part of the reason of that is because customers are looking for some stability, right? As I'm sure you all have heard the term token maxing out there right now. And one of the things that we hear from our customers is, listen, we want some predictability in our billing structure, right? So we want to be able to buy in and unlock AI. And so they're doing that through Teamwork Collection because they're getting 10x more credits right now.

But over time, as that consumption continues to grow, as those seats also continue to grow as we saw in Q3, right, Teamwork Collection outperformed as well as Jira stand-alone seats outperformed, and that was across both developer and engineering seats as well as the business seats as well, we'll continue to evolve the business models and the commercial models to meet those needs.

James, I wanted to ask you kind of a bull thesis question. And then I'm going to ask you a bear thesis question. But from a bull thesis, AI is an accelerant. I think, at Atlassian, the business and the stock is very much in the heat of the debate of is AI a tailwind or a headwind. And so maybe share with us some of the things that you're seeing within the business that help validate AI as a beneficiary? Any metrics out there? And maybe other metrics that are less seen out there or things that you guys are kind of tracking internally that is kind of giving you that confidence that AI is a tailwind?

Yes. I mean I think, again, you can see it in the performance already, right? We talked about -- we introduced ARR at the Investor Forum growing north of 20%. And if you look at the NRR on our cloud basis as well, north of 120%. So incredibly healthy. We called out the outperformance in Q3 due to Teamwork Collection as well as continued growth and expansion in Jira stand-alone seats.

And on the AI side, a couple of the areas that we had shared was the fact that our Teamwork Collection customers, they're using Rovo credits at 2x the rate and deploying 2x the number of agents as those that aren't yet deploying Rovo. Our Rovo customers are growing and using their AI credits 20% month-over-month. And Koji, you asked a question about maybe some stats that we haven't necessarily emphasized as much. If you think about the platform, I talk a lot about Teamwork Collection and then multiple platforms as well, but again, open by nature, right? There's customers certainly that use their own agents MCP into the Atlassian platform. And that, again, compounds back to the Teamwork Graph, and we're seeing MCP users grow at 2x the rate.

The number of objects being written to Teamwork Graph right now is growing 100% month-over-month. This is through via MCP, right? So as customers continue to develop their agents, as customers continue to use Rovo agents on top of our platform out of the box, we're seeing incredible adoption across the AI sector. And I would also mention that those customers that are using MCP, their MRR, it's early days, but MRR is growing 2x the rate. And these aren't just existing customers, these are customers that have been both with us for a very long time and also what I would consider as AI native customers, right? If you think about the Forbes AI 50, 2/3 of them are Atlassian customers.

On the bear side, definitely a discussion on seats. What does AI do to seats over the long term? And so why or why not is this a worry for Atlassian, whether that's -- does AI create more seats, pricing model changing? Like how do you -- how should we think about as AI and seats not a bear factor for Atlassian?

Yes. So I think the first thing is we really take a long-term view of this, right? And if you believe that AI is going to lower the barrier to entry as it relates to coding and as a second order effect create more innovation, more software, and as a result of that the need for more collaboration and workflows will be created, that's exactly where Atlassian sits. And even today, within our results, as I mentioned a little bit earlier, as customers are continuing to adopt more AI through purchasing of Teamwork Collection, we're continuing to see stand-alone Jira seats expand, right? So I think this is really customers voting and saying, look, Atlassian is a long-term partner for us. As it relates to our own AI strategy, it's going to be a key platform that we continue to invest in. And that's really the thesis as I think about like the long-term opportunity for us. We're seeing it in the results today, and we believe that it's going to be a tailwind for us through our existing platform.

Got it. Yes. James, we're all out of time. Thanks so much. Have fun.

Thank for doing this.

But yes, I want to welcome James on stage, newly appointed CFO of Atlassian. Thanks again for coming, and Martin for -- Martin is in the back. He has been with the company for many years and been a big supporter of our team. Thanks again for doing this.

Well, thank you, Brent, for having me. Hopefully, you guys can hear me okay, and thank you all for being here today.

Yes. James spent 13 years at LinkedIn, including 5 years as the CFO. And he basically took the company from $10 billion to $18 billion, so an incredible trajectory. Congrats on that.

And for those that don't know you as well, maybe talk to why you made the jump over? It's been only a few months, right? And maybe just give us your first impressions, kind of first observations, and then ultimately, kind of what you think -- what you're really focused on over the next year?

Yes. As Brent said, it's been coming up on 2 months at Atlassian. And I would say there's no major surprises per se, but I would say I'm seeing more and more evidence in terms of what drove my conviction to the opportunity.

And I'll speak to some of those areas. I think the first is just how I underappreciated, I think, how well diversified the business really is. For those maybe not following Atlassian closely, you could sort of pigeonhole it into a technology point solution for engineers, right? And while there is an incredible legacy of product-led growth that really started in that domain, when I looked much more closely to the opportunity and where it's at now and frankly, where it's been for several years now, is that -- Jira users, as an example, 65% of Jira users are knowledge workers. These are non-edge, non-dev. These are folks and teams sitting across HR teams, finance teams, legal teams and marketing teams.

And that number is even higher for Confluence at 70%. And for JSM, our Service Collection, that's 75%. So an incredibly strong and diversified base in terms of the opportunity set across enterprises and companies. And that diversification, I think, also shows up in other dimensions in terms of the scale of the types of customers that we have, right, over 350,000 customers, everyone from SMB, all the way to enterprises as well.

The other aspect is when I think about fundamentally where AI is now and where it's going and the companies that are going to be incredibly well positioned to deliver that type of value for customers durably. Right? A couple of things are happening. On the AI side, it's reducing the barrier to entry as it relates to coding, right? So you're going to see a proliferation of code. We're already seeing that coming out of developers.

You're seeing a proliferation of code coming out of non-developer teams as well, marketers, legal, finance, et cetera. And you're seeing more innovation, more software, more applications being built day-to-day. And we see that in the hundreds of millions of workflows that flow through our platform. And so that's doing two things. One, it's creating a lot of proliferation as it relates to the need for planning, tracking, governance and collaboration. And that's exactly where Atlassian's platform sits.

The other piece is then that not all AI is created equal, right? When you think about the agents and AI that is much more intelligent, it's going to need context. And I think we're seeing and hearing more and more of that right now. So when I think about Atlassian's 20-year history and the investments that we've made, not just in applications, but more and more on the Teamwork Graph that we've talked about is that we're able to deliver higher quality outcomes and outputs through that Teamwork Graph for our customers at a much better rate as well. So those are some of the things that really stood out to me, Brent.

This concept that AI can massively disrupt your end market, I mean, the stats are obviously really good to see because Joe in customer service and Benny in accounting don't really have a choice of ripping something out their business processes built there. What else has been maybe surprising to you in terms of the sentiment? I think you look at those stats, and that it's pretty telling that you're more installed and deeper ingrained in these workflows than I think people understand.

But are there other things that have kind of stood out to you that perhaps the casual observer right now, we're just are getting, hey, everything is getting AIed? What else is standing out? I mean, this concept of the work graph and all the different applications you can use, the multiple products that you're adopting, I would assume if you're adopting multiple lines of your service, that's harder to AI, if you will. So anything -- those are just a couple of observations from my side, but anything else that...

Yes. Ultimately, I think the proof is in the performance, right? When I look at the outperformance that we had in Q3, it came from a couple of different areas. The first was cross-sell into our Teamwork Collection, and that outperformed our expectations.

And that's really important because that's where -- it's the best vehicle to buy AI and unlock AI with Atlassian. So when customers think about AI right now, you can certainly buy single SKUs, Confluence and Jira and service -- our service management tools. But I think what we see over time in terms of the customer journey is that they go from single SKUs into a collection. And then they're seeing more and more value out of that collection and they buy more systems of work, right? So Teamwork Collection, Jira Service Management into Service Collection.

And we unlock 10x credits for our customers. So it's the best vehicle for customers to actually unlock AI for their organizations right now. We're seeing that in our ARPU uplift when we monetize through Teamwork Collection and our other collections right now. So that's an area where we're seeing strong performance. We're seeing really strong traction, and that continues to play through.

In terms of other areas of opportunity and maybe less so surprise, but we are still very early in the enterprise journey. We've been sort of evolving that go-to-market motion over the last several years, and it continues to mature. Brian and team are doing a fantastic job of that.

And we shared some of these stats out at our investor forum a couple of weeks ago. The $1 million dollar customers cohort has grown 6x over the last 4 years, and they're growing at 39% year-over-year. And our $3-plus million cohort has 10xed over that same time period, growing at 54% year-over-year, and our fastest-growing cohort is our $10 million plus.

And so as customers are continuing to adopt more and more AI and deploy more and more AI agents, we're continuing to take share in some of these really key markets. We talked about JSM, our Service Collection business, being $1 billion ARR business growing 30% year-over-year. Confluence is now a $1.5 billion business. Jira is a $2.5 billion business for us. And so a lot of opportunity to continue to grow into these different parts of the segments that we play in and all the different domains within those enterprises.

The's transition to cloud, it's a big catalyst, this end of life for server. Maybe just talk to the dynamic? I mean, if you look at the surface, I think total revenue growth slows, but the real focus should be on the cloud, right?

Yes, that's right. And that's a big part of the reason why we disclosed ARR recently, right, to really just showcase this overall business in the right light. It removes a lot of the noise as it relates to data centers.

So for those maybe not following us closely, what's happening on the data center side is that in September of 2025, we announced our data center end of life. And what that did was create a couple of dynamics. One is there's ASC 606 rev rec that got pulled up from future periods into FY '26. That's one dynamic that we saw.

Q3, the quarter -- our most recent quarter is our largest installed base in terms of expiry base for data centers. We had a pricing change going to effect in March of this year. And what we saw was that for customers that know that the migration to cloud is going to be a multiyear journey because of all the custom builds, all the change management and the very large user base that they need to make sure they migrate in the right way to preserve business continuity, we saw them pull up their business, right? They expanded and said, look, we're going to continue to commit to Atlassian. We're expanding, and we want to take advantage in the quarter. And so we saw a lot of that revenue also get pulled up into the period.

The other dynamic that we saw then is for customers that are actually getting ready and active to move to the cloud, they're going to see much more muted expansion, right, which makes sense. As they move to the cloud, they will continue to expand there. And so those are some of the dynamics, and that's why we wanted to show that in FY '27, we'll see a revenue trough, a mechanical sort of revenue trough in FY '27 with reacceleration out in FY '28, but the area to really point to is ARR growing north of 20% and reaccelerating as well.

When you talk about the go-to-market, Brian Duffy, I think has done a really nice job and came from SAP, and kind of no one knows the enterprise better than SAP. So the conversations -- the limited conversations you'll let me have with him are -- it just seems like there is a lot of opportunity inside the enterprise. And so you mentioned, hey, things are going -- it's early, but things are going well. Kind of what are the other pieces in the enterprise that you're excited about that you're seeing that Brian and the team are doing?

And maybe one thing to tie in, and my question was really tied into this is that we all do these partner checks, but the partners are visibly -- some of the partners are visibly upset, and I think it's intentional from you, where you're like, look, we're pulling this more direct. And so we may hear static from the checks, but that's not really reflective of actually what is going on. And that's intentional, I believe. So I think everyone wanted to hear just a view on that as well.

Yes, it's a great question, Brent. Brian is busy closing customers, so we'll try to get it in front of you on this, Brent.

But I think a couple of things that we're seeing right now. If you think about the opportunity still on the enterprise side, we're in 85% of the Fortune 500, and yet it only represents 10% roughly of our revenue. And so if you think about then also the fact that we've got 150,000 Jira customers and roughly 65,000 JSM customers, that's 80,000 customers that we have yet to attach in terms of cross-sell opportunities across the enterprise as well.

And so that motion is well underway right now. There's a lot of opportunity across both breadth and depth as we talk about all the different cross-sell opportunities into our customers and then all the different teams across customers as well, HR, finance, legal, marketing, et cetera, as well as the developer domain. So I think we're seeing a lot of opportunity there.

The partner ecosystem remains incredibly important to us. And it's an area where we want to make sure we continue to fine-tune and work with them to deliver the right types of value to our customer. We want to make sure that we're incentivizing the right way. And ultimately, it is really helping customers get the most out of the Atlassian platform especially as we deploy more and more AI capabilities, making sure that both partners and our own go-to-market teams are ready to deliver that type of value and demonstrate that type of value.

And then from a cost perspective, obviously, going through a reduction in force is painful, but you had, I think, a 10% reduction. We've seen some pretty big ones, Intuit, others. And everyone will say, well, this is happening because the industry is starting to decay. That's the bear view. The bull view is this is going to be really profitable in a year or 2 years. I mean, how do you view what happened? And how do you view from your lens, these changes we're seeing in the industry?

Yes, it's hard to speak to sort of other companies and their decisions and how -- that they're making right now. But I think if I go back to the fundamentals of what's changing right now, right? We talked a little bit earlier about the barrier to entry on coding reducing, and that's going to continue to create more software, more innovation, more applications. And as a result, there's going to be a need for more planning, tracking and domain expertise, governance. And that's exactly where the Atlassian platform sits.

And so when we saw the outperformance in Q3, as an example, that's customers telling us, listen, we want to unlock more AI with Atlassian. That was the outperformance we saw in Teamwork Collection. And we've got now over 1,000 customers in Teamwork Collection with over 1 million seats as part of that, and that continues to grow. And the other thing that we're seeing then is that it's allowing more domains to play in this space of creating more opportunity, more software, more innovation.

The other piece I'm really excited about then is the Teamwork Graph, right? And we showed this at our Team '26, where we put Claude Code and we demonstrated 2 versions, one with Teamwork Graph and one without. Gave it the same repo, gave it the same prompt. And ultimately, we're able to show that with Teamwork Graph, we're able to demonstrate 44% higher quality outcomes at 48% fewer tokens. So that's an opportunity for us to continue to deliver value to our customers, right?

Not all AI is created equal. We're demonstrating that through Teamwork Graph right now. And we have the ability, because we're also an open platform agnostic to models, to be able to optimize those models as well. There's a lot in that zeitgeist right now about token maxing and talking about making sure companies are responsibly managing those token costs. And I think Atlassian can play a big part of that.

You're a pretty global organization. And when you think about how that's playing a role, how do you think about the importance of what you've -- how you've architected and built it with Australia and the rest of the world? Maybe speak to the strength of why this is working?

Yes. I mean I think when we think about the opportunity, it really is a global opportunity. And we've seen really healthy growth across all of the geographies that we're playing in right now from an international perspective.

In terms of go-to-market opportunity, there's still a lot within the U.S. There's still a lot within APAC and EMEA. And then there's other international domains and regions that we have yet to really scratch the surface on right now. That's an area that I'm working with Brian on to make sure that we unlock over these next several years. And so that's one aspect from a go-to-market perspective.

And then from a global domain perspective in terms of the R&D investments that we've made, it really is at the platform level. Brent, you asked me this earlier about sort of costs and thinking about that. We've gone through an investment cycle on the R&D side over the last several years to build an enterprise-grade cloud to make sure that's enabled and ready to also build a unified AI platform.

We're starting to see a lot of leverage come out of that right now. The fact that we're able to deliver things like Rovo Dev, the MCP Gallery, Jira agents, all within months and quarters. That's the type of acceleration and innovation that we're benefiting from through those R&D investments that we've made over the last several years.

And so you're seeing that show up in the top line, but you're also seeing that, I think, in our cost structure as well. Our gross margins, non-GAAP, 88%. That's 3 points year-over-year. And a big part of that is because we're able to continue to optimize against those platforms that we've invested in over time.

We're coming off on the other end of that cycle right now. And so I think that answers a little bit of your -- maybe question a little bit earlier. But again, we're taking a very global view of how we want to build that platform as well to be able to drive that type of leverage.

The one common thing with the partners, and a lot of our investors, they look at you and they say, okay, I got Act 1 with Jira. I got Act 2 with JSM. And everyone says, okay, what's Act 3? Is it Rovo? Is it the whole organization taking this and all knowledge workers? Is it some killer new app? And I don't know the answer, but -- and maybe we don't need an answer because you have so many products today that are -- you don't suddenly need this third superpower, but -- is there -- how would you describe that?

Yes. I mean, I think if there's a third act, it really aligns with our priorities that we talked about, which is AI, enterprise and system of work and more and more driving durable, profitable growth.

So let me hit on maybe a couple of those. When we think about what AI can help drive for both Atlassian and ultimately, our customers, it's coming through Teamwork Graph, where we're going to meet customers where they are, right? Customers that are very tech-forward, and they've stood up sort of internal engineering teams to build their own agents, et cetera.

Atlassian is open by design, right, open by design, and that's how we really think about our platform. And that doesn't mean we're giving away value. What it means is it's actually compounding the value. When you think about what Teamwork Graph really does, it sort of packages all the different contexts that happens within enterprise workflows. Right? So right now, customers can invoke a Jira ticket certainly through API or MCP, but they're going to get a lot more coming directly to the Teamwork Graph, right, whether that's through their own agents, whether that's through agent to agent like we introduced through our Jira agents.

And some customers are going to want Rovo out of the box, right? They either don't want to spend the time or resources building for that. They can get Rovo out of the box and deploy the types of agents that will serve their organizations and their teams best, whether that's sitting in marketing, whether that's sitting in finance, legal or engineering developers as well. And so there's different sort of mediums, if you will, in terms of the types of agents and agentic workflows that we can provide for customers to meet them where they are.

Your best deployment of AI internally, how would you describe that? Is it inside R&D? Is it in service? Is it -- maybe it's across the board, but how do you describe your adoption of AI internally?

Yes. It's -- if there's maybe one thing that was a pleasant surprise for me is just how AI-native and how AI-forward Atlassians are, writ large. And that's not just the engineering team. It's not just the product team. It's actually across the board. Finance teams, marketing teams, they're going deep on Rovo, creating their own agents, really rethinking and rewiring the workflows underneath. That's been a really pleasant surprise. It's -- I've built more agents there in my time in these last 2 months than I have in the last year. And so I think that really speaks to the culture of it.

And from a development perspective, where is this all going? It's showing up in our product. It's showing up in feature releases and product releases like Rovo Dev, like MCP Gallery, like the Jira agents that we talked about and ultimately, at the platform layer as well. When we think about building AI for Teamwork Graph, Teamwork Graph serves all of our collections. It serves all of our applications. And so you're seeing that come through as well.

Mike, your founder, co-founder has been on a lot of podcasts. And I'll go on a walk and listen to it, and he keeps talking about 20% growth, 20-plus percent growth, like we're in this, and we -- I just don't see the AI destruction that Wall Street keeps talking about, yet your multiple keeps fading.

So this -- I guess, the question I get is this conviction level in this durable growth engine, it doesn't feel like you guys are giving up on that yet. Investors are questioning right now, maybe it's the excitement of memory and the AI party going on in infrastructure and everyone's left the software complex, which I think is partly true. But what -- I mean, if you keep putting up these type of growth rates with this type of margin at this multiple, I don't know how that continues. Something's got to give, and...

Yes. And look, I...

I know that's our question for the multiple, but...

That's right. Brent, you and the team are sort of the experts on that. What we're focused on right now is making sure that we're taking and delivering real value for our customers. And it really has to just continue to show up in the performance. And I think the Q3 print really reinforced that in terms of how AI is showing up in our products, how it's showing up in our monetization as well.

So we're going to continue to execute. And as I mentioned, whether it's the go-to-market enterprise opportunity and the motions that we have there, whether it's through Teamwork Graph and the acceleration in the products that we're continuing to deliver, we have a lot of opportunity still ahead of us right now. So that's an area that we're going to continue to focus on our execution.

Okay. And where the stock is now in terms of your cap allocation, I mean, how do you feel about this?

Say more, Brent?

Just in terms of capital allocation, in terms of buyback, M&A?

Yes. I mean, look, I think when we think about capital allocation, we first think about the opportunity that we have to serve our customers, right? Organic growth opportunities where we see the highest impact, highest ROI and opportunity. We think about tuck-in acquisitions and opportunities there as well. And I think we've made some of those over the past.

And then when we think about repurchases, we've been aggressive with repurchasing in Q3. Q4 is on track right now. And really thinking about those 3 pillars in terms of returning capital and making sure that we're driving durable value for our investor base, for our customers and for our employees.

And monetizing AI, the industry is still -- it's tiny today in terms of the monetization for the software industry. But when do you think this can be more measurable and more material? Is it a '27 event, '28?

I think different companies are on different arcs of that right now. I don't think it's one size fits all. I think what we're hearing writ large from our customers is, as it relates to AI, is they do want to unlock AI. We're seeing that in our performance in things like Teamwork Collection, where they get 10x more Rovo credits and the growth and opportunity that we see there.

But they're looking also for predictability, right? We're hearing a lot right now about token maxing and making sure folks are being really mindful about the tokens that they're spending right now. And so they're looking for predictability. And they're also looking for the ability to load balance those AI credits as well, right? So for any enterprise and organization right now, oftentimes, what we see and what they see is that they'll see hyper users of those credits, and then those that are deployed, but not necessarily using those credits. So it's helpful for them to be able to take a package of credits and tokens and being able to load balance that across their organization as well.

Right now, for Atlassian, the best vehicle to monetize AI and the best way for our customers to unlock AI is through Teamwork Collection because when they buy into that collection, they are getting 10x the Rovo credits. And we're seeing a lot of traction with that right now. We see that Teamwork Collection customers are using 2x more credits than those on a stand-alone basis. They're deploying 2x more agents, which then in turn consume more credits as well.

And for Rovo customers, we're seeing credit usage grow 20% month-over-month. So a lot of traction on the AI side there. It's being monetized, and we're seeing that today through ARPU in our Teamwork Collection. And I think over time, that may shift over more to consumption, along with seats.

And we also introduced our Flex program as well. This is a single wallet for customers, our largest really strategic customers to go all in on the Atlassian platform. That's access to the entire suite across our collections, across all of our applications and being able to unlock all of those credits across all of the different applications and load balance against those applications in terms of the value. And so through Flex, they're able to actually drive the type of value that is most meaningful for them across the entire platform.

Thanks, James, for coming. Really appreciate your time, and it's great, great having you.

Awesome. Thank you, Brent. Appreciate it.

Good afternoon, everyone, and welcome to Atlassian's Investor Forum that we're holding here at Team '26 in Anaheim. It's great to see so many familiar faces in the room, and thank you for coming out. And for those of us joining via webcast, thank you for tuning in. But because so many of you were coming out, making the effort to learn more about our platform, learn more about our solutions and hear from our customers, we wanted to use this chance to help you better understand our strategic vision, our opportunities that we're attacking and the momentum we're seeing across our business and our 3 strategic priorities.

And so today, we want to talk to you about how we're serving enterprise customers, delivering that unique AI value and what our System of Work unlocks. Today, Mike, Brian and James will share more about our longer-term vision and strategy. We're coming off a strong quarter, but today, we're talking to you about why we believe Atlassian is uniquely positioned in the AI era and why the market is still misunderstanding or underestimating our runway and growth opportunities.

And so you'll hear from Mike about Atlassian's evolution into a platform company, our System of Work that we've built that serves all teams and powers hundreds of millions of workflows each and every month. He'll walk through our Teamwork Graph and the powerful context that delivers, our AI strategy and the massive runway ahead across our 350,000 customer base.

Then Brian will speak to you about our enterprise go-to-market evolution and how he's taken our platform and the increasing value it delivers and how it translates into bigger, stickier, faster growing customers and relationships. And then you'll hear directly from two customers, Cisco and [ Canal+ ], on what that looks like in practice. And then finally, you'll get the chance to meet and hear from James, our new CFO, who will share his early perspectives. Please note that we won't be providing long-term financial targets today. And then we'll close with some Q&A.

Before we dive in, the standard legal housekeeping around forward-looking statements, which you can see on this beautiful slide behind me. Please take a moment to review.

All right. With that, I'll hand it over to Mike.

Thank you, Martin. Good morning, everyone. Good afternoon, sorry. It's morning, where I'm from. That's my excuse. Good afternoon. Thank you for being here. I hope you all had a good morning this morning. Did you all attend the keynote? Just so I know what I have to replicate. Okay. Well, this will be way more fun, don't worry. And thank you. It's good to see so many familiar faces. I should say that.

As Martin mentioned, we're coming off a very strong quarter. We -- total revenue, $1.8 billion, 32% year-on-year, cloud at [ $1.1 billion ], 29% year-on-year, RPO passed $4 billion at 37% year-on-year. I'm sure you all know those numbers as well as I do, but a really strong quarter, another chapter in our story. It is an example, I would say, at the highest level of our 3 strategic pillars, the Enterprise, the AI and the System of Work all coming together. And I hope over the 3 or 4 presentations today, you see how those continue to thread together and lead to that strength and growth as we have shown continually.

But as Martin said, it's not about that quarter. I want to -- we want to spend time talking a bit more about the longer-term story and what that means because -- underestimated, under -- misunderstood, all these things that you said, I think it is totally true. There is a big disconnect, I believe, in how we are seeing and what we are actually delivering. And so I thought we'd go through some of those doubts and give you a lot of facts and figures and other things to go through those.

So you've probably familiarly heard a bunch of the, hey, I is going to make devs redundant. We only serve devs, seat growth is going to die, seats are going to disappear, AI agents are going to make everything less critical. People can now make their own SaaS by themselves, make their own operating system. Don't probably make everything, AI-native start-ups are going to just kill everybody. We don't have the right monetization model. I'm sure you've heard some version of all of these things.

Let's go through some of them. Fundamental problem, I would say that's very much looking backwards, right? That might be looking at it last 10 years ago and assuming we're a static company. We've never been a static company. We've probably always been underestimated and misunderstood. Awesome. Bring it on.

The platform we built, transmissions we're delivering, I hope we're showing you every quarter that we are delivering the numbers that we say we're going to deliver durable growth that you can see in those numbers. I do think it misunderstands our runway going forward, and we'll try to give you some indication on that.

Let me tell you what Atlassian is about, grounded in real numbers. So I know a lot of you, despite being extremely small, struggle to model Atlassian. You see a bunch of apps, and you usually talk a lot about Jira and Confluence, Although I still don't know how many Confluence questions we've had in any earnings call. I think I said this a couple of years in a row, like it's still amazing to me. So we'll get to that in a second.

But the Jira and Confluence is not how Atlassian works. It's really not how we work, right? We are building a singular platform. As you now see, we have all 5 collections. And plenty of companies claim to have a platform. Most of them, I would argue, as a technical person, do not have a platform, not like we do, right? We have a single platform that delivers a single System of Work that continues to compound and multiply the more collections and apps that you have on top of it. It delivers a common way to do things to the flexibility for an organization.

And the value is in not the data, but the graph, the ontology. We will spend a little bit of time talking about that. And that's why I'd argue we're becoming an operating system for work for a lot of the world's largest companies. Customers are increasingly committing on a platform level. Brian will go through that. We have more and more platform level committed customers. I've talked a bunch even this week that are making even greater commitments to us, which feels excellent. It's a justification of all the things that we've invested in.

As they add collections, they deepen their investment in us. It also makes our AI smarter. I hope you see that. We'll have a lot of slides, and I'm sure there will be at least a couple of questions on AI as we get there.

Now one of the reasons that our growth is so durable is that it's incredibly diversified. So we told you in our shareholder letter last week, the Service Collection has passed $1 billion ARR and is continuing to grow at 30%. That's ARR, not even revenue. Now that's just Service Collection. Confluence by itself has passed $1.5 billion in ARR. Jira is past $2.5 billion in ARR. So we've built multiple billion dollar-plus businesses, all of which work on a single platform, which is really important for our customers, that serve every industry and every team, from finance to HR to IT to software teams to designers. And that is an incredible set.

And people will keep asking, well, how did you and Jira and Confluence keep chugging? They must be slowing down, right? And it's not the case. Today, Jira and Confluence are accelerating as we have said in the cloud. And it's because of the platform, right? We serve more and more workflows and business processes, which I think people greatly underappreciate. Right? With the Teamwork Collection, people aren't buying point products anymore. They're buying a collection of things that work together that are part of the platform. And that's a massive signal for us, as we've shared, of 1,000 customers that was quarter a bit ago, I should say. It was in previous quarter's results and more than 1 million seats in the first 6 months.

So those are some really, really strong numbers, but the point is diversified business and multiple large businesses, all of which are growing very strongly. And again, the collections make it easier to expand. The changes we've made from a set of products 3 years ago to the apps and collections that we have today working on a singular cloud platform make it easier for customers to consume our software. We have less things for them to buy with far more value. And part of the reason we're seeing that runway ahead of us for durable growth and the growth we're seeing today.

Now you can see all of this diversification playing out in our numbers. Right? Customers are not just buying in, they keep expanding. So let me give you an interesting chart, I think it would be interesting for you. Let's look at total cloud seats, excluding all migrations. No migrations involved. And despite the seat based, it's going to disappear. You can get your rulers if you want. I know you do. You can see visually, it's not slowing down. It's a pretty amazing curve. Again, this is excluding all migrations, cloud seats. They continue to grow every quarter, every year. Durable growth, as we talk about. Why? Because workflows continue to get more complex, more intertwined. Teams and companies are buying more into the Atlassian platform and getting exponential value as they increase their commitments. And that's really important, and we think that only keeps accelerating from here.

This team started orchestrating AI agents alongside their people. You heard me talk a little bit this [ mongo ] graph. I think we have more ahead of us that we can continue to do because of our investments in that platform. [ Ryan ]? Now you might be asking, okay, they're adding those seats, but seats for whom, right? This is where the old narrative, I think, breaks down. People pigeonhole Atlassian as a [ fellow ] company. I might argue there's going to be more developers in the AI era. I think that's going to be true, but fine. You think we're the developer company, or some people do.

We love that heritage, I will say. Developers are awesome. Technology and business teams working together is the core of what we do. We think developers are incredibly important to the future of every single large business on this planet. Technology is the core strategic advantage of almost every single big company that you will talk to. If not, they have some sort of regulatory barrier, et cetera.

But the growth we're seeing hasn't been driven by developers for a long time. The System of Work is for the entire company. It's for finance teams, it's for HR teams, it's for marketing teams. It's for operations teams and service teams. When we talk about assets and buildings and laptops and everything else, we're talking about far more than developers. We're powering hundreds of millions of workflows every month.

Now heard us talk before about how half our users are not in technology teams, and we've got a half technology, half non business. We shared that before. So how about this one instead? Break it down, and let's look at developers versus everybody else, knowledge workers. In Confluence, 7 out of 10 users for that $1.5 billion plus business that's growing very well in the cloud. 7 out of 10 of our users are knowledge workers, nondevelopers. In JIRA Service Management, it's over 3/4. Even on Jira, it's roughly 2/3 of the users are nondevelopers. That's HR and finance and legal and marketing and operations staff and design. We spent 2 decades connecting these business teams with their technology teams, and we have a lot more to do. Again, a different way of showing that we are a well-diversified durable growth business.

Now let's look at the customer segmentations. So when you're embedded across that many teams inside a company, customers are expanding, and how do we see that? Well, we talk about having 350,000 paying customers. We know that that's the bottom of this kind of pyramid illustration. How about at the top end? So our $1 million customer base, which I believe we said a quarter and a bit ago, had passed 600 customers spending more than $1 million a year. That has grown sixfold in the last 4 years. In the last year alone, it grew at 39% year-on-year, that category. These customers have more than a 99% retention year-on-year, and they are almost all expanding.

If we look at our $3 million cohort over the last 4 years, when we talk about the enterprise investments we had on the technology side, on Brian's side, that $3 million cohort has grown tenfold in the last 4 years, 54% year-on-year in the very last year alone. And we have quite a number now of those $10 million-plus ARR customers. These are ARR numbers as well, not revenue numbers.

Takeaway I want you to get is we're not a nice to have tool. We are part of how these organizations run. We are a strategic partner. That has been our goal, as we've said in every shareholders' letter for the last 4 years. That is our enterprise goal. We've been working on the enterprise for a decade now since data center launched a decade and a bit ago. And I think that's reflected in the movement of our customer base.

So the top end of the pyramid is going very well. The important part is we have an awful lot of customers in that bottom end of the pyramid who are moving up there. So the platform works, customers stay, they expand, they deepen their commitment to Atlassian. Natural question is, but do you have all the businesses? What is the runway? So we've updated all our SAM numbers. The way we've recalculated it now, updated the calculations is that our SAM is about $140 billion. We have a lot of runway is a simple thing to take away from this, see it broken down by different collections and other bits and pieces there.

So there's a lot ahead of us. And then the question naturally is, well, how do you go after that? How does that actually happen? So we've broken out these 4 growth levers, which are the ways that we grow typically, right, expanding inside the customers we already have. Those million-dollar customers become $3 million customers, have come $10 million customers that started as $10 customers. That is expanding inside customers we already have. When we move to new groups inside those companies, we don't count them as a new customer, they're the same customer that we've always had. Most of the customers you'll hear from today, and I'll show you some examples in a second, have been with us for 20-plus years. I routinely speak to customers who have been with us for more than 2 decades. None of them are spending less than they were 2 years ago, let alone less than they were 10 years ago, and their commitment to Atlassian keeps growing.

We obviously cross-sell across the portfolio. I'll show you some stats about that in a second. But we obviously have far more apps, I think you can see across the moon rise than we have ever had in collections. Upselling into new value tiers as we've added the premium and enterprise tiers in the cloud. And of course, winning brand-new customers is still something that's incredibly important to us.

When we look at that 350,000 customers across the globe, they're in literally every industry on the planet. I have spoken to customers in every single one of these industries in the last maybe quarter, at least a year, every single one of these industries. And for every single one of these industries, they're driven by technology. But their technology and business teams connect together is how they're trying to win in the future, and that's exactly where we sit with our platform.

And it's a massive number, but we have barely scratched the surface with the opportunity in most of these accounts. How do we know that? Again, we talk about the Fortune 500 that are already Atlassian customers, 85% of them. But again, representing only 10% of our business today, I think we only just passed 10% very recently. We have a huge amount of growth in that Fortune 500 cohort alone.

But the headroom inside all the other companies we serve is massive. We are in the European equivalent of the Fortune 500, the Australian equivalent of the Fortune 500, the Asian APAC equivalent of the Fortune 500. So across the global enterprise landscape, we have a huge amount of runway ahead of us. How do we know that in terms of those knowledge workers? Well, if you look at the 1 billion knowledge workers on the planet, about 900 million of them are outside of technology, about 70 million technical knowledge workers and about 30 million of them are in development. Call this order of magnitude, rough numbers, there's various surveys, they all end up about this sort of proportionality.

If you think about the fastest-growing segment of our customer base, which is that nondeveloper audience, we have an awful long way to go with our tens of millions of users today to that $1 billion. So a few different ways you can think about our potential. And again, when we land a new department, we don't add a new customer.

Just 2, 3 months ago, we landed a 200-person marketing organization that had never touched Jira, in 1 of the 10 largest companies on the planet. What's important is those 10 largest companies, they said they had never used Jira. In fact, one of the people said, "I didn't know this was Jira. I thought this was someone else." I won't say which competitor. And that was awesome. Right? That was amazing. And then when they use it, they're really happy. Why? Because they're connected to their technology team. They almost literally repeated our core mission back to me in a meeting, and it was a truly amazing moment.

So, massive opportunity ahead of us. We do have significant cross-sell opportunity just in the Jira base. So how do I keep illustrating this in different ways? Here's a different way to look at it. If you look at the Jira base, in the cloud, 150,000-ish customers, call this a sort of a round number. And again, as I said before, Jira is growing extremely fast in the cloud by itself. So this number keeps going up.

However, if you look at Service Collection as an equivalent, it's only 65,000-odd customers. There is a huge runway just if Service Collection did nothing other than sold to the Jira base,right? That's over -- should have done that before my coffee. What is that, 80,000-ish, 85,000 Jira customers where Service Collection is not today? That is a huge number when you look at enterprises around the world. And these are only significant customers, I would say. So the reason is 150,000 have included a lot of the smaller ones and stuff like that. So they're of size, let's say.

The best part, those aren't cold conversations. When Brian's team go in and say, "Look, your Teamwork Collection is going really well. Let's talk about the Service Collection," and you've got the same data, the same platform, the same Teamwork Graph. It's not a cold conversation. That is an amazing conversation. Part of the reason why the Service Collection continues to take share and do really well in a lot of those -- increasingly in the enterprise and strategic segments.

I talked about upgrading additions. This gives you some interesting statistics on where we were. So if you look back 5 years -- again, this is Q3 numbers, so not quite the end of FY '26 yet, but roughly a 5-year period, call it 4.5 to 5 years. You can see that our mix here has moved from the standard premium enterprise we had 5 years ago to where we are today. It's an example of our enterprise journey continuing.

Now I drew this chart for you, so it was illustrative on the left to the right. The right-hand bar, obviously, in quantum is far larger than the left-hand bar. We have far more customers than we had 5 years ago. But just as a proportionality, it shows that our customers are increasingly opting for Premium and Enterprise as we continue to solve scale, security, regulatory compliance and other issues that can opt into. At the same time, the standard continues to grow well because we get that broad base of millions of companies around the world.

How big is that broad-base? Well, there are at 6 million companies roughly that we would estimate are in our target market, right, that aren't Atlassian customers today. We have a few hundred thousand free instances in businesses of any significant size. So again, we're not talking about a one-person instance, someone credits a test, et cetera, excluding that. So it sort of shows you where some large amount of opportunity when you look through those different things.

So we talked to the System of Work, a growth, lots of opportunities. I thought it would be helpful if I broke it down into some actual customer examples. So this is real customer data anonymized. Neither these 2 customers are coming to talk to you today. They are 2 examples of thousands of customers that I could pull out literally that show a multiyear journey.

So I'm going to start with the global auto manufacturer, 100,000-plus employees, a very big company. Let's look at their journey over 15-plus years with Atlassian. It's a bit of an eye chart, so let me walk you through it for a second. If you see the line at the bottom, the first line is their time on server, for those of you who have been with us for a while. The second line is their time on data center. And the third bit of the line is their time on cloud. So they're on cloud for the last 5 years, they spent 3 or 4 years on data center, and what is that, 6, 7 years on servers. So they moved their deployment options over time as this example of a customer.

They've been with us for 15, 16 years at this point. And you can see at the very bottom, what applications they've bought. You're always asking, where does all the R&D go? Well, here is a good example of where they've built things that we didn't have and they bought things that we didn't over time. They're now sitting -- oh, and I should say at the top -- sorry, it's probably the most important part that I missed. This is obviously their ARR in millions of dollars at the top. So they were at $1 million to $2 million 5 years ago. They're now sitting, what is that, sort of 8 to 9, maybe 9 and change. Sorry, my eyes aren't that good anymore.

But you can see, as they've moved, where those jumps in revenue related to their movements. So you can see when they move to data center, it moved from what was actually an exponential chart for the first 5 years. It is actually exponential for the first 5 years. It's just -- on the left-hand side, they're probably spending $5,000, $10,000, like near -- you can't see the bars, move to data center, they're getting to the $50,000 to $100,000. They get to the $1 million in data center range. And then as they move to cloud, they continue to ramp up.

We talk a lot about why that is, but it's fundamentally they have many more things they can buy. They're expansion opportunities. Their expansion speed in the cloud is a lot faster, and they've moved to many more users. Back here, they're in the 5,000, 10,000 user range. At the end now, they have 70,000 users running on cloud enterprise. And the scale of what they're doing is absolutely wild, right? Millions and millions. In fact, more than 10 million automation rules running every quarter, hundreds of thousands of manual tasks disappearing, massive Rovo adoption across the organization, agents running AI, Rovo is their default for AI. They like it more than any of the other AI solutions, et cetera. So you can see when they've started to add strategy collection and Jira product discovery, albeit those are small and still have some growth. So one example of a customer, auto manufacturer.

So I got one more. No, I forgot something. Didn't elation Rovo, I already said that. And it's all about the platform. When you talk to this customer, the platform is what has enabled them to keep going. A typical pattern that we'll see with the cloud, '21, '22, '23, they're actually adopting cloud, moving to cloud, moving users over. Once that 2- or 3-year period is done, you start to see that acceleration afterwards as they then take on JPD, Service Collection and onward to the Strategy Collection, which is now running their enterprise dashboard for this large organization.

Here is a totally different customer. This is a major financial services firm. Different continent, different part of the world, different industry. Again, a second of many hundreds of customers, I can sure they look exactly the same. They again have been with us for about 15, 16 years. I actually cut this one off. I think they actually have been with us since 2004, for memory. So actually 22 years as a customer, but the first few years are literally dislinked from the scale.

Very similar journey to show you this one. Again, I believe they're at 30,000, 35,000 users, something in that realm, so about half the size of the prior customer end users. However, very close in spend, and you see them in the last couple of years, again, once they've moved to cloud, a year or 2 of adopting and moving themselves to cloud, moving their data across after a long journey with us and then starting adopted Product Collection 3 years ago, Rovo 2 years ago. They again have tens of thousands of AI now. They're running with Rovo. They really, really like it. They use it in automations. In everything, it's one of their default things. They built a bunch of agents to do critical work inside compliance, in HR and lots of other places that run natively on the Atlassian platform.

They're a big user of the Teamwork Graph CLI. They're in an alpha program for the Teamwork Graph CLI. So they're actually using the [ camel ] interface. They think it will unlock a whole lot more usage of the platform. They have an incredibly strong, responsible AI framework. They spent 6 months putting us through our -- their AI paces, and we're one of the first AI tools that they turned on, which we're really proud of. We love customers that have very strict guardrails and barriers, and then we pass those parts.

One of the biggest goals they have is what they call the connective spine of their organization. So Rovo is part of their connective spine, automating reporting, cross-team overhead, thousands of engineers like it's a really core part of what they do. And in the last 12 months, they've adopted DX and the Strategy Collection. So you can see that nice jump as they've come those types of things. It's not entirely due to that, but just like a general movement. It's an amazing example of customer. And it works because of the platform.

So two of many hundreds of customer examples, I hope they were illustrative to try to show you what it is that we deliver for our customers. And I think they show you the power of being an R&D-led company. We've always been an R&D-led company. We made a deliberate choice to build a true large-scale platform, a single platform, not taking any shortcuts. Even if that meant taking margins down temporarily as we invested in our platform, as I believe we've tried to explain every single time what it is that we do, right?

We have certainly ramped R&D over the last few years in a very deliberate effort to build that multiyear period of time to build that platform, right? What have we done in that period of time? Many shifts simultaneously, taking our largest customers and moving them to the cloud. Building that singular cloud platform, which we've seen the results of today as we saw this morning, delivering all the enterprise reliability, governance compliance scale of those world's largest companies to 50,000-person-plus companies right there, 30,000, 40,000, 80,000 seats, were 70,000 seats. And moving from those point products to those integrated collections, a huge amount of work to do, all of those.

What does that deliver for customers? Well, I thought I'd give you an example, one way of looking at what it is we deliver for customers today. So all of this is what we deliver for customers today. So when I say that, we look at our 3, we think about our 3 transformations, right? We think about it 3 pillars. We've got the Enterprise, the AI, the System of Work. Tried to organize the things we do into those sort of put it into the same lens that we explained in our shareholder letter.

All of this stuff on the left, isolated cloud, not easy, [ Jira ] customers really want it. Government cloud, we're in Google Cloud, FedRAMP moderate. So multi-cloud is Google for now alongside AWS. All of the things on the left guard security clients we talked about. In the middle, obviously, all the AI capabilities that we've talked about, from Rovo Search and Rovo Chat, which are -- the first customer there, it's like their best AI tool. We give them the best answers in Rovo Chat of any tool that they use. The CLI, all the things you saw this morning, MCP, et cetera, we talked a lot about AI questions. Obviously, all powered by the Teamwork Graph with pulling that out. That's very important.

And on the right, those collections, all the third-party apps, all the platform apps that we've built in terms of goals, et cetera, et cetera, et cetera. You see the icons, you get it. And our Forge development platform, I don't know where to put that. It's not technically in any of the 3, so I put it in a System of Work.

Now we can support our biggest customers in the cloud after all of that R&D. We've built the world's best context graph at a time and context graph are incredibly important, and it's running at absolutely massive scale. Like we're preparing for trillion object scale. We have to, right? $150 billion plus at the moment, it's nontrivial size and scale of anything. Even on a consumer internet company, that's a big scale. Deliver FedRAMP, all of the things that we've talked about there for banks, government health care around the world. That's what unlocks all the enterprise expansion that I'm sure you'll hear a lot about from Brian.

So I put this down for one reason because you're always asking, where does R&D go? So we look at that. Let's have a look at what this looked like 2 years ago. So 2024, it looked like this. So we had apps. We had no collections. Most of the AI stuff wasn't there. Very little of that enterprise stuff have been delivered. Everything on that prior slide, by the way, was GA, shipped out to customers being used today. 2026, 2024. That is a massive change in our delivery of product that those 2 customer examples hopefully are showing you how that is turning up. Hopefully, that was illustrious. We would explain where R&D goes.

And our platform investment, R&D investment is not just going into product capability, all of those things you show. It's delivering leverage that I hope you can see showing up in our financials. What does that leverage look like? Well, you probably already know these numbers. But for FY '26, whole year is not finished yet, et cetera, expected non-GAAP gross margins of 88%, right? 3 points year-over-year, by continued optimization and scale, and a lot of R&D investment that goes into creating that scale and optimization of our client infrastructure, which now is running at massive scale.

We are hosting more customers. We are hosting larger customers. We are running more workloads. We are powering far more usage through AI. We're doing an absolute boatload of AI traffic, and our margins are going up, not down when it comes to COGS in R&D. And that is an incredible effort, thanks to R&D leaders. I don't know if we have any in the room at the moment. I think we have at least one. And all of the R&D team that have done that over the last few years. That's 2 charts you would expect you in opposite directions. And that's the leverage I would argue you get when you build a real platform, right?

Now in the front run some of the questions that you're going to ask. I know a few of you very well at this point. How are you going to moderate that R&D expense? I get it, that all sounds wonderful. What does that mean? Well, quite simply, like we've done a lot of the heavy lifting. So we keep trying to get our language correct here. The unified platform, all of the enterprise capabilities, the unique data graph, that has to be built upfront. That is an upfront spend to get all that. We can't move a single one of those 2 customer examples without all the things that were built in the enterprise. That takes years, 5, 6, 7 years to build properly and to do it at scale and for them to test you and trust you to get on to that. We believe we have done most of that work in the enterprise capability and in the System of Work capability. A lot of the heavy lifting is there.

We will keep investing in all of those areas. But in terms of proportionality of revenue, it will moderate and trying to explain the reasons why it does. Means R&D doesn't need to grow at the same pace as revenue going forward. We're obviously going to keep investing in AI. AI will likely to continue to grow. Enterprise will moderate. We're balancing between those two, but moderate as an overall share of revenue. Right? And that's about the leverage we're getting from the R&D investments that we have made.

Every new capability we build in the cloud and as we migrate more customers to the cloud. It's on a singular foundation because of the investments we've made, 1 platform. Not lots of different platforms. We don't have lots of different apps we built in M&A. We replatform everything. It's a long-term R&D story that -- I'm going to be here in a long time. It makes a huge amount of technical sense for us, and it gives us that customer advantage as well. Means every incremental R&D dollar we do now benefits the entire cloud platform.

And a huge credit to R&D team. I can't explain to you how different this is to the vast majority of other SaaS companies out there, especially anyone with our breadth of product and customer portfolios. So we talked a lot about the platform R&D investment, so people can ask about AI. Look, every SaaS company has an AI story right now. And so we are trying to work out how we explain why ours is different, and we truly believe it is differentiated and different, right?

I can tell you, having talked to that customer a couple of days ago, they probably have 7, 8 apps that have a chatbot, chat sidebar, chat thing, chat app, chat something. Majority of them are just utter c***, right? They don't work very well. They don't give you what you need. Why are we winning in that organization? Because our chat is awesome because it's backed by the graph, it's backed by contextual. Massive amount of work in architectural intelligence, smarts and understanding of what it is. We built it properly. We built it really well. We adopt modern models, a whole lot of other things. It is a big investment. I believe it will pay off in time, and it's very unique. That's the way to say about that.

Context, you probably heard a lot about it this morning, so I'm not going to repeat any of that. I'm happy to answer any questions on that. I do think in a world of Agentic capability, agents flowing around, personal agents, team agents, et cetera, our context is going to become really important. I have a little video coming up, which I think will be hopefully interesting. But we do think that is something that is both durable and expanding to our TAM.

If I had to simplify from an investment point of view, it's really tricky to work out how to do this. We have tons of AI advantages. I try to get down to 3. Enterprise is really hard. One of the reasons is that platform we've built, Rovo, Teamwork Graph runs on top of that platform. So for those customers, we can operationalize that at quite some scale. When we have tens of thousands of AI users in some of these companies, that's a nontrivial thing to do, and most other vendors actually can't deliver that today. And so we've got that.

We continue to add more and more permissions and compliance and controls alongside our customers as they're learning about AI alongside us. We're really on the cutting edge of doing that, and it's very nontrivial and backed by the Teamwork Graph and the platform that we've built. Permissions and AI don't go super well together. It takes an incredible amount of really hard work.

Obviously, you've got the Teamwork Graph. We believe we have a big differentiator in our context and ability to context, not just across Atlassian, but across all the apps and work that we do. For those companies that have moved from the cloud to data center, the 2 examples I showed you, 15 to 20 years' worth of workflow data, code data, understanding of their knowledge, which we can give them back in a graph instantly that is accessible to all of their AI tools is a really unique differentiator that I don't think anybody else has in availability today.

And we're not stopping. We're going to keep moving that advantage. And hopefully, you saw a whole bunch of examples today of this whole like, right, Jira is going to disappear. I call bulls*** on that. But as a control plane as a part of the Agentic and human collaboration, we see more and more customers using it. We've given you a bunch of stats. I've got a few more coming for you in a second.

The Teamwork Graph, as we talked about this morning, what can I say differently. Most SaaS companies see only a slice of data. If you look at any of the people who live in a vertical, they don't see all of the information, which means they can't give you great answers. We see more. We have more links. We have more connectivity because of our breadth of workflows than most other SaaS companies, the vast majority of other SaaS companies. And I think we built a better engineering system underneath that and a better platform. So we believe that's different, and we have a singular platform. If you've got a lot of different platforms and your data is all scattered right now, and I wouldn't work there for the next couple of years, it's going to be miserable.

And as we try to show this morning that are compounds, the more usage we have from customers, the more AI mail grows, the more that compounds the data they have, and we create a wonderful data flywheel. We're seeing this already working. Models are continuing to improve. That's wonderful. We have great relationships with all of the foundation model vendors. It's not our job. Our job is to take these wonderful models that are built and deploy them as quickly as possible and to use cases that customers want. We're down to sub 24, 48 hours on full model transitions where we have it running in our gateway. We often get early access to all foundational model vendors now. We get it running in 24 to 48 hours of public usage, and we can start running 1% of traffic through it to see how it performs really, really quickly. And if it works well, we can move it. If it cost us more money, but the results are better, we make these trade-offs. It's incredibly advanced orchestration system that we have, but it's really important at the scale we're doing.

And we think it's a moat. We talk a lot about AI, sorry, I'll keep moving quicker here. We've made the Teamwork Graph a lot richer, as I hope you can see from this morning. Lots of new connectors, lots of new types of processes, a lot of new categories of content. Code was a massive lift. It is a huge differentiator to us, the code intelligence. Internally, it is getting used everywhere because the understanding of code is so critical to business process. It's not just technical processes, and it's not just about writing the code. We see it used in all sorts of different ways. We try to show that with the example in Service Collection today. We're an IT ops scenario to fix an issue, understanding the code makes a huge difference to how quickly you can fix an issue. Again, a true differentiator in that Service Collection space.

And how it does reasoning over all the connections, et cetera, the graph is just amazing, and now we're opening it up with MCP, with CLI and with Dia. So again, if you want the breadth of what we're trying to explain here, as someone pointed out this morning, we showed everything from a terminal to a browser. There are a few companies in the world that can actually show you that and actually deliver all the R&D in between and huge customer benefits at all points. So a lot of excitement there. I'll stop myself before I go on too long on AI and the core things that we're doing there.

Instead, I wanted to get 1 of our engineers to tell you about this. So there's about a 4-minute video and it's kind of nerdy, let you not hear from me for a second. Trying to understand what is the ROI of the Teamwork Graph for our customers. What is the opportunity for us if we can get this out there and show customers how it works? So watch this video. I hope you follow along and it doesn't go too deep. One second.

[Presentation]

Okay. So I think hopefully, [ Kunis ] has given you some idea. That might go into it, if you wanted to just zoom out, the exact same Agentic kinase in this case, [ Cloudone ], probably the most popular at the moment. $2.68 to run that task, a real world, quite complicated engineering task. Without Teamwork Graph, $1.32 with Teamwork Graph. Don't have to be a Brian-level genius salesperson to go to a customer and explain why we can help them.

Secondly, we actually finished in a minute in 10 seconds less, and we got a better result. The code needed less tweaking afterwards, it was more clear because it did a lot of searching of the context first, it understood business and technical data to get a better result. Exact same coding engine, exact same harness. The only difference is we added the TWG COI. And we obviously have a lot of our own code index, et cetera, et cetera, et cetera.

So hopefully, that is a different example of the graph in action. You can multiply that across all the business agents that are coming across all the other areas. This didn't use people data at all in this case, but we have great access to that, et cetera. So when we say cheaper, better and faster with the Teamwork Graph, it's a very simple message to customers, and it's a very true message backed up, and nobody else can do this right now.

So it's not theoretical. It's already showing up in the numbers. Let me show you what we are seeing with some AI stats. Some of you know, some that I think are new. So as we said in our shareholder letter, Rovo customers AI credit usage, their Rovo credit usage is growing at 20% month-over-month. That is a pretty good number. We're early in the curve. But we're already a very large player in terms of AI [ mal ] and usage, and the density of usage is growing very fast.

Secondly, when customers adopt Rovo, they grow their ARR at twice the rate, twice the growth rate. And our expansion rate, as you know, is quite good NRR. They're growing at twice the growth rate of customers that haven't turned on Rovo. And lastly, it is delivering value, right? They are stickier. They move more. Again, we've given all these stats. I don't know if the 75% of the Fortune 500 companies that have turned on Rovo is a new stat, but it's there. And you can see our Agentic automations are growing really, really strongly. One way of using agents again is through automation, so putting them into various rules that happen automatically and can access all of the Teamwork Graph.

So some AI stats. And when you look at the Teamwork Collection, which is our primary AI monetization vehicle right now, again, north of 1,000 customers, 1 million seats inside the first 6 months of upgrades of existing customers. Some new in there, but mainly upgrades Choosing to upgrade, why? You get roughly 10x the AI or Rovo credits when you upgrade. We have a lot of other economic advantages. And I would argue now advantages for the customer, you get the same number of Confluence, Jira and Loom seats, which increases your collaboration broadly, but again, far more AI credits.

TWC customers use twice as many, who use, consume twice as many Rovo credits per paid user as non-Teamwork Collection customers, and they have twice as many active agents. Now they have more credits. So they've got more credits, they've opted in. Awesome. Give people more credits. They use it more. As long as that keeps growing, it's a really good wicket to be on.

And I'd say this often enough, because sometimes I don't think you have differentiated. These aren't road maps. These are delivered in market features being used by customers today. We delivered the Teamwork Graph CLI today. The Teamwork Graph is used by all our customers and available to all our customers. They can log in teamworkgraph.com and see it today.

Almost nothing we showed this morning is not available today. It's like 1 or 2 features that are coming in the next maybe 2 months, 3 months, everything else delivered on the day, right? That is our amazing capability. So obviously, you are saying, okay, well, how do we capture the value in that model? We're going to get asked about our pricing and monetization. So I put this together, I hope it's useful.

We have multiple pricing models. We're trying to be customer led, we're trying to meet customers where they are. Most of our apps are priced per seat. I still think that's the way most customers want to purchase software. When I talk to customers, that is what they say they want. We have a very generous number of Rovo credits involved in those per-seat accounts. So we have the price per seat. I'm sure you're familiar with that part of our model. And these are sort of illustrative down the bottom. There's other things we could fit in.

Secondly, we do have usage-based pricing, consumption-based pricing. We have a growing set of consumption-based offerings, whether that is Rovo credits, whether that's customer service management resolutions, Bitbucket Pipelines. We have assets, which is increasingly growing with some customers. We have Forge and Forge Compute and Forge Sequel in our extension framework. So we have a lot of usage-based models that are growing, right, and established revenue streams there.

And we have our hybrid pricing, so that is things like the Teamwork Collection and quite a way to put that, where you can buy these apps individually. Most of them, you can buy the usage-based pricing individually. And then when you buy something like Teamwork Collection, you get a set of those usage meters together inside the collection pricing, right? So it's a different way of thinking about it.

And we have a flex-based model that we are working on with customers at the moment that -- we're actually talking to a whole bunch of customers this week, which is more of the overall sort of commitment-based model, as I would say, is the way to think about it. So as our bigger customers that get well north of $1 million, so here's what I want to commit to your platform. I want to be able to move it around seats, move it around applications and collections, and I want more usage-based certainty. That is another model that we have.

Again, we're here for the long term. This is us being customer-led, as they ask. We have the ability to move around this. And again, I would say the early signals are strong. Customers using MCP grow their ARR at twice the rate of those that do not. So the people use a run away from Atlassian, and I'm like, Oh, certainly not seeing that the data is, saying quite the opposite, I would say.

Customers using our MCP server. That's before the CLI. We obviously don't have any stats on that. Early signals. MCP is a pretty advanced organization. So we need a lot more data to have that growing, but at the moment, twice the rate in ARR. And as we said, our Rovo credit usage growing at 20% month-over-month, moves you between different pricing models if you're seeing value.

I think I've covered all that. I didn't know where to put this stuff. So AI isn't just adapting how we price, right? It's also creating new product categories. So here, we have a focus on talent and DX. Reason I put these up here, these are different applications to what we traditionally sell. They're really only enterprise applications, sold at large scale. If using DX to measure the productivity of an engineering organization, you probably have 500 or 1,000 engineers to start with, right? You're not buying this for 10 people. You don't need Talent for 10 people, you need to look around the room.

These -- as workforces adopt AI, where we're seeing those customers like the financial institution I showed earlier, they are using us in their how do I think about myself moving from AI novice to AI native. How do I look at my talent, my skill mix, who can help me see that. DX is all about understanding how AI native my engineering force is. And which teams which services, which parts of my organization are faster and slower, which are using more AI, which are quicker and not quick. That is a phenomenal business. I wanted to make sure I put DX down there. It's the head of our projections. We're feeling really good about that business. It's only a few months in.

But again, all in that area, it's not necessarily a different pricing model, but a different type of application for us. Again, as we have these customers who've come in and opted into us as a platform, it's those customers that you saw earlier that are likely to open it up. And these are all used by the C-suite. As we continue our enterprise journey, I spend a lot more time with CEOs than I ever have and CIOs. They're using these applications day to day. They don't probably sit in Jira so much, but they certainly sit in Talent. They certainly sit in DX. They certainly sit in Focus. They're very important to them, helps continue our journey on that.

And there's a prerequisite for all of this. This one is going to kill me, we should probably talk about cloud migrations. A little bit of a topic. I haven't gotten there yet. I'm taking too long. Customers are moving to the cloud. We're doing really well. I think you know that and you've seen it. It is the ultimate destination. It's the value of Atlassian, where customers get the most value, can't get AI, can't get the Teamwork Graph, can't get anything. This, I think I should say, is illustrative, by the way.

So we've been very thoughtful and systematic, I hope you can see, about our multiyear, decade-long cloud transition, both in terms of the building of the future ahead and moving customers I think we've executed extremely well across the hundreds of thousands of server customers. Now we're getting the data center customers at some scale. But the migration still has a ways to go in terms of the number of seats we have in the data center. That's a good sign.

What does this look like? What is an illustrative example of customer pricing? It's always hard to pick an example. 93% of our data center customers that are upgrading to the cloud are landing in Premium or Enterprise. And I know this because in some of the models and some of the things we've seen, you can think, "Oh, well, a data center customer could go backwards moving to cloud standard." That doesn't happen for 93% of those data center customers. Can mathematically happen, but I thought it was useful to say this, this is a -- what did we put, 5,000 -- sorry, 5,000 user data center tiers, so that's 4,200. Again, in the cloud, you buy what you need, you don't buy sort of bigger tiers infrequently. So we've talked about that in the past.

The interesting part that probably isn't news. The interesting part is what happens after they migrate. So now we have many years of history of moving large-scale customers. So let's look at multiyears, let's take a 3-year period. Let's take 1,000-plus user customers. So only the large customers have moved, 1,000-plus users that have upgraded to the cloud, what happens in their 3 years after they moved to the cloud? Well, they grew about 1.75x, 1.5x to 2x growth in the 3 years after they migrate. Why? All those things I talked about before, seat expansion, cross-sell. They can get Focus. They can get Talent. They can get DX, they can get the Product Collection. They can get the Service Collection with all the capabilities.

So you saw that in some of those customer examples earlier. It's saying that we're being successful at moving those customers. And when we move them, we have a good couple of years after they move. They continue to expand their footprint after they move because of all the reasons we talked about. And their ARR growth continues strongly after they migrate.

We're not collecting all of the value at the point of upgrade. In fact, we're trying to trade that off over that 3-year period. And you've probably seen this chart before, but the cloud is not a flywheel, right? Sorry, it is a flywheel. What am I talking about? It's not a single project to upgrade. It is a flywheel that moves into the cloud, and they continue to grow. That's what we're trying to show over time. It allows us to continue to ship our AI faster, monetize all those new use cases, capture those workflows, right? Compounding our momentum with consistent 120%-plus NRR growth at scale in the cloud. That is what we're seeing. We had this rainbow chart when we went public. I love that we just keep adding years to the rainbow chart, and it keeps it going.

So we have a huge opportunity. We're crushing it with customers, voting ever more for us as a platform. We feel incredibly strongly. Brian will come up. You will hear from him. Our cloud growth is extremely healthy. Our AI progress continues to be extremely strong, and we're -- hopefully you can feel for me and everybody on stage, we're so bullish about what we're doing in that area. NRR, 120% strong.

You might be asking it can be difficult to see this in your financial statements, on the face of your financial statements, with ASC 606 through this migration. So what can we talk about that? Well, I want to cut through a little bit of noise before I hand over to Brian. And again, is anyone familiar with this logo? Extra points for investors, if you can tell me what it means. Open company, no bulls***. Love it. Yes. This logo means open company, no bulls***. It's 1 of our 5 company values, and we want to be direct, right?

So 2024, 2 years ago, we issued expectations on a 3-year, 20% plus revenue CAGR through FY '27. Since then, we've had a few major changes. In September of 2025, last year, yes, that's right, calendar year, we announced [ Ascend ]. So the end of life of data center by March 2029. First thing I want to stress, that is a great thing for our customers. It's a great thing for our R&D organization and our business.

The challenge was made for us, we're a year ahead of schedule. We delivered Ascend in September 2025, not September of 2026 due to all the enterprise progress we had made and the R&D we invested in. That was ahead of our schedule. That's great for customers. That's great for our business, enabled us to accelerate our customers' journey to the cloud.

However, as a result, as you saw last quarter, that creates 3 interesting dynamics that affect the data center revenue line. First, with ASC 606, we moved from 20% upfront revenue to 50% upfront revenue. And you model that with the 1-year acceleration, creates a challenge for us on the license line and data center subscriptions. Secondly, we moved our customers, which was not predicted 3 years ago, from multiyear deals to 1-year deals.

A couple of reasons why we did that. Firstly, when you have a 3-year end of life, you can't tell someone a 3-year deal a year later. It doesn't make any sense. Secondly, we want to have multiple opportunities to talk to that customer. So we've moved the vast majority of our data center customers to 1-year licenses. Model both of those together, you see what the effect is. Those 1-year licenses give us 3 opportunities to talk to that customer over time. They often say, "I get it, but not right now. I've got busy things." Business AI, I think have you not heard about it. We have a conversation. Yes, we're good at that, et cetera.

And lastly, data center customer purchasing patterns have continued to emerge and accelerate as we move to cloud. Again, all these are good things. We saw that play out in a pretty big way last quarter, as I know a number you heard about, with a lot of pull-forward activity into FY '26 from FY '27, which results in greater licensing revenue in a DC in '26, far more than we had expected, which is a good thing, in general, timing dynamic creates a problem.

So we continue to see strong cloud growth rate. Great for our customers, great for our business and data center retention, but the greater term revenue in '26 in data center, we now expect negative data center revenue growth in '27. We've pulled all that forward, which is a great thing for us. So I tried to explain this, both overcoming no bulls***, and I'll give you some illustrative charts. I thought I'd say all that to we're listening and I said we're running before, I showed you the charts.

So this is an illustrative revenue growth. Number one, we're expecting a trough in total revenue growth in FY '27. Number two, we expect that to significantly reaccelerate in FY '28 as we lap that data center effect going through. You can see why that 1-year acceleration is a credit to the engineering team, creates a challenge for the finance team. And given these dynamics, the 3-year, 20% CAGR that we set [indiscernible] years ago is no longer a relevant target to anchor on.

What is relevant and a much better measure of the strength of our business is [ ARR ]. Again, this is illustrative. I get at your rules. So why is that? Well, ARR normalizes the effect of ASC 606, that revenue recognition, and helps everyone, I think, much better understand the overall health of our business. So if you take ARR subscription business, so data center and cloud, put it together, to a lot of great mathematics that our finest team is able to do, you see a very different pattern.

Here is our subscription ARR for the last 7 quarters. What you can see in the last 3 quarters is a pretty good pattern of acceleration of ARR at the overall level of the business. One of many indicators, but I think a really strong one, showing how strongly, we feel about how our business is operating and trying to explain the dynamics between all of these different things. I'm sure we'll have time for questions on that.

Last one I wanted to talk about, 1 more thing before Brian comes on. What do we mean by the phrase durable, profitable growth. Well, I hope we've shown that we have a durable growth story both in our results and in the go-forward opportunities we have in AI, System of Work in the Enterprise and all the things we're doing in cloud, the customer stories, the customer scale, all the things we've done.

The profitable word is also really important to us. We've been a capital-efficient business for 24.5 years. And I think we will make sure that we are continuing to be so. We also expect, as a result of all the changes that we've made that was not taken into account 2 years ago to accelerate and grow our GAAP operating profit, beginning in FY '27. I'm sure we'll have more on that in the future, but I wanted to put that profitable and the durable and the growth, all 3 words incredibly important to us.

So we've made a lot of the great investments. Enterprise, AI, System of Work, hopefully, they add together to see why we have that durable, profitable growth over time. But you probably want to hear a lot more about our large customers.

Let me bring up Brian, our fabulous CRO, who has lapped 1 year and a little bit in the seat. So he has a lot more to tell you than he did a year and a bit ago. Here's Brian.

Thank you, Mike, and good afternoon, everybody. Great to be here with you. So I -- as Mike said, I've been here a little over a year. And I guess I'm still relatively new at this, I'm running with us. .

And I'm regularly asked, why did I join Atlassian? And the answer for me is pretty simple. And that is when you look at Atlassian, we are a very unique company. We obviously are known for the incredible PLG motion that we have. And we have scaled the business to be billions of dollars, as Mike has laid out. And we also have 350,000 customers.

Now we did all of this without having a mature enterprise sales team. And many other enterprise organizations would say that they have somewhat similar ways of acquiring customers, but in reality, they don't. And for me, when -- the reason for me to join is because we have the opportunity to take that massive frictionless flywheel that we have where customers really love the product. And when I joined, Mike notes that I regularly said I'm surprised by how much our customers really love Atlassian and love the product. And they are expanding with this organically. And now the opportunity is to layer on top of that, a world-class enterprise sales motion.

But importantly is that at the same time, we're not moving away from our PLG heritage, and that motion is still running at the same time. Instead, what we're doing here is we're going to be spinning a new gear, and I'm hopefully going to show you exactly how we are aiming at doing that. So for me, really, this starts with the foundations, and you can't build a great enterprise sales foundation if you don't have enterprise-grade products to ultimately back it up.

And if you look at the landscape today and you see the slide behind me, Atlassian is recognized as a leader across all of our major product segments. And we are putting the necessary sales muscle behind these products in order to capitalize on the opportunity ahead of us. And the good news is, as you saw on the slide in terms of the ARR growth, we are already seeing the positive momentum. And over the last few years, we have been evolving the business itself. And that shift is still underway, and the transformation is an evolution.

But in the 16 months that I've been here, I've been very pleasantly surprised with the progress that we have made and the wins that we have under our belt. So I want to go in a little bit deeper in terms of some of the numbers that prove that the motion is working. So in Q3, our volume of deals over $3 million surged by 79% year-over-year, which we are very proud of. It's not on this slide because we just decided to add it last minute. But over the past year, we saw a 54% increase in deals over $5 million. And that obviously is something that is significant and has a strong contribution to our ARR and RPO.

Now not only are we closing more of these larger deals, but the ASP at the same time has also jumped, and that's jumped by 22%. The best part of all of this is that we're not feeding the larger deals at the price of the smaller transactions. Because what is happening is that our smaller deals are also growing at a clip of 32% as well. And all of this is happening with our retention rates, like Mike said, at 99%. So when you step back and you look at the business, you can say we're firing on all cylinders, from the top of the enterprise into the middle of the pyramid and then at the bottom of the pyramid as well. There's no piece that we are sacrificing.

And at the same time, it's not just about the size of the deals that we have. It's also about the durability of those relationships. And something that obviously is hugely important to us is the time frame of our commitments. And our customers are now committing to us for longer time frames. As we shared in Q3, our RPO grew to $4 billion, and that is an increase of 37% year-over-year.

Now I know you regularly ask, as these customers migrate to the cloud, what happens thereafter? The good news is that they're not sitting still with us, and neither is my team of salespeople. They're driving customers to expand in the cloud and expand across the Atlassian portfolio. Our team is focused on uncovering new opportunities for our customers and driving product adoption. Also cross-selling into new collections and at the same time, closing complex, high product deals as well.

Now our customers, it's fair to say, have more options than ever before. And they are clearly voting with their wallets and they are expanding seats across our core products and adopting our additional offerings. In terms of when we look at our collections, that certainly is being led by Teamwork Collection. And as Mike said, that is our primary motion for AI monetization. And then being led by Service Collection, which you saw the numbers there in terms of the size of that business, and we're continuing to make progress there.

And if you look at the slide behind me, you can see the outcome of the strategy. And these are just some of the logos that have placed their trust in Atlassian over the years. And many of these have been customers for 20-plus years, and their footprint has grown with Atlassian.

But one thing that I would stress is that these brands grew their footprint, firstly, by themselves without having an enterprise sales team in place, which speaks highly to the products, first of all, and then also speaks highly to the ecosystem that we have. So I thought it would be interesting, similar to what Mike did earlier, but with a little twist, to show you 1 of the brands and the evolution of that particular brand.

So the brand that you can see behind me is a semiconductor company, and they have been a customer of ours since 2015. They were a low-touch customer, so there was no accounting associated with this customer. A story we've seen many times over, they were a Jira and Confluence on-premise customer and they were experiencing hyper growth. This particular customer had internal systems that does not fit for purpose. And then their management made the decision that they needed to transform and that they needed to modernize.

In 2023, you can see that we made the decision that we would assign an account team to this particular customer. And we consciously made the decision that we would build relationships across the entire business. At the same time, as an enterprise sales team, we would also build relationships with the C-suite within this particular customer as well. And we were not pitching a lift and shift to this particular customer. We were pitching a complete transformation and reimagination of their business, and we were doing that in conjunction with our partners as well, all obviously to fuel their hyper growth that they were experiencing.

Now once an enterprise account team was in place with this particular customer, you can see what happens, the investment here. It multiplied because obviously, they bought Strategy Collection, they bought Teamwork Collection, they bought Guard Premium and they've invested in advisory services as well.

Now this customer is just 1 customer journey, and I could have shared many others with you. But what's particularly promising to me is that we are hiring and I'm building out the organization, but there are many stories like this to come where we will have a similar journey and a similar investment projections, which are obviously going to change. So we will see many similar stories like this as we move forward.

Now even with these wins across our enterprise base, it's fair to say that we've only scratched the surface. We have a $140 billion total addressable market, and we have an incredible runway in front of us with our 350,000 customers. And we also have a massive opportunity to go out and attract net new logos as well.

So I walked you through the opportunity, but internally, we are obviously looking at how are we going to go after and capture this opportunity. And we have a transformation, and there's a lot of work happening behind that transformation. But today, I wanted to walk you through just 2 particular pillars, which is customer-centric selling and our partner ecosystem and give you a little bit more detail around what we are doing in terms of those pillars.

So when it comes to customer-centric selling, we are evolving the go-to-market motion within the organization to become a trusted strategic partner to our customers. And obviously, coming from a PLG motion, this is a complete transformation of the sales team and the [ VAT ] team and the presales team around us. We are now engaging like I said, in the example, beforehand with the C-suite to deeply understand their business challenges so that we can help them address those business challenges and we are now delivering business outcomes for our customers.

In many respects, we are slowing down in some of our deal cycles so that we can actually grow the transactions, and then we can speed up and then we have a better result at the end. This is translating into stronger customer wins as we said, in terms of the logos. Secondly, in terms of the value of the deals and then in terms of the length of the commitments from our customers as well.

Now secondly, we've also realigned our sales incentives to reinforce our strategic priorities. We are now enabling our AEs to focus on the outcomes that matter most strategically to Atlassian. We are incentivizing them in a big way to uncover new value within our customers. Obviously, focusing on our collections and expanding our footprint within these accounts as well. We now have a specialized sales force for those collections, which are focusing on new demand within each one of those customers. And as you can see from the numbers that we've put on the board, uncovering new value and new demand is also playing out in our favor currently.

Now we are appointing the team directly at our biggest growth levers. And I touched on this already, which is customers are expanding across our collections. And our team is looking at ways to grow accounts, which is great. We are in a very fortunate position that we have a lot of white space around the world as well in terms of countries where we are not present, and we have an ecosystem that is present. We are also operating in high-growth markets as well where we are making investments where our customers are present. That is in countries like the U.K., France and India and a few more. It's very clear from where we sit that the demand is there. We are expanding our growth horizon. We're prioritizing new markets and cross-sell opportunities through our collections in order to unlock that incremental revenue and opportunity at our customers.

Now to capture this opportunity and to sell to these enterprises, we're obviously making investments and to ensure that we have the right amount of resources, quota carriers. Now what you can see on the slide here is that 4 years ago, believe it or not, Atlassian had 117 quota carriers. So the sales force was 117 people. And now since I have arrived, we have grown that to 400. So I constantly remind Mike and James of our productivity, which you can do the math, is best-in-class in the industry by far. And we are clearly punching above our weight. So obviously, as we moderate the spend in R&D and we look to make the investments in sales we obviously have an opportunity to continue to make significant improvements here as well.

But we aren't just adding head count blindly, I would say. We are tightening our coverage ratios when we look at where our customers are. We are increasing our quota carrying capacity relative to the overall sales headcount that we have. And we ultimately are building a very mature sales organization. And what's exciting is we have the opportunity to learn from the mistakes of many organizations who have gone before us, which is an exciting spot to be in, and that gives us the opportunity to scale it very efficiently also.

Now even with the 400 sales reps that we have, we know that in order for us to capture the opportunity, that we won't be able to do it by ourselves. And that brings us to the second area that I said and mentioned, which is our ecosystem. And for the first time at Atlassian, we are now partnering with the GSIs. And I think that's particularly important because obviously, if the GSIs are involved, this speaks highly to the opportunity that they see. So we are now partnering with Accenture, Deloitte and PwC in a big way. They are giving us access to the C-suite at a scale that is unprecedented for Atlassian, which is great.

Earlier this week, we had Mercedes on stage. Mercedes is a customer where we partnered heavily with Deloitte and would not be in the position that we are with this customer if it wasn't for the partnership there. At the same time, our partners are building dedicated solution to drive collections and AI adoption. Earlier this year, I was with Infosys in India. And they have just launched a center of excellence in order to support their booming Atlassian practice as well. And now when we look at Accenture, where we have a very deep relationship, they are also driving significant pipeline for us personally. And I would add that we're tracking all of our GSIs in terms of the incremental new pipeline that they are bringing to the table for Atlassian. And we're continuing to see an evolution of our relationship with those GSIs.

Now at Team '26 this year, we have over 1,000 partner attendees. And I spent time with them on Monday, and I explained to them how we are committed to helping them evolve their business also. You all know that in the earlier days of Atlassian, we would reward those partners really on a transactional basis. And we are obviously now changing that. And we are now shifting our incentive structure really to be towards high-value strategic services. We want to help them grow their services from a one-to-one to ideally a 1 to 3 or 1 to 5 ratio, and we are making the necessary investments to help them grow that business as well.

And we are seeing a return already because we are seeing by incentivizing them in terms of the right behaviors, that, that is leading to a higher adoption for us and better customer outcomes as well. This is obviously a big evolution for the ecosystem overall. Now this is obviously a -- I've walked you through the combination of our product-led foundation that we have and our enterprise sales muscle that we are building and evolving and the ecosystem, which is critically important to us. And I could share with you a lot of numbers and a lot of slides around how we're very successful and how we're knocking everything out of the park.

But instead of doing that, it's best if I could welcome onto the stage, two customers who can actually share with you what it is we are doing. So if you could please join me in welcoming Jason Andrews from Cisco and Stephane Baumier from Canal+ to the stage.

All right. Well, thanks for joining us, first of all. I appreciate it. So maybe we will get started with you guys quickly telling us about the company and then what you're responsible for. And Jason, we'll get started with you.

Yes. So I'm with Cisco Systems. I run the engineering operations function across our product development, specifically for the networking business. That results in a like kind of helping guide the -- how engineers work for around 25,000 users. I also have a couple of other functions and program management process ownership, which is a real asset. And then on the back end, having our global app services, which is like a large data center environment.

So thank you. So my name is Stephane Baumier. I'm the CTO of Canal+ Group. So perhaps you don't know Canal+, but in U.S., it's not so famous. Canal+, it's a media and pay-TV company, a French company, which is based in Paris and headquarters in Paris, but we broadcast pay TV in Europe and in Africa. It's a EUR 7 million of turnover to give you an idea of the size of the company, we have more than 40 million subscribers. And so I would give more information in the link.

Okay. Great. So Jason, Cisco, obviously, the company, everybody in the room knows has evolved over the years and has 1 of the most complex and operational footprints in the world. And when you look across the organization, our relationship with Cisco has evolved. We initially had been, let's say, viewed as a tool that you were using. And I know from the conversations that we've had, we're now viewed as being a mission-critical to Cisco. So maybe you can share with everybody, how that has evolved over the time?

Yes, it's definitely evolved fast. I think it's evolving the way we work, right? A lot of ways, if you view it as a tool, you'll only have a tool when you look at it as a platform to deliver product. As we start to leverage things like the Teamwork Graph, again, bringing all this work we're doing across 25,000 to 30,000 engineers making collaboration easier. And a large company, if you work in a large enterprise, collaboration is the hardest thing you're going to do. Building a product in a single team, super easy. But as you start to say, I'm going to blend security into the fabric of our networking. I've got to get the security group. We're going to get the networking group on the same page. It's extremely hard because they have different models of working.

And as we started to align those groups, we've seen great results in terms of how fast we're able to deliver product to our customers. And we've actually seen -- what's also about this is we've seen huge gains in productivity as we leveraged a Teamwork concept or a System of Work concept. We saw as much as a -- for about between 18,000 and 20,000 engineers, an estimated 5% uplift in productivity just by adopting the System of Work. On our own side, we actually saw like a 40% reduction in our TCO of actually managing the platform as a whole. So it's been a great journey.

Awesome. And Stephane, anything you want to add? In terms of the journey that...

Yes. We have the same idea. In fact, as Canal+ is 42 million subscriber, we would like to target to 100 million with organic growth, but also with acquisitions. So acquisition means M&A. And at this moment, convergence and synergies are key. And Atlassian is really a part of the suit to be able to manage this convergence and to adopt all the same process and the standardization that we can have in the different countries in Europe, it can be in Poland, in France, but also in South Africa.

Great. And so Stephane, you had shared with me how you moved to a unified System of Work as well and change your global decision-making and collaboration system. So what happens within Canal+ if, let's say, that was to go away?

That's a good question, especially in technology. I work in a 30 years now in technology, and I have a different job in the world. And not in Europe, in Africa and in Asia. I was the CEO and CTO. So I have to manage both side. And I was appointed as a CTO to create a global technology department with 6,000 people. So standardization is a key to have exactly the same.

So to answer to your question, if it's going away, we will continue to stream. We'll continue to broadcast some live sport to use the satellite and OTT towards. But the key is to take some decision for the projects. Because we can have some project in Poland, in South Africa, in Senegal, in France or even in Myanmar, where we broadcast. And from this, if we don't have any more the different system to do it, we will not be able, and we'll have to do what, to have new Excel file, spreadsheet, hours of meeting, discussion is finance. And to take this decision will be so complicated, which is not the case today.

Awesome. So we know the criticality of Atlassian within both companies. And we know that AI is top of mind for everybody, including both of your companies. So maybe Stephane, to you, can you share with everyone how -- and I know you're a Rovo customer as well. So you can share with everyone how Rovo is helping accelerate the decision-making within Canal+ and how you're utilizing Rovo?

Yes. AI is a key. It's a revolution for everybody. The result of promise since few years that we'll have 50%, 60%, 70% of productivity. But when you have to manage a worldwide company in technology, you need to have a P&L also and to have some results.

So each choice that we have to do with AI, I have to answer a different subject, cybersecurity, finance and usage. For cyber and for finance, we use Rovo because we know all and we validate all. After for the usage, it's not just a key for the tech department. It's a key to deploy in the different departments. For example, if you have to manage projects, the CFO of the group, it's EUR 7 million of turnover for Canal+, for example.

When you have some questions, what he did in the past. He asked me to say, okay, what is the cost of the program? Where is the program? What is the CapEx? What is the OpEx? And all some meetings as I said before. And now with Rovo is able to ask directly for any project, any programs and to do this kind of validation. That's a very crazy situation for us and very useful. And the dynamic can be that the CFO of France, of course, but of Poland or South Africa can have the same question for his own project.

And just 1 thing so it's clear for everyone, like Atlassian's footprint within Canal+ and then how Rovo is being utilized, it's not solely within IT as well?

Yes, exactly. IT, in fact, at the beginning, we use like a lot of company confluence because we have all the documentation. And after we start to use the different suite of Atlassian and last year, with Team '25 when we discovered Rovo, we said, okay, this is a key now to be sure that we can deploy all the suite for all the departments, which are not technical.

Great. And Jason, anything you want to share in terms of Rovo?

I think we're seeing a lot of value and really focusing a lot on the time to revenue aspect. A lot of times, a lot of people are focused on engineering productivity because it is obviously a huge win in kind of early focal point of AI. But really, what we're trying to look is leveraging Rovo to actually run a different business process for us, right? How do you actually standardize and automate the reporting? How do you make these things faster? How do you stop spending time pulling status together from different pages, meetings, everything to actually focus on solving the risk and issues?

We're seeing the team really lean in heavily to it. Our Rovo usage is going through the roof. It's great, right? I'm getting great feedback from the team and how it's making their job easier, how it's easier to collaborate across the organization, even ones that aren't on our system will work. Because, again, we're still getting everything together the outside teams. But so as those teams like to bring features and data that are attracting a slightly different way from this instance to this instance. It used to be that was a very manual spreadsheet-driven process. Now leveraging Rovo, we automatically pull that data in. It creates dashboards, it does all the things you need to do so people can focus on managing risk in issues and not bringing status reporting as their primary job.

And maybe in terms of the transformation from a change management, and maybe both of you, if you want to show the change management a difficult process? Or...

I think it's impossible. I think at the speed of AI is going, people I keep on saying that the change management. And I think we're spending a lot of time kind of democratize AI and make it very easy for us to leveraging the Atlassian platform, prebuilt agents and things that people can get value about, but they're having to understand system architecture, codes on all these kind of crazy things.

But I laugh when it talks about a change management. What I thought we were going to be doing with AI 60 days ago is different than today and definitely different than a year ago. So it's a tough ask, I think.

That's tough. And change management is human, in fact, human relation to be sure that people can adopt what you would like to do. What we need to be able to change the way that we manage this is to go to create a clear strategy that we can adapt for each country. And for this moment, as a human adapt the strategy, we will be able to do exactly where we go and where we would like to go. And at this moment, they will be ready to change. But it's not so easy, for sure.

And then maybe, Stephane, do you want to share with everyone your vision in terms of the future of exact reporting?

Yes. So [ means ], is that in fact, you use for example Loom, you just record a video because you have an idea. So you can imagine, you are in [ Jonesboro ] in [ Deca ]. You have an idea, you record your video. You have an automatic translation of this video to create the project in the system. And everybody, all the countries are aware of this new project and can start and to expand it. This is really our future, what we would like to target, especially when you are in different countries. Different culture to have 1 common product where it's easy to speak your language because we have many languages. It will be easy to speak, to translate. And everybody have this information. And at this moment, we can create also process to create it with the Atlassian suite. This is really key for us for the virtues where we go and battalion is going and the discussion that we have during the different conference is really the past in fact, of Atlassian. So it's interesting for us.

And how do you see our relationship evolving in the future?

With this, very good. As I said before, we define a global strategy for the group to be able to manage M&A. And when we define the strategy, we have defined a list of trusted partner, where we have a good relationship. So it means that we are confident with partner, not only in terms of legal, in terms of finance, but also in terms of product. It means what is important for us is to have some partners like Atlassian or [ Datadog ], for example, we have many -- we have 10 partners what we select.

When we can exchange about the product and to give some advice, if we can say advice or what we would like to do, what is our remand for the moment, each time, we have this kind of discussion, we saw that it's coming after a few months or 2 years. We are calls, okay, we have these features. You asked it for 1 year ago, and we have it.

So the relationship is really important, not only in the contract and the finance, but the relationship is the trust that we have and to create some -- to create the future of this because the evolution is very big. AI is a revolution for everybody, including for you. So we have to be confident in cyber, finance, legal and to be partner intact more than to be just a customer and a reseller.

Great. So then maybe, Jason, to you as Cisco's business continues to evolve and change and grow, how do you see Cisco's relationship with Atlassian evolving and then the reliance that Cisco has with Atlassian as the business is going to continue to change and evolve?

I think it continues to be this massive partnership, right? There's a lot of 360 relationship, we go back and forth. Obviously, Atlassian really steps in and lean in when we have problems. So I think the relationship couldn't be better from an enterprise service standpoint.

I think when you look at the future and how it scales with us, it really is I think doing a great job. It's literally leveraged, I think Mike Cannon-Brookes today and the things said something that really was impactful to me is he said, acceleration is context times intelligence, right? I think that is really where we're heading. As we start to develop AI native applications, things that are written 100% in this vibe coting method.

The System of Work in the frame is kind of required to do that, right? You're going to need those the product requirement do built of the feature link the dependencies track in the program management space. We're leveraging Rovo to go out and look across our entire stack to help us identify dependencies we were not aware of, right? These -- all of these programs and these motions are going at a constant pace. We deliver around 15,000 features a year in networking alone. That's -- these are top-level epic. We have about 6 engineering epic. So you're really talking about a platform around 80,000 to 100,000 features, it's impossible for a human to track and connect how they work. But something like Rovo, it's really made our job in driving visibility into the work we're doing is super impactful.

Awesome. Great. Well, maybe to close the side, maybe -- and Stephane, we'll go to you. Maybe you want to kind of wrap it up in a short answer in terms of like the ultimate business value that we drive to share with everybody the ultimate business value that we drive for Canal+?

In fact, I think we have 3 business value. One is let's say, more but compliance. We are a listed company in London Stock Exchange and very soon, in Johannesburg. So we need to have some partners that we trust to be sure that the process will run for a daily basis and 24 hours per day, 7 days per week, so which is really a key success for us in terms of business.

The second one is really operational. What I said before, Atlassian suite is more for technology department, but more and more for all the departments of the company. So this is the business value that we'll bring when we start to set up the application on the smartphone of the CFO to say, now you just have to check for the project and to have the cost of the CapEx and what we spend on what is the status of the project.

And the last one is more for the development. As I said, we would like to continue our development with M&A. We have some shares in [ Viaplay ], for example, in Nordic Europe with a view in Southeast Asia company who -- around 30%. And each time we do some M&A, each time, we bring in our suitcase or partner to say, guys, now we know exactly how to manage a convergence in the synergy, which is a key for all the M&A.

And Atlassian suite is a part of it. So if you do the addition of the business value for this operational, this compliance and the organization is really key for us, and it will be the value at the end of the day for us.

Awesome. Great. Jason?

I think the ultimate business value, if you break it down, is it becomes a platform to deliver product, right? Our time to revenue improvements that we kind of mentioned earlier. I think the real power is it gives you the context in the system. And it also helps you orchestrate it, which, again, builds a platform a collaboration for a team to centralize that work on and it really helps them stay in touch. It's incredibly hard in organization. I can't reiterate that point enough. And they've really done a good job of kind of helping us lean into that and get this sorted.

Great. Well, I want to thank you both, firstly, for the partnership and the trust. I appreciate you coming here and sharing your story with everybody. I have a great job because I got to spend time with awesome customers like this every day. So if you could join me in giving these 2 gentlemen a round of applause.

All right. And with that, I'm very happy to hand over the clicker to the new guy, James. So if you can give James a warm welcome.

Good evening, everybody. I consider myself really lucky to be able to kick off my Atlassian journey right here at Team. This is my first one. And it's been really inspiring to spend time with our customers, our partners and so many practitioners and users that are super passionate about the Atlassian platform.

Before we get to Q&A, I know a couple of you asked me last week during our call back, what drew me to Atlassian. So I thought I would just share a couple of thoughts. First, I would say that I've long admired Atlassian. This amazing culture of innovation and this very powerful mission of unleashing the potential of every team. Right? It's such a powerful enduring mission in many ways, sort of an infinite TAM. I've got my GC back there waving and say, "You can't say infinite TAM."

And we know there's a lot of noise right now in our market. But if you punch through that noise, what I see is an incredibly well-positioned company, right, one that has a diversified and durable set of businesses, building a platform that's serving over 350,000 customers and hundreds of millions of workflows.

I've been in the role now for a little over a month, and that conviction has only grown. There's a couple of reasons for that. And the first is that we are incredibly well diversified, not just across tech teams, but non-tech teams, business teams, it's allowing us to play in these massive expansive TAMs with line of sight to $140 billion of opportunity. And you saw some of that momentum play out in Q3 with the outperformance that we saw in TWC while also expanding our Jira seats on our stand-alone offerings. You saw Service Collection grow to over $1 billion in ARR, growing 30% year-over-year. And that value, that ROI that we're delivering to our customers right now is positioning us really well across all of these segments.

The second is how well Atlassian is positioned within that enterprise workflow stack, right, serving not just developers, but HR teams, finance teams, legal teams to help them collaborate and manage an ever-increasing amount of workflows. That's only more amplified with AI now. And it's early, but we're still seeing a lot of amazing traction. Mike talked about it a little bit earlier, AI credit usage growing 20% month-over-month. Customers that have unleashed Rovo, they're deploying 2x more agents. They're using 2x more credits, and Rovo customers are growing their ARR at 2x the rate versus those who haven't yet, the keyword being yet.

So that's off to a great start. You heard from Brian just now, the progress that we're making across our enterprise motion and with our partners and a ton of headroom still with us being penetrated into 85% of the Fortune 500, but that only represents 10% of our revenue. So a lot of headroom still ahead of us here.

And maybe finally, you heard Mike talk about it a little bit earlier. We talked about this in our shareholder letter last week as well, which is alongside AI, Enterprise and System of Work, we're elevating key strategic priority of driving durable profitable growth. Right? You heard me talk about it a little bit earlier. This culture of innovation, that's a big part of what drew me to Atlassian. It's what drove all this enterprise value over the last 2 decades.

And so we're going to continue to reinvest in areas that's going to drive the pace of innovation and scale that's required to win in this era. But we're also going to do that while driving the culture a strong fiscal discipline while we accelerate our path to GAAP profitability.

So just a ton of opportunity here. Really excited to be here, the privilege to partner with Mike and the entire Atlassian team to really steer this next stage of growth for us. It's a wonderful time to be in our market right now, and it's an incredible time to be at Atlassian. So thank you, all.

All right. With that, why don't we go into Q&A? I'll ask Mike and Brian to join us.

All right. We'll open up for Q&A. I see Gregg in the front row, so we'll start with Gregg Moskowitz.

All right. Thanks very much. Gregg Moskowitz with Mizuho. Mike, the fact that Atlassian customers will be able to use MCP and other external tools to query the Teamwork Graph, add to it as well. Super interesting. What does this mean though, not only for your relevance over the long term, but also your ability to continue to grow at a healthy rate? Why is this going to be a winning move for Atlassian?

Why is it going to be good news for Atlassian. Let me give you 3 reasons. It's probably many. First, again, we're seeing the current -- we've had our MCP Server market for 6 months or so, something like that. Quite a lot of adoption already, growing very, very fast. The customer is using it, and we're quite a medium to high level of adoption. It's hard to know. There aren't a lot of MCP stats around there, but we believe we're certainly in the top handful of used MCP servers at scale anywhere in the world.

Customers using it. As I mentioned, we're growing significantly faster than customers that aren't using it. So if they're AI-native organizations or the most forward thinking, the early signals we have is that, that really helps accelerate because they can do a lot more on the platform. Those customers are in the cloud. They're using Rovo. They're using the MCP server. That generally will result in more workflow. So the data we have so far, it's very early, it's very good.

Secondly, it allows them to do many more workflows, right? They can use other apps. So the example we showed on stage, Figma, a lot of customers, Figma and Atlassian overlap, a good partner of ours. We use a lot of Figma things, they use a lot of Atlassian things. And the customers that use both of those is a live subset. It enables both platforms to play with each other in terms of data exchange and usage. It makes Figma make better to be able to access the Teamwork Graph. It also will result in write-backs to the Teamwork Graph. So it grows our graph, which then makes the next operation. Maybe you then move to Claude Code to code after designing or something like this. That's going to help us from a network effect point of view, if you think about sort of the data network effect of the Teamwork Graph, right? People that are reading and writing from it, the more access there is, the overall the graph size grows.

It also keeps it fresher and newer because it's the active workflows that are really important, right? The latent graph is not. It's how it's used over time and continues to evolve and grow. And lastly, there is a good angle for us in terms of being more actively used by customers. If we are more actively used by customers in a generalized sense, I always believe that is better for us. We don't have a lot of data on this yet, but if you look at the very, very small amount of data that seems to be true in like now and all sorts of other signals as well.

So I think there's a lot of reasons why I would generify MCP to like app and Agentic usage of our AI stack, if you like. There's a huge amount of AI that goes into making the Teamwork Graph. And so we obviously have a Rovo credit story. Again, too early to see how that one pans out, but we feel very confident about it. But overall, both the CLI, the MCP and other usages, I think, are very, very positive for our overall story.

I guess we'll go with Peter Weed in the front.

Got to keep the mic up here close. Peter Weed from Bernstein. Maybe I continue the conversation around AI, obviously, both the hot topic for your users and adding a lot of value, but investors have really been kind of wondering how can we see the upside beyond kind of like the strengthening of the platform like directly in revenue.

And I think there's kind of two sides of this question. One is you're showing kind of the amazing use cases of plugging the MCP in, delivering a tremendous amount of value. But it's not as clear to me how you might get directly paid or monetize that. And I think the other piece that's been really kind of an investment, maybe you talked about it, which is on the credits that you provide, you're not really enforcing people having to pay for those. And I think that's like, hey, we want to get people like to a certain level. We want the flywheel to get working before we want to crank that down. As you think about those two things, you're clearly adding value. What's the line of sight for you to participate in some of that financially, I guess?

Look, we obviously struggled to answer these questions by continuing to answer it. So I'll try another attempt at doing it. Teamwork Collection strength is due to AI. Like it's a huge driver of that, right? It's a very obvious customer path to upgrade to Teamwork Collection to get far more AI Rovo credits. It's not the only reason to upgrade to the Teamwork Collection, but we're trying to make sure for customers that they see it as a simplified package.

So there is some amount of that cloud growth that we are seeing and increased revenue from Teamwork Collection in the AI story. How much, it's hard to pass because there's a number of reasons where we've moved to Teamwork Collection, but it's always in the top handful of reasons. Why? Also, as we've talked about many times, the upgrades of the cloud, increasingly, AI is this is 1 of the top -- 2 reasons that customers will move, right? And so that -- the economics of customers moving to cloud for us is extremely good over that multiyear period. So both of those are actually leading to a positive economic outcome that's a result of our AI investments.

We obviously have an AI Rovo credit story in the longer term. That requires that usage, that requires that flywheel to be moving. We're seeing it moving, which is great. We want to be very careful to grow, very patient, looking at that long-term story and making sure that it comes through. There is a story there for sure, but we're trying to make sure that, that is the case. And again, we'd rather have customers consuming and using and seeing the value of the platform. We will learn about the platform and really early in that journey as an industry, I think, everywhere.

Lastly, I would say, there's a sort of interesting competitive dynamic, right? The things that we're investing in building and the amount we're investing in R&D in AI, the platform we've built is very, very hard for us to replicate. There will not be 20, 30 SaaS vendors that can do this. They just won't. It's too hot. It's too expensive. It's too difficult.

We're determined to be one of those handful of SaaS vendors that can do that. And I believe that's the long term of very good position for us to be in, to be able to do that. The stuff we're doing in the Teamwork Graph, this is nontrivial massive consumer scale stuff that very other few other vendors can do. Again, the video I showed of [ Kun ] is one of many examples where the Teamwork Graph can accelerate the customers. We have to continue to tell that story, get that out there and grow it and scale it, but we feel really good about where we sit at the moment.

And Mike touched on this a little bit earlier. But just maybe to put a finer point on it, TWC is the best AI monetization vehicle right now. And a big part of that is because of the credits that we're giving 10x credits relative to the stand-alone SKUs.

But I think what we hear from customers is twofold. One is they want the access to, they also have within their enterprises, and I'm sure you guys see this within your organizations as well. There's lumpy usage. You got some hyper users, others that are provisioned but not using it. So they're able to load balance those credits across their organization as they're getting better and better at driving value from that. So it's giving them that access, it's giving them that predictability from an invoicing perspective. Then Mike shared a little bit earlier, all the different commercial models that we will adapt to as our customers are evolving as well. So I think we're seeing that.

One of the things I don't want to get lost here is when we showed the video a little bit earlier there. I'm not sure if we ended up showing the stat, but in the keynote, we showed a stat that talked about how we were getting 44% of better quality in terms of output and 48% cheaper rate, right? You're using 48% fewer tokens to get to that same or better outcome. That's a conversation with your CIO. That's a conversation with your CFO that's going to resonate. And so I think both things are true. We're seeing that show up today in our monetization, and we're still building the platform in the flywheel to continue to compound on that.

And maybe one thing to add from a go-to-market perspective, obviously, our approach is quite different from others in the market in the sense that we've given our customers access to Rovo when both of them have said, get more access via TWC in terms of credits. That approach removes friction that might exist if we were positioning this in terms of how much it costs. So it's a way easier way to position it to our customers, first of all.

And secondly, this is, as Mike had said, a more patient approach that we're taking. However, this is an approach that is -- historically, this is something that Atlassian has done before. However, the one difference compared to previously is we now are making considerable investments into our customer success organization in terms of helping those customers adopt even more so. And not only into our own customer success organization, but also into the partners as well to help them stand up similar adoption organizations. And a combination of all of those is where we are now seeing an increase in terms of our monthly active users.

Let's go to Jason on the front.

Thanks. It's actually a good segue to my question. So the side-by-side of the Claude example, and James, your comment about utilizing tokens more efficiently or cheaper. I think a lot of companies right now are still pretty early in maybe their token utilization. You see this means online of people making fun of how many tokens they're trying to deploy. Right? So if the value prop for players like Atlassian is to utilize tokens more efficiently, but the user is not quite asking that question yet, what needs to happen to get there? Or how long might it take for the tech community to rationalize their token usage mark?

I'm not sure most CFOs really like the token maxing meme, to be honest. I think they are starting to see and pay bills that this magical revenue pile is not coming from nowhere. So I do think that story resonates. I can give you multiple customer quotes already today that have been sent around some of the internal rooms and groups I'm on where customers are loving it. They're talking about it. They're already saying, "I'm installing Teamwork Graph," we read to get someone at work that did it like in this morning. And these are large-scale big customers. So I think that is a relevant story the cost side and token usage.

I would not dismiss the other two, right? We've done a ton of work making sure that it's both higher quality and faster. So the example we showed finished a minute and change earlier. Again, that's one thing. But imagine that when you're running suddenly more and more parallel agents, you're doing more and more things and your workloads get more and more complex. The more complex this gets, the more saving you get.

For these smaller trivial examples, the math's way, less good actually. But that's a good thing for us. If we believe the trend is towards more complexity, more complexity of agent use and agent work, we're heading into a better and better world as that happens. I believe that's absolutely the world that we're going to head into. But even if we just sit down with a customer and explain, we can make every AI agent you use, have a better quality answer due to the work we've done in your Teamwork Graph, the search that runs across that, again, those answers coming out of a search engine, kind of a search and graph combination like answer. It goes to reason that the better answers we can give the better information we give to any AI application, whether that's Figma or Claude Code, it doesn't matter, anything in between.

The more you put into the Teamwork Graph, the better quality answer you will get. Even if you take out the cost story all together, that's a really compelling story to customers, especially if they already have a huge amount of data in the Teamwork Graph. They're going to connect that, that's going to write back. That's going to grow. So the quality in itself, let alone the speed, people still want the stuff to finish faster.

So it's a really, really compelling pitch to customers. I expect that it lands very, very well. And if they're not having a token cost problem today, 3 months from now, 6 months from now, 12 months from now, they will probably have that in some point.

Yes. And ultimately, Jason, we're not in the business of selling tokens. We're in the business of selling value, right? And that customer journey that we walked you all through a little bit earlier in those slides where customers start with a couple of SKUs, they realize the value, they go to collections and then they go to multiple collections ultimately buy into the platform. And that reads and writes right back to that Teamwork Graph. So that is that compounding value ultimately. And if you're a customer and you're getting 40% better outcomes at 40% cheaper prices, you've got a competitive edge. And I think that's partly what we're seeing right now in terms of the consolidation and the conversations that we're seeing with some of our customers.

And maybe, Jason, just to round it out, I would only add that -- like it's top of mind for from the customers that I speak with every day in terms of the usage, not only the usage, but the return on investment. And when we look at DX, which obviously is operating in this space, 75% of the transactions that they are doing are associated with AI and the return on investment in terms of AI or agents, specifically. So it clearly is top of mind for our customers.

Why don't we go to one online that I thought was good from Thomas Blakey. Maybe good for Brian. Customer examples given were excellent in terms of continued growth focused on cloud and the power of one platform, noting the consistent growth in millions of dollars, sometimes $5 million or more in a year or so time is meaningful. Could management talk to penetration rate of these accounts at these spending levels and maybe cite where this spending is coming from, i.e., is it consolidating from other vendors or other IT spending pools? Brian, I know you and I talked about this the other day.

Yes. So obviously, we have considerable customer still that we need to move from DC to cloud, and we are continuing to make progress there. We have also established a considerable specialized sales organization. Now that specialized sales organization allows us to focus more in terms of selling into specific buyers into our customers. We historically have landed in IT, so tech. And from tech, we will expand into new buyers. So when we now look to sell to new buyers within the organization, we have to position ourselves differently to those particular personas.

Therefore, we are selling into -- if it's marketing, if it's into HR, et cetera, we have persona-based selling that we have in place. So we are seeing and making progress there. Where from a collection perspective, obviously, Service Collection is where we are making considerable progress. We have -- as you saw in our Q3 results, we have made considerable progress in Service Collection. And then also, we have had seen a pickup in terms of our win rate against [ ServiceNow ], specifically and also some replacements as well in terms of our competitors, which is what we like to see. And we're hopefully expecting that that's going to continue in that vein.

Why don't we do Rob Oliver, right here.

Great. Thanks. Rob Oliver with Baird. Mike, I was struck. In the 2 charts you put up, the financial services company and the audio manufacturer, Jira Product Discovery was kind of right at the crux of the hockey stick there. And obviously, that's a very important part of the Teamwork Collection, but would love to hear how you guys think about that as a driver when I think about some of the most durable companies and software, they are those that are around system of record, system of truth, design. So thinking about that JPD opportunity for you guys as a component of the Teamwork Collection, how important is that as a land factor?

Look, there's no doubt, the newly grown Product Collection. So we have the Feedback app that got launched today. We have Jira Product Discovery and that Product Collection. It is a few things. Firstly, it's an excellent cross-sell opportunity to a Teamwork Collection customer or a classical Jira or Confluence customer because it is a very different way of looking at the data that you have and a very logical part of the workflow.

So there's no doubt it is a good cross-sell opportunity. I would say that's more of a classical Atlassian business, right? It's still quite small, it's growing quite fast. We are making sure that the product is just freaking awesome before we start scaling it. I think we've only just added a premium edition 3, 6 months ago?

Yes.

Not long. We don't yet have an enterprise addition of Jira Product Discovery. So again, I want to make sure that it has that momentum, the seat growth, people are loving it first. And then we can start working out what we need in the premium enterprise that makes sense as the value grows. So classical cross-sell opportunity for us, a great team doing really well.

Feedback is a really interesting addition, I think, because it moves us into some other spaces we have not classically been in beforehand. At the same time, it leverages our strengths in AI because I do think the volume of Feedback is going to go up, the product manager's job to take all of that feedback and distill it down and turn it into ideas that become the pipeline for engineering. If you want to think about it that way, you've got to first start with a set of insights and sort of scraps of text and other things from customers. You distill that into a set of ideas. Those ideas become road map items, and road map items get built by engineering.

Engineering is -- as [indiscernible] ceasing to be the bottleneck in that process. So that creates other economic opportunities when you go outside of that. Now a product manager's job isn't going to be as classical. It's going to have a lot of AI and automation and other things associated with it, which is exactly what we're trying to do in the Feedback after show some of this at a large scale in a category where we don't have much footprint. So I think it's all upside for us, which is going really well.

I think it is also a completion point because more and more marketers, other roles in the business are going to start looking at that feedback and working it out. And it somewhat completes a cycle. You saw a customer service management as one of the ingestion points for Feedback. Think about customer services, I think you do at the very end of a chain. You've built the thing, you've marketed it, you've sold it to someone, someone's used it, and then they have some challenger feedback that comes from customer service. Inevitably, it's a problem that they also add some feedback into and it kind of runs around the cycle.

So it's us continuing to show that we have a system that can take those customer requests with a really deep AI and Teamwork Graph core. So that's a really interesting point for us, as well as a new point of data connectivity to some of those other systems we've shown, whether it's Pendo or passive sales force, other sources of Zendesk, whoever of access, all partners of ours to say, look, if you've got the connector to vendor ex installed, now look what the Feedback app can give you, look what the Product Collection can give you on top of the existing connector that you already have installed in your Teamwork Graph, right?

So you don't need more data. You don't need more connectors. You have that already. It creates a higher multiplicative AI sort of ROI opportunity for that customer, and again, makes our graph more central to that customer. So super bullish on that area of the business, but I hope in multiple years' time, we're talking about the Product Collection heading in the same direction as the Service Collection is.

How about DJ, right here.

DJ Hynes from Canaccord. Two quick questions. I'll ask them concurrently. I think they're straightforward. Mike, you talked about, we're now at the point where you can start to moderate R&D spend. And it sounds like Brian's team will be a beneficiary of that. What does that look like in practical terms and kind of over what time frame are you talking about?

And then the second question, some really interesting data and context connections to the Teamwork Graph today, right, code, assets, which is apparently your favorite skills. Are there any other major areas of data that still need to be connected to the graph that will kind of improve AI outcomes?

Two very different questions there. Look, the moderation of R&D spending is going to continue to happen over time. We've seen some of it already, and that will continue to happen over time. I think it's probably the best answer that we can give.

I think what we're trying to explain is the why behind it, right? I really like to -- people to understand things from first principles. We need to build this enterprise platform. We need to build the AI infrastructure. We think those are all strategic long-term pieces for us. There are only so many enterprise controls and compliance. There is a limited number of those eventually that you get to. And we've built them into our platform.

Again, our FedRAMP, our isolated cloud, commercial cloud, all run on the same code base, which is quite unusual. We don't want any engineer to be slowed down, and we continue to keep rolling those things out. Same as our multi-cloud offering, our data residency. There is an upfront cost to pay for all of those things. It needs to be maintained, it continue to build and evolve and all those things, but that is a different price over time than the price we've paid to get here, I guess, in terms of the smart teams. It also frees up engineering resources to be able to put towards some of those other things like the Teamwork Graph. So you'll see that coming through over time.

Secondly, on the graph, I don't know if there's any major categories that we're looking at. Code has been a long-term investment. It's technically very challenging, both to index large volumes of code. Again, as we said, we're north of 1.5 billion lines, 11 million files. It's a nontrivial sized code index when you're looking at it semantically. And breaking it all down into the component parts, all different languages, everything else, that is a huge piece, but also because code underlies a lot of the other things that we want to do.

Secondly, the people aspect was a big investment. The assets in the graph we've had for a long time, that's really taken the asset graph we already have, continue to scale it and connecting it into the Teamwork Graph, right? It's really connecting 2 graphs in the same graph language running across both of them and all sorts like that at the moment. That's been a sort of longer-term thing. People has been a new investment, right, as we continue to grow really strongly in the HR function broadly.

So we have the Talent app now. HRSM continues to be a big aspect. People, chief people officers increasingly responsible for culture. So things like the Loom and other things become a big part of how they're communicating. Hubs and Confluence are big for HR usages. Again, we partner with all the major HRIS vendors, and we have a very symbiotic relationship with them, which is really helpful.

So I think that's a big category, right? If we look at what we need to answer questions fulsomely and well better than anybody else in the world can answer said questions, it's about the people, the code and the physical objects connected to the sort of knowledge or the classical knowledge objects that I guess you have. So we feel pretty comfortable where we sit actually at the moment in terms of the major categories of things.

Adam Tindle, right here.

Adam Tindle from Raymond James. Really appreciate the presentation today. James, just wanted to ask for you, Mike mentioned a helpful comment expecting data center to decline next year. I wonder if you might put any parameters on the magnitude of that decline and the potential knock-on impact to be mindful of on margin and cash flow given the upfront rev rec?

And the flip side of that question would be -- as we've talked to partners here today, customers are not looking to churn. There's no real viable alternative to Atlassian's products here. So if data center is going to be in decline, I wonder what that might mean cloud growth into next year?

Yes, I really think about this as sort of timing, right? To get a step back, Mike shared a little bit earlier, cloud remains really healthy for us. We're seeing retention rates as high as we ever had, in fact, actually outperforming expectations in Q3. So I think you hit on all the points there.

As it relates to cloud -- or sorry, data center growth being negative next year. Again, this is more in that spirit of clarity. I think a lot of folks were sort of asking for that. We're obviously not giving out FY '27 guidance quite yet. We'll be more clear about that in August earnings, but obviously, you need to still see Q4 play out as well.

But again, like the dynamics that Mike described a little bit earlier, I think was worth reinforcing, right, what we're seeing in terms of strength in cloud, strength in retention on the data center side. And then some of that customer behavior, right, as end of life is nearing, they're making decisions about what that more complex migration is going to look like, being able to pull up some of those commitments. Again, these are good things. These are customers that are committing to Atlassian whether it's through data center or through cloud. So we'll see that play out over time. We'll have a little bit more guidance, I think, in the August time frame for that.

Koji?

Koji Ikeda from Bank of America. Mike, during your presentation, I thought you had a pretty cool slide on your AI advantage with enterprises hard, Teamwork Graph and Jira as the orchestration letter as the 3 advantages. And so if we fast forward 3 years from now, what do you think will be, out of those 3, the most important advantage for Atlassian? And I asked the question because I think that inherently implies that might be the hardest to defend.

I mean, I suspect all 3 of those are important advantages. I think it's always important to remember the world is an incredibly dynamic place. So right now, our advantage is in AI. We want to make sure to magnify those advantages with customers in terms of getting that adoption. The flip side, maybe if the question asked earlier around, we'd much rather get that AI adoption right now while we have an enterprise advantage, going to harder for other people to invest in building it. And we know it's very hard and very difficult at the moment, right?

So it's a dynamic world. You might argue some of those advantages relative over time, and we will find new ones. It's about us continuing to evolve. I don't know that I could say that any of them are more or less important. We love our Jira franchise. It's an amazing franchise. It continues to grow really strongly and we ask a lot to make sure that it is the case.

At the same time, in the Agentic world, what has been done, who is doing what, to which piece of any workflow is -- needs to be tracked, managed and understood. I think if you want to think about it generically, I believe you'll have way more actors doing that, right? The idea that a 100-person company might have thousands of agents running around, that creates a lot more management overhead and understanding overhead, which I think is really good for orchestration platforms like a Jira that already have workflow and automation and all sorts of other capabilities to handle or manner of business workflows and processes.

So I talked on a podcast and someone sort of -- I think 1 of the hosts explained to me backwards or I figure which way it went, but you're sort of talking about system of record and system of record. And that always sounds to me like a very static database-driven type of thing when you're a system of record. We were sort of -- maybe not even accused or pointed to being, I forget how it happened, to a system of process. And I'm like, that's a great description of what it is that we actually do, right? These dynamic business processes, you've heard from both Cisco, Canal+. You heard from customers today, we talked about Mercedes-Benz yesterday on stage. We showed another handful 2, 3 customer examples between Brian and I that aren't those other 3 customers. They're all running processes through Atlassian, right?

And those processes that they have, 10 years of data center and server history that move to the cloud, they only grow the number of processes they run through us. Agents are going to yield many more processes and much more of that difficulty. So I think Jira is going to continue to have a really strong place, especially if we can give all those tools to allow people to manage and understand that, which we keep trying to do.

There's no doubt that Teamwork Graph has amazing potential, right? As customers use it as it grows, we're seeing it grow very rapidly, create some fascinating and interesting engineering challenges for our team to grow it at the scale that it's growing. But again, things that are hard to do and hard to scale and hard to deliver on are great because it's very hard for other people to do that, and we have a distinctive customer and data advantage already.

Keith Bachman?

Good afternoon. Thanks for doing this. I'll ask two concurrent questions in the interest of time. Mike, just to pick up on that thread. When I walk the show floor, it just seems like Teamwork Graph is one of the key competitive advantages that Atlassian could have over multiple years. And so the inverse of that, though, what is the risk you see from a competitive dynamics? In other words, if somebody -- when your Atlassian customers is not deploying Teamwork Graph, what else might they be using? Or might they just be using a stand-alone cloud or something along those lines? Which you've shown and demonstrated it's not as efficient, but just curious on the competitive dynamics that you see on Teamwork Graph. In other words, what somebody might choose to use instead?

And then just to ask a second question, Brian, you indicated you had 600 -- or excuse me, 400 sales reps or quota-carrying reps. I'm not sure how you refer to them. It's still very subscale, right, on almost every respect. And your -- 10% of your revenues are Fortune 500. So -- and you're moving to collections and these higher value-add sales. How should we think about the ramp of sales as we look at '27 when you're trying to, I think, get more revenue, greater revenue from existing customers?

I guess I'll take the first one. The Teamwork Graph competitive question is an interesting one, actually. I think -- look, firstly, customers don't have to buy the Teamwork Graph, they get the Teamwork Graph. We've made it a core part of the platform. There's a reason that we don't sort of separately charge for it or sell it or any of this sort of stuff, which always makes it harder from an investor point of view to communicate that. You'd love to see a separate line and that's going up into the right, and it's looking really, really great. But from a long-term strategic point of view, I don't think that's the right thing for us to do.

What we want is anybody using Jira, anybody who's using Confluence, anybody using Loom, anybody using Bitbucket to have the Teamwork Graph. And the more of those things they're using, the better their graph gets, the compounding exponential effects, right, [ Metcalf ] lore of context graphs. I'm not sure if they can kind of take 2 different eras of technology and put them together there.

But that is a really powerful thing because it means that the next collection they get, the next app they add, that graph gets more powerful. The next connected they add, it gets more powerful. Now we have a lot of connectors already because we've had various graphs for -- the reason we built the graph 8 years ago was nothing to do with AI. It didn't really exist. It's machine learning. It was a very different world. It's to do with us connecting to other customers' applications and them wanting to share data and us continually managing the connectivity of that data.

In such, it doesn't really have a competitor in and of itself. You know you need to buy it as a customer. What we're trying to make sure that customers understand is the more Atlassian products they use, the more connectivity, the more their data grows and more processes and workflows they run, that graph is just going to keep growing in value. Now you don't need to connect only the graph to Claude Code in that example. You can connect the graph and other -- something else, great. It's up to Claude Code to determine where it's going to get the better answer.

Now in the long term, it's a really interesting question, whether the agents themselves will learn that we are a great place to get great answers. I suspect they will. And that's a great thing for us. We're just going to make sure that, that is the best graph that you can get off the type of data that we want to serve.

Now we have a lot of partners that do different types of data, and that's great. If you go look at Databricks or Snowflake or someone doing sort of relational numerical data at massive scale, that's not what we're trying to do in the Teamwork Graph. And so you're going to have multiple of these types of knowledge graphs, data graphs, whatever you call them. Most of your agents are going to have a number of places they can go and get information to help them. We want to make sure that we're building the best for our use cases, I guess, our competitive vector, and make sure that customers understand and that we can bring all of that past history into the graph.

So today, you can have 2 customers do it already, download the CLI and be like, holy c***, look at all the stuff I have. I'm like, that's the exact reaction that I want them to have. And then I'd say, "Great, just go plug that into Claude Code and watch it get better." That will -- I suspect lead to the graph continuing to grow and then getting more and more value from us and them seeing us as a more valuable partner to them, which is an amazing position for us to be in over the next few years. And we can continue to invest in the R&D to make that both scale and the smarts.

And as you said, we have 400 quota-carrying reps. And we certainly punch above our weight when you look at the revenue. Over the course of this year, we have increased our reps. And the way we look at it is we prioritize both from a geographical perspective, and also from an account to a sales rep perspective to look at where we'll be the highest return on our investment.

As we look at FY '27, as Mike had said, there will be additional investments made into my team, and we will continue that approach of ensuring where we will make those investments from a return on investment to ensure that we're going to maximize the return that we will be getting for the company. That includes from a geographical perspective, entering into new markets where we do not have people.

So just earlier this year, we put our first reps on the ground in India, where we did not have any reps before. In addition to that, we're also going to be leveraging the ecosystem. So there will be certain parts of the world where we identify that we have an opportunity, but we won't be going in there yet. So we've already leaned on our partners to ask them to come into those markets with us where they are doing that. And they will serve as an extension of our sales force, and we will continue to make investments and look at it prudently as we move forward.

That's actually all the time that we have today for questions. So I really appreciate everyone for coming out, learning more from us, talking to our customers, learning about our announcements. And for those that tuned into the webcast, thank you for joining.

Thank you, all.

Good afternoon, and thank you for joining Atlassian's earnings conference call for the third quarter of fiscal year 2026. This conference call is being recorded and will be available for replay on the Investor Relations section of the Atlassian website following this call.

I will now hand the call over to Martin Lam, Atlassian's Head of Investor Relations.

Welcome to Atlassian's Third Quarter Fiscal Year 2026 Earnings Call. Thank you for joining us today. On the call with me today, we have Atlassian's CEO and Co-Founder, Mike Cannon-Brookes; and Chief Financial Officer, James Chuong.

Earlier today, we published a shareholder letter and press release with our financial results and commentary for our third quarter of fiscal year 2026. The shareholder letter is available on the Investor Relations section of our website where you will also find our other earnings-related materials, including the earnings press release and supplemental investor data sheet. As always, our shareholder letter contains management's insight and commentary for the quarter.

So during the call today, we'll have brief opening remarks and then focus our time on Q&A. This call will include forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.

You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made. And we undertake no obligation to update or revise such statements should they change or seek to be current. Further information on these and other factors that could affect our business performance and financial results is included in filings we make with the Securities and Exchange Commission from time to time, including the section titled Risk Factors and our most recently filed annual and quarterly reports.

During today's call, we will also discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and are not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is available in our shareholder letter, earnings release and investor data sheet on the Investor Relations section of our website. We'd like to allow as many of you to participate in Q&A as possible. So out of respect for others on the call, we'll take one question at a time.

With that, I'll turn the call over to Mike for opening remarks.

Thank you all for joining us today. As you've already read in our shareholder letter, we delivered some incredible Q3 results. Total revenue grew 32% year-over-year to $1.8 billion. Cloud revenue surpassed $1.1 billion and accelerated to 29% growth year-over-year, and RPO grew again 37% year-over-year to $4 billion.

These are likely thanks to our team's excellent execution and clear momentum across our key strategic priorities: enterprise, AI and the system of work. This quarter, some of the world's largest enterprises, including Siemens Energy, Rheinmetall and Wayfair deepened and broadened their commitments to Atlassian. In AI, we continue to add millions of monthly active users to Rovo and our AI Rovo credit usage is growing more than 20% month-over-month. Customers using Rovo are also growing their ARR at roughly 2x the rate of customers who are not using Rovo, contributing to our strong cloud outperformance and expansion in the quarter.

And more and more enterprises are embracing our platform-wide vision using Atlassian system of work to see the full picture of their organization. This is because the Teamwork Graph connects knowledge, work, people and code, giving our customers one of the richest enterprise context graphs in the world. Context is a clear differentiator for us. And we're saying this is our competitive momentum built. This is our largest ever quarter for competitive displacements from a major ITSM provider. We're taking it from rivals as customers move away from legacy systems and choose Atlassian for a more modern AI native and much better value service platform.

As I've said before, I believe AI is one of the best things that has ever happened to Atlassian. In a world where human will run teams of agents, context is the only anchor to avoid chaos. And we believe the companies that prioritizes context will come truly AI native. With Atlassian, our customers aren't just choosing software that choosing the kind of company that they want to become.

This is a time of significant change in our industry, and we're moving forward with strong conviction and discipline. We're focused on executing, delivering customer value and driving, durable profitable growth.

With that, I'll pass the call to the operator for Q&A.

[Operator Instructions] Your first question comes from Arjun Bhatia from William Blair. Your first question comes from Keith Weiss from Morgan Stanley.

And congratulations on a really solid Q3 print. It's great to see all these investments in all innovation really starting to come to fruition within the numbers. As it is important in getting investors more confident in the stock, I think another sort of important part of it, and I think Mike, you do a good job of this, is helping people better understand how the existing software that Atlassian brings to the equation plus AI brings a better result.

And then there's one line in the shareholder letter that I thought was really interesting. When you're talking about the Teamwork Graph and how it makes the AI investments not just smarter, I mean, we've been talking a lot about context and how it makes the AI better, but you're also talking about cheaper and more valuable. So one, I was hoping you could dig into that and how the Teamwork Graph and the broader system lowers the cost of these AI investments, particularly as we're hearing more and more pushback on these credit costs were really starting to rise and the token costs starting to get really big?

And then maybe a follow-up for James. Again, in the shareholder letter, you mentioned data center outperformance driven by some pull forward of some of the -- some deals from future quarters. Any kind of view you can give us into what that means for FY '27 and what we should be expecting from data center in the year ahead?

Keith, sure. Thanks for the question. Not what I expect from the start, but a great question, very, very savvy as I would expect from you. Look, the Teamwork Graph and the Atlassian platform is certainly delivering amazing results to customers. You can see that, that customers using Rovo are growing their ARR at twice the rate of non-Rovo customers. Their credit usage continues to grow strongly, with strong results of over 20% month-on-month. And they're upgrading the Teamwork Collection to get more of those credits included in the base offering, but also using many more agents, right?.

And that agent usage is, I think, what you're referring to, whether that agent usage are Rovo agents or whether they're other platforms' agents that are accessing Atlassian's context with Teamwork Graph, that usage is increasing markedly. And that's the compounding effect of intelligence for customers as models continue to get better. But to really accelerate a business, the intelligence compounding is only one aspect. What you also need is the context. That is your knowledge, your work and projects and goals, understanding of your people, so your org chart, their skills and everything else, as well as knowledge of the code.

We have a lot of huge announcements coming up next week at Team '26 around this area, but what you're seeing in the Teamwork Graph is the world's best context graph across all aspects of the business. So whether that's a service team, a marketing team, a technology team or a business team, bringing that context to bear in all of those AI surfaces is what's the most important.

Now when we say it makes better, faster and cheaper. Why is that? Well, we have a lot of statistics and proof points that not only do you get higher quality AI answers because of our search, the Teamwork Graph, everything put together in the knowledge that we have about your business, but you also get cheaper answers. Those are cheaper answers because you use far less tokens to get to an answer in the same amount of time and fundamentally using less tokens and reduces your cost of AI or allows you to do far more AI investment, whichever way you look at it. So customers are seeing that. You're seeing that in the usage and then showing up in and financial results.

James, do you want to follow on with the second half?

Yes, Keith, thanks for the question. So on the data center side, the Q3 revenue beat, as we mentioned, was primarily driven by recognizing greater-than-expected upfront term license revenue within that quarter. Since our announcement of the data center end of life back in September, we've had a couple of quarters now to really better understand some of the signals that we're seeing from our customers in terms of their buying behaviors, especially Q3 being the largest expiry base for us.

So let me unpack that a little bit more for us here. So first, I would say that the migration to the cloud is on track and continues as expected. We're pleased with what we're seeing there. We still expect that to contribute mid- to high single digits on cloud growth. And second is that the retention rates on our data center business remain incredibly robust, in fact, actually outperformed expectations in the quarter. And third, for some of our largest customers with more complex migration, they remain committed to transitioning to the cloud.

But it's going to be a multiyear journey for them, right? They've got a lot of deep customizations, change management. It's going to take these customers time, right? Often many of these have tens of thousands of users, some with over 100,000 users. So this category of customers, we saw a pull forward of purchasing and expansion activity into Q3 from future periods. And we also had a pricing change in March. That further catalyzed this dynamic.

So as a result, that drove greater-than-expected upfront term license revenue recognized in the quarter. In fact, relative to our expectations for Q3, we recognized approximately $50 million more in upfront term license revenue. And that's some of the trends that we've been seeing since our announcement of end of life back in September, but more pronounced in Q3 given the size of the expiry base and the pricing catalysts that I mentioned.

And maybe lastly, the cohort of DC customers that are actively planning and transitioning to the cloud, we're seeing these customers moderate their seat expansion. versus historical trends we've seen. Again, I'll mention that retention rate remains incredibly high, but now expecting a more muted level of data center expansion from these customers going forward as they try to move to the cloud. We're still seeing really nice uplift when customers move from DC to cloud.

So net-net, what we're seeing is that our largest strategic customers continue to deepen their commitment at lasting, whether that's on DC or cloud, and we're working hard to meet them where they are and help them accelerate that transition so they can unlock all the AI and agent capabilities in the cloud.

So hopefully that gives you a little bit of color there, Keith. And maybe I'll just share that with these dynamics sort of playing out across the year on data center, with Q4 yet to play out where revenue rec is being pulled into FY '26 from FY '27, we recognize that there's lumpiness in that pull-forward effect in data center and having the timing of -- and that does impact the timing of reported revenue RPO and CRPO.

So internally, of course, we look at a variety of metrics to performance manage our business, including a really healthy ARR. So next week, we're going to be holding that investor forum at our Team '26 Conference and to help guide investors through the revenue recognition timing dynamics on the data center side. We'll look to enhance our disclosures and share historical subscription ARR, which will help normalize some of those timing effects and help everyone better understand the underlying strength of the overall business.

So all up, we feel really good about our execution, the runway that we still have ahead of us. So more to share next week at the TEAM event and the investor forum.

Your next question comes from Arjun Bhatia from William Blair.

Sorry about that. But congrats on the strong quarter here. I was curious on just Rovo, how you're thinking about positioning that against some of the third-party agents. It seems like you're having a lot of success in your existing customer base I'm curious, are customers evaluating other agents against Rovo? Or is this sort of an easy add-on given how integrated it is into the rest of the platform with Jira and Confluence and JSM and the rest of the suite?

Thanks, Arjun. I can take that one. Look, there are a lot of places that customers can access Rovo is maybe the simplest way to phrase it. Think of Rovo as the AI part of the Atlassian platform that shows up in all of our surfaces, whether those surfaces are on the Atlassian platform inside of Jira or Confluence, in our chat app from the mobile and the desktop or whether those surfaces are in other agent platforms, right, be that from Google, Salesforce or any of the foundation model vendors. Like we want to make sure that Atlassian's workflows, processes, the Teamwork Graph show up wherever is most relevant for the customer.

Now that has required us for a number of years to push past through a huge amount of R&D work, really hard R&D work to make sure that our context graph in the Teamwork Graph is the best out there. It has the most amount of context about the organization. It's the most deeply connected. We do the inference upfront to make sure that you get those better, cheaper and faster results that we talked about, better quality answers at lower cost with that run your agents faster is an amazing offering to customers, and they're realizing that.

Whether or not that happens on the Atlassian platform or off the Atlassian platform, what we want to make sure is that the customers see value in the platform overall. There is no doubt that agents existing in native context in our automation framework. If you have a huge amount of business processes running through Jira or the Service Collection, the agents that are natively integrated have the largest access to that platform and they're right in the sidebar. They appear in the Jira UI, that's a huge advantage.

At the same time, we've shipped a whole series of features that allow third-party agents from Gamma and Canva to Cursor and Claude Pro in each of our different types of teams. We want to make sure that third-party agents also surface in Atlassian's context, whether that's on a Confluence whiteboard, whether that's on a Jira work item, but they all use the Teamwork Graph at the core. So customers are really seeing that. We certainly get evaluated against other platforms. I'll tell you that customer reaction is amazing.

We've done a phenomenal amount of R&D to give you great quality answers. We see that in the increasing usage of our Rovo platform on and off Atlassian, both of which benefit us. And then you can see that in the customer is increasing their they see an expansion rates as well as using our AI technology. So all AI is not built equal. We build fantastic AI, and we get it into the customers' hands. That's what's most important.

Your next question comes from Gregg Moskowitz from Mizuho.

James, welcome to Atlassian. Mike, you may recall my high level of frustration one quarter ago when after I thought it was a pretty good quarter of acceleration, your shares perceived to go materially lower -- continue to be materially lower. And I don't want to minimize that there's a lot more work to be done. But clearly, this is an impressive result. My question relates to a comment in the shareholder letter that strong seat expansion in Jira was a key driver of the cloud revenue acceleration this quarter. And given that there is so much fear about meaningful seat compression at Atlassian being on the horizon, can you unpack the drivers of the seat growth for us? And secondly, is this a dynamic that you think can be durable?

Gregg, thanks for the question on that. Yes, on the cloud side, again, we saw strong performance reaccelerating to 29% year-on-year there. And maybe I'll start with the fact that DC migrations again to the cloud were in line with our expectations and not the realistic contributor to that $50 million beat on the print. It's progressing well, and we still expect that to contribute that mid- to single high-digit growth to cloud, like we mentioned. So the real 2 primary drivers that we talked about on the outperformance is really that cross-sell and seat expansion. .

So on the cross-sell side, we saw outperformance in our collections business across Service Collection and in particular, Teamwork Collection. We have got Jira and Confluence, Loom and Rovo. And just keep in mind that right now, Teamwork Collection is really the best vehicle for our customers to buy and unlock AI and all the agent capabilities across the Atlassian platform, right? Customers are upgrading to TWC because of the increased AI credits. We're giving 10x more credits on Rovo versus the stand-alone subscription. And I'm sure Mike can touch a little bit more on some of the progress that we're seeing there.

But importantly, we're also -- the other driver here is that we're seeing that growth in TWC while also seeing continued seat expansion in our core Jira stand-alone offering, right? And I think that really speaks to how an AI-driven agentic world, Jira and the Atlassian platform really remain core to enabling customers to manage their workflows and collaboration to fully unlock that value of AI. So whether it's TWC or standalone Jira offerings, we're launching a ton of new value that's really enabling our customers to deploy agents to do the work, to capture that agent activity alongside work history, full permissions and audit trails and admin governance. So a lot of great traction here, as you can see in our Q3 print.

Yes, Gregg, thanks for that and for calling it out. I hope we've been very consistent on our views in that world. We are not seeing any signal of seat compression from customers. If anything, we are seeing the opposite. We are seeing strong expansion numbers, strong cross-sell numbers between collections, strong usage of AI and strong commitment to the Atlassian platform. Many, many competitive wins, a huge amount of consolidation happening into the Teamwork Collection. So we have a lot of green lights in a lot of different places.

Similarly, you can see that NRR maintained north of 120% and even ticked up again for, I think, the third or fourth quarter in a row. We have a lot of reasons why that is. Firstly, I would go to high R&D investment in just great quality software, right? That does matter. It always gets ignored in a lot of context, wrong choice of words, in a lot of quarters. But we build amazing applications that deliver great value for our customers.

Secondly, the context we have in the Teamwork Graph and the critical business processes continue with AI to blur the boundaries between teams and between roles. That means our platform and our offering between service teams on one side that connect to finance and HR, marketing and in through ops teams to technology teams with business teams and leadership teams. The same context across all of those teams allows us to expand into those nontechnical roles at an increasing rate, right, which shows why we are getting that seat expansion in different collections, in different areas and just the continues in our business. Fundamentally, customers are opting for more and more workflows on the Atlassian platform.

Your next question comes from Brent Thill from Jefferies.

Mike, you called out the largest competitive replacements. I think I don't know if you've seen or just you were mentioning that. What are you seeing? What's driving this now where you're seeing that increasing rate?

Thanks, Brent. Yes, we had a great quarter for competitive displacements, especially in the Service Collection, especially -- look, we continue to be incredibly strong in the mid-market area. As you can see from many years of investment in the enterprise pillars of our business, we are starting to go really, really strongly in the enterprise and strategic segments across service management in particular. That's not just in ITSM, although in ITSM, we are growing really strongly, it is in broader employee service management.

We're seeing that -- we get the statistic of the 75% of the Fortune 500 uses Service Collection. 60% of Service Collection customers use us outside of IT on HR and marketing in other areas. This is just a fantastic example and why we're getting those competitive displacements. It was our largest quarter ever for those. And it's because, again, I would go to the quality of the software, the state with which you can get up and running on the Service Collection continues to be a strength. The high level of user experience quality continues to be a strength.

The comprehensiveness of our data and the Teamwork Graph and bringing that to their Service Collection fundamentally allows you to operate those services cheaper, quicker, better answers because we have access to a better knowledge graph across your organization. And AI continues to win every which way. We're incredibly AI forward. It's one of the largest areas of usage of agents in automation and automated workflows because it allows the service teams to run more quickly. And we're only just getting started in customer service and had a great quarter in that area as well.

And our asset management platform, again, assets moving into the platform as a whole, part of that overall Teamwork Graph. It's just an incredibly strong customer story. And so we're really excited about how we keep taking share in that space. And $1 billion of ARR is a great milestone. We thought it was worth celebrating. That's just a fantastic milestone for that business while continuing to grow incredibly fast.

Your next question comes from Allan Verkhovski from BTIG.

Mike, it's great to see the AI momentum here. I'd be curious if you could share what drove the decision to announce the data collection changes you're making? And what are you looking forward to from a product capability perspective on the other side of it?

Yes. Thanks, Allan. Look, Atlassian continues to be incredibly driven by its values and its long-term philosophy. I say that because our data collection, the largest part of that is clarifying exactly how it is that we use customer data what the data is in the different segments, I think we have an absolutely world-class policy there. We are as clear as any vendor out there about what the different categories of data are, where they are used, what the benefit is to the customer for that, and what the customers' option sets and other things are.

So think of it as broadly a large clarification of what it is that happens at different points and the value that's delivered to the customer from those. The increasing usage of AI allows us to build ever more powerful features. We are seeing a lot of customers. If you look at the DX business, for example, one of the greatest advantages is being able to see how my engineering organization compares to others in my industry, compares to others of my size, et cetera, and this requires a lot of those changes.

Similarly, the usage of different types of SaaS tools is how we build the Teamwork Graph. So it's all about that open company, being very clear with customers what it is, what the advantage is and trades are. And we've had, I would say, a really positive customer relationship, customer response because we put trust and openness at the core of that relationship and explaining to them what they get from that. And those usage patterns of customers are incredibly important to building fantastic software, which is our highest overall.

Your next question comes from Raimo Lenschow from Barclays.

Perfect. In your letter, you talked a lot about momentum in ITSM. Can you talk a little bit about what you're seeing there? What's driving it? And how skilled customers like how meaningful this is for you?

Sure, Raimo. Yes, we are seeing great momentum in the Service Collection, again, as I mentioned earlier, celebrating the milestone of passing $1 billion in ARR. We try in the shareholder letter to put a different focus each quarter. So last quarter, you saw us talking about the Teamwork Collection. When we passed 1 million seats and 1,000 customers, less than 6 months into that offering, so showing some momentum in that area, that continues. This quarter, we've chosen to focus on the Service Collection because of the milestone that it passed, which is a great milestone.

The strength we're seeing is across the regions. So we had a great quarter in EMEA, the business, but also in the Service Collection a lot of large wins in Europe, Middle East and Asia region of increasing strategic customers and enterprise-level customers. We are seeing a big strength as we mentioned in non-IT use cases as well in the Service Collection. So that blurring of roles is really, really important to understand in the Atlassian platform and importance to business as having less -- one tool for the IT team, one tool for the employees, one tool for the HR team, our ability to connect the teams in an organization is really powerful as your organization becomes increasingly service driven.

And lastly, as I mentioned, we have a huge amount of AI features that are delivering real value from AI ops in the IT area to be able to diagnose and fix problems more quickly, all the way through to how you can use Rovo as a broad platform and our increasing adoption by customers of our MCP servers and our CLR Command Line Interfaces. We'll talk a lot more about this next week, but especially in the Service Collection, you're seeing that enabling customers to get access to the contact craft it's built in their service offerings, which lets them just get, again, a fantastic results, a better value proposition for the customer and the service part of the business execute more quickly and at a lower cost.

Your next question comes from Alex Zukin from Wolfe Research.

This is Arsenije on for Alex. So Mike, what is working best with customers when adopting service and Teamwork Collections that's kind of driving that stronger cross-sell growth contribution in cloud? And then a brief follow-up, James. I think you mentioned it earlier, but when we're thinking about next year and the DC revenue growth decel comment, do you think we could get more color on how DC ARR is trending? Or clarify whether we'll get any DC ARR figure exiting the year to better understand for growth when we kind of lap some of these tougher comparison periods next year?

Thanks, Arsenije. What is working best? Good question. It's all working really well. Look, I think I've covered the Teamwork Graph as a whole and the data we have. The speed of adoption and user experience, again, we have customers that have 500-plus different service desks from a new organization, for example. The ability to get new service desks up and running with all of the data from your organization to create incredibly efficient offerings for your finance team, for your operations and workplace teams, for your HR teams, that is going really, really well. It's because of our investment in user experience overall.

We continue to do really strongly in the HRSM space. So in service management around HR and other business functions that continues to be a source of strength for the service question. And our traditional connectivity between the dev team and the IT team between your technology teams and your business teams has always been a source of strength for historically for Jira Service Management, we've seen that continue to deepen and improve with the Service Collection because both of those 2 teams are getting more and more AI driven.

And that AI-driven nature of things and our ability to connect different teams across the organization with a single context graph with a single AI offering and take that offering out to all of the other products that a customer uses makes all of those service-driven parts of their business just quicker to operate and faster to run. So I would say we're seeing strength across the board.

And lastly, our newest addition to the service suction in customer service management, internally, we're having huge success there, right? Again, we got a statistic that more than 70% AI resolution rates are being hit internally across hundreds of thousands of conversations in our internal adoption of customer service management. So it lets us run our business more efficiently and customers are seeing that, too, as the customer service offering continues to roll out with fantastic set of features.

Arsenije, thanks for the question. As it relates to FY '27, right now, it's too early to discuss any guide at this point, we'll, of course, provide that guidance out in August, our Q4 earnings. But as it relates to ARR, as I mentioned a little bit earlier, right, we're seeing that lumpiness in the revenue recognition in the year on the data center side. And next week, we're going to be able to share some of the historical subscription ARR across the overall business to help really smooth out those timing effects that we talked about.

And I think that will give folks a better understanding of the underlying strength in the business. But maybe just as a reminder, too, for the data center end of life announcement, right, we began to recognize great upfront term license revenue and that results in greater upfront revenue recognition in the period, but there's a corresponding drawdown in RPO and in particular, CRPO as well.

So it's worth sharing then that when you normalize for the impact of ASC 606 here, our RPO would have been north of 40% in the quarter, in Q3. And our CRPO would have been north of 30% year-over-year in Q3, much more in line with some of the recent trends that we're seeing, and again, underscores the strength in the backlog that we're continuing to build.

Your next question comes from Fatima Boolani from Citi.

I wanted to ask you about diversifying some of your pricing strategy, collections has been a huge step in the direction of consolidating adjacent capabilities into more intuitive selling motion. But a lot of your peers in other enterprise software complex are sort of investigating or testing the path of usage-based pricing. So I'm curious what you think about that approach and particularly how pertinent it could be for the service collection, for instance, and to the extent you're A/B testing any of this with certain products, I'd love the perspective.

And then a quick one for James. There has been a tremendous amount of focus on driving efficiencies in the business and is leveraging AI to help Atlassian become even more efficient. So I was curious about what type of qualitative learnings and quantifiable yields you're seeing as you more sort of move down the path of deploying AI internally?

Fatima, look, I'll take the first one on pricing and James can talk about efficiencies next so the efficiency is an incredibly important part. What does sound pricing broadly look? Our philosophy has always been to meet customers where they're at. Let me start there. Customers, in general, like the way we price our offerings and we wish to continue to be customer-led and meeting them where they are. The largest amount of value delivered today is through the seat-based pricing model. The collections have been a major transformation in how we do that, for sure. And in that, you are getting a broader amount of value that you can see there..

So we talk about that when people move to the Teamwork Collection, which we're seeing great momentum in. We talked about the cross-sell and the expansion earlier. The Teamwork collection gives you an amazing amount of software value across Jira, Confluence and Loom and all of the platform assets, goals and projects, et cetera, gives you access to Rovo, but it gives you an increased Rovo credit allowance. And we see that in the Teamwork Collection customers using more than twice as many Rovo credits per user, right?

We want to make sure that we're building amazing features that use those Rovo credits, that the customers see value in using those credits. They also have more than twice as many active agents. So the Teamwork Collection comes with a larger pool credits, which customers are then using increasingly. And that's leading Rovo driving customers to have twice the ARR growth rate of non-Rovo customers, which is all a good set of long-term clients' direction and areas for us.

We have a series of consumption or usage-based pricing meters now. I think we're over 10 or 12 meters from assets to customer service, index subjects, extra Rovo credits. Forge has a series of different offerings for extensibility, Bitbucket Pipelines. So I would say that we continue to be customer-led in how we deal with that pricing as long as customers continue to consume our AI offerings and continue to grow, which I believe they will. We have a great track record of doing that, growing that token usage of 20% month-on-month. is an incredible achievement by our team, and it shows value of the offerings that we are delivering.

And fundamentally, it's about selling the outcome to the customer, then understanding the value that they're getting from our software. You've seen that in them broadly increasing the length of their commitment to the Atlassian platform and increasing their overall dollar-based commitment. You can see that in our strong RPO growth, as James pointed out, normalizing for the Ascend revenue recognition north of 40%, that is customers voting for the long term for the Atlassian platform with our pricing models continue to adapt to their needs underneath that. So I feel we're really strongly placed for that.

James, I'll leave it to you to talk about the second half of the question.

Yes, Fatima, as it relates to margin expansion, I think we're just in this unique opportunity right now where we're seeing a lot of demand signals, and we're going to continue to reinvest I think on the AI side, on the enterprise sales side where we see a lot of opportunity. But at the same time, we're going to do that while balancing a very disciplined fiscal approach. You saw that in the shareholder letter where we elevated driving durable, profitable growth as a strategic priority for the company, alongside AI, enterprise and system of work. So again, that margin expansion is going to come twofold through those types of efficiencies as well as continue to drive value for our customers on that top line.

Fatima, if I might just add on that. Look, we're seeing an amazing result of investments in the business, right? James talked about durable profitable growth. That's been a long-term Atlassian aim. We've run an incredibly capital-efficient business for our entire history. And I appreciate you calling out we've had some great quarters about as we look to continue the durable, profitable growth story as one of our strategic priorities.

At the same time, we've had a number of wins across the R&D investments that we've had in terms of the engineering at scale. You can see that in our continued strength in our COGS numbers, in the cost of operating our platform which is an incredible achievement because that platform is operating with the larger customers that are also expanding at larger and larger scale than ever before, and we are running the platform at a cheaper and cheaper rate without any reliability hiccups.

So that's a huge credit to our engineering team and the work that we've done across every level of the stack to continue to build that durable profitable business, every reason that we should do that in the future.and we're seeing that in the fantastic results that we have. So I just wanted to add on, there's an R&D story, there's a finance story, and we're feel really strong about that in terms of durable profitable future.

Thank you. That's all the questions we have time for today. I will now turn the call over to Mike for some closing remarks. Mike?

Thank you all, everyone, for joining us on the call today. Thanks to the Atlassian team for a fantastic quarter. As always, to all of you, we appreciate the thoughtful questions. I believe one of our long-time friends, Keith Weiss, is retiring after this call. So Keith, thank you very much for all the questions over time in person and virtually. We appreciate your thoughtful questions, especially today.

And to everyone else, hopefully, Keith, hopefully you will join us next week in Anaheim for Team '26. We have a series of incredibly exciting announcements as well as an investor forum. So whether we see you online or in-person in Anaheim, we'll see you next week. And otherwise, hope you have a kickass weekend.

Good to go. We're very excited here. First and foremost, I'm Tom Blakey, infrastructure software analyst here at Cantor. We're excited to have the Head of Investor Relations, Martin Lam here with Atlassian, which we think is an exciting buying opportunity. As a segue there, I'd ask Martin to maybe share with the uninitiated, what is it that Atlassian is trying to solve for customers?

Yes. Martin Lam, thanks for having me. So if you think about Atlassian, we're a collaboration company. Our ticker symbol is obviously TEAM. If you look at our products, it's really to plan and manage work. It's to help share knowledge at scale. And especially when you think about that future in an AI world, none of that really changes, right? You still have to plan, manage and track your work, whether it's humans or agents. You start to share knowledge across the organization, whether with AI or cross with humans, all that continues to be very relevant. And that's, I think, why we're really excited about our position in AI era.

One of the genesis of Atlassian was with developers as IT in general took over organizations, you were there in terms of managing those teams. Why don't you just maybe address the bogeyman in the room in terms of AI. Will we need less developers and how this is going to affect the Atlassian model maybe?

Yes. I think it's interesting, right? We have a strong heritage with developers, and that's where we got our start initially. That represents a small part of our business today. We actually look at even Jira, Jira's core user base. 50% of their users are technical. That includes basically developers, engineers and IT. The other 50% are nontechnical or general business users. So we already have a very diversified kind of user base. Everything -- everyone is focused right now on the development and how that continues to evolve. We think of this world where humans and agents are going to work side-by-side. Humans are always going to have to be in the loop.

When you think about humans are always going to have to have an agency of directing what do we want these agents to do. What do we want them to build? What do we want them to accomplish? And then humans will have to have checkpoints of, did that agent actually accomplish what we wanted it to do. So there continues to be this role of humans and agents in the loop, especially even in software development. And again, tracking back to the point I made earlier, the role that Jira plays, I don't think that changes anything that level of criticality continues to rise because you need to be able to say, okay, did that agent actually build what we wanted to do? How do I track and manage all these different agents running across my business? Are they doing what we wanted them to do.

Jira has always been this orchestration layer of tracking work and who's working on, what is the output. Does that actually ladder up to our company strategy in a world where there are agents in the mix, are those agents doing that? How do I track this increased complexity across my organization. And so again, I think that's a really exciting opportunity for us.

Along those lines, people are worried about seat growth, see growth. You commented on your last quarter, continues to expand. You even invoked the, I guess, the AI 50. Many of them are using your product and customers are expanding their seats even faster in that vertical. Just maybe talk to us about. You said you're expanding outside of developer. Your outside of the developer community. Talk to us about what's driving the seat growth?

Yes. Look, I think we continue to grow with those technical users and nontechnical users. So across both vectors, which is great to see. I think -- two things I would first share. It's like one, we look at those customers that are using these co-gen tools. So again, trying to address some of the fears out there. When we look at those customers that use a cursor that use a cloud code via MCP across thousands of customers, so not an insignificant number. Those customers are driving 5% more tasks through Jira.

It's leading to actually 5% greater monthly active usage because to your point, more people have to collaborate to manage this increased complexity or throughput of work. And then ultimately, it's driving those customers to expand their seats 5% faster than those customers that don't use these co-gen tools. So it's really interesting. And again, it kind of backs up what we've always believed in, but we thought it was important to share with the market.

And then number two, I think we get questions about, okay, what about these hot new AI start-ups. So we picked the nonsubjective list. The Ford's AI 50. I didn't want to cherry pick some stats. I just drew that over to my data science team and said how many of these -- the hottest startup -- AI start-ups in the world are our customers today? 60% are already our customers today. And they're all growing their seat counts much faster than the overall corporate rate, which is probably not too surprising, but again, it's like -- so we feel good about our kind of position in an AI world, especially even with these hottest companies that investors may have questions about. Hey, do you know those companies work in a different way? It seems like we're well positioned even with these companies.

Going back -- shifting back to the core, the non-AI 50, you guys have been making a concerted effort for a long time now to move upmarket with the enterprise. You saw RPO jump over 40% in the last quarter. Can you just maybe give us an update in terms of the -- I guess, the positive report card in terms of those moves with the 40% growth?

In this moment In time, I think some people would say, okay, our enterprises, maybe taking a beat to evaluate their investment options or evaluate, kind of, the vendors. If anything, we're seeing a lot of these enterprises vote with their wallets in this moment in time. So we saw enterprises grow their seat counts. They sign for larger dollar amounts, and they're signing for longer contract duration which showing the commitment to the Atlassian platform, showing that they want a trusted vendor to run their Agentic workflows on and a reliable platform that has context behind the type of work that they're trying to do.

So the enterprise efforts are going great. The actuary report card that you referenced is the result of three things, I think. We've talked to in more recent times about three company priorities. And so it's -- and serving enterprises delivering AI and what we call the Atlassian system of work, which is moving more towards this collection strategy or holistic solutions as opposed to individual point products.

So those three strategic initiatives are coming together, and that's kind of the combination culminating in the report card that you just referenced and that's driving great results right now. We want to continue to push ahead on those three strategic priorities. And I think those are going to be important ones as we drive more durable growth into the future.

It's good to see the buy-in view that RPO statistic. The -- sorry to keep addressing the boogie man, I think it's important because we've seen the pressure on software in general as well as Atlassian stock. So that's why this vector is a little bit more leaning this way.

So from an AI orchestration and that orchestration layer you talked about with regard to the system of work and even the horizontal movements that you've had across organizations and successfully in recent years. You've heard some providers of maybe some of the apps you connect to talk about the orchestration layers that -- and not just Atlassian, it could be ServiceNow, it could be Microsoft becoming parasites, if you will, in terms of trying to connect to our data. Could you maybe, not to be provocative, but maybe address how does Atlassian get some of its data? How do you -- how would you view, like, Atlassian in that type of market where maybe there's an instance where one of the applications shuts off the connection to some of its data?

I think a couple of things to start on for those less familiar. Atlassian has 350,000 customers. We have tens of millions of users and we power a lot of hundred millions, hundreds of millions of discrete business workflows throughout the platform. And so that platform investment that we've made over the past several years is really important. It provides what we call the teamwork graph or a knowledge graph of understanding how relationships and kind of the context behind those relationships. What third-party tools are your individual teams utilizing.

That's actually how we're able to surface, I think, very intriguing and compelling actions or use cases with our AI. We've always had an open ecosystem philosophy. That's no different in an AI era. Like we've always tried to be this coordination layer or a single pane of Atlassian coordinate, all your different workflows even when you use third-party tools because we realize that you're not going to be sitting in our platform. And so we've intentionally tried to stay away from getting too far into specific dev tooling or specific technologies because what's lasting is kind of the human problems of like, okay, human problems are going to be the more lasting problems as opposed to technologies, which come and go.

And so we've always believed in integrating with best-of-breed third-party tools. Now those have come in and out of flavor depending on which kind of segment that you look at, but it's very important to tie in to these third-party tools. So whether you're in Microsoft Teams or Slack or Salesforce products, we want to be able to understand how those teams are working because that's the basis of the teamwork graph. In this new era, I think we're -- you're poking at. We still continue...

The market's poking at.

We continue to believe that the open ecosystem approach is an important one. If customers want to tap into Atlassian products, like that's going to be an important one because they should have that freedom to do so. We want to encourage that. What's important, when we look at the MCP data, customers are writing and editing within our products. That's an important aspect rather than just purely reading because that means that we're driving more and more workflows through the platform, and that begets more and more users to collaborate on those workflows and then that also drives upsell opportunity or upgrade potential.

So we encourage that type of access into our platform. It is an area that we continue to monitor. I think we look at how the industry continues to evolve about how to maybe monetize this kind of access platform. But again, that open philosophy is a really important one for us. And philosophically, that's something that we believe in.

Certainly, it doesn't sound like you're seeing any issues in the market. So thank you for addressing that. And lastly, Atlassian has a number of drivers to growth. You talked about seat growth, talked about even subsegment growth, whether it be the AI 50. Another growth driver you have is moving folks from your data center segment which on-prem to the cloud. Maybe give us an update there in terms of what we should expect in terms of tailwinds? And we had -- we just had some tailwinds recently and maybe some future headwinds as we kind of move through this moving folks from data center to the cloud.

Yes. So today, we have two deployment models. It's -- we have our SaaS offering or Cloud offering, and then we have what we call the data center offering, which is an enterprise-grade on-prem deployment model. We announced the end of life of that data center deployment. And so those customers will have to move off of that by March of '29, so a little over 3 years from now. And during that time, we'll continue to migrate those data center customers to the cloud. That's an important aspect for us because the cloud is where the innovation is. Earlier, I talked about the platform. That's where the lion's share of the investment has been.

That's where you have AI capabilities, that's where you have analytics, that's where you have automation capabilities. None of that's available on data centers. So it's really important that we migrate those customers to give them the best experience that they can get, which is going to be on the cloud platform. These are our largest customers, the data center cohort, right? Like these are the biggest or big enterprises, many of them who have been Atlassian customers for over a decade. Many of them have 50,000 users or more.

And so it requires a little more handholding to bring these data center customers over. They have customized kind of footprints on their data center instance. So part of the challenge and an opportunity, of course, is how do we get them to rebuild some of that customization onto the cloud platform. That's why we know it's going to be a multiyear journey for some of these customers because they have to rebuild some of the customization on the cloud instance.

How do we hold their hand through it with more kind of white glove service? Like these are all the different avenues that we've looked at. We have a program now called Fast Track, which is giving them a dedicated R&D resource to help them road map out the path to get to the cloud. That has accelerated customers' migration plans quite considerably. And so that's something that we're rolling out with larger scale today.

One of the genesis of Atlassian was with developers as IT in general took over organizations, you were there in terms of managing those teams. Why don't you just maybe address the bogeyman in the room in terms of AI. Will we need less developers and how this is going to affect the Atlassian model maybe?

So I think a couple of things to keep in mind is, again, the data center cohort is a much smaller pool of customers, but with much larger seat counts behind them. So that's the first thing that I would point out. I talked about it being a multiyear journey, I had to move these customers over to the cloud. You get varying levels of price uplift to that you're pointing at, depending on how many users the customer has.

So on the low end of town, it could just be a cost neutral or 5% uplift. On the high end of town, there could be upwards of 2x the price. So it really depends on kind of the number of users that a customer has. We've been hesitant to give kind of a direct ratio to apply because of that varying level of complexity. But I think that's something that we're thinking more about how do we help investors understand the level of uplift.

I think the commonality between all these though, is that because these are the largest customers, we do have a more traditional enterprise negotiation process with them. We want to ease them over to the cloud. So in those instances where they have more significant uplift. We want to smooth that path out for them. So in year 1, it may be less prohibitive and, therefore, make it more cost neutral for them, so more of a 1:1 kind of ratio in year 1. But in years 2 and 3, you start to peel back that level of discounting. So you slowly ramp them to that full list price over time. So you kind of actualize that price benefit in years 2 and 3.

Very helpful. Talking about some of the benefits of moving folks to the cloud and you get a lot more technology. You've rolled out just 9 months ago, the teamwork collection, maybe a lot of AI capabilities in there as well. So this is a segue for the audience. They just know now that you've moved to the cloud, you can buy things like teamwork collection. Maybe we have a brief definition of that? And what are you kind of seeing there in terms of drivers for this. I think you've reached 1 million -- over 1 million seats in less than 9 months. So there's demand there. And what are folks doing that on that?

Yes. So the teamwork collection, as you talked about, has only been in the market for about 3 quarters now. As we rolled out Rovo, our AI capabilities across our platform, you get a certain number of AI credits with your standard subscription. With teamwork collection, you get 10x the amount of AI credits relative to U.S. stand-alone Jira stand-alone confluence subscription. So it's very appealing for customers as they think about their kind of AI journey because when you talk to our customers, they don't want consumption base pricing, at least today for our products.

I think it makes sense for certain other models. But for our products, they don't really want to pay on a consumption basis. So today, if you use AI credits above and beyond your allotment on your standard Jira subscription or Confluent subscription, then you start to pay us on a consumption basis. But again, if you upgrade the Teamwork collection, you get 10x the amount of A credit. So it's a way to kind of forgo that worry or monitoring of AI credits today. That's been the #1 driver of why customers want to upgrade or choose to upgrade the Teamwork Collection. A lot of success early on, it's our expectations. 1,000 customers have upgraded to Teamwork collections. It equates to 1 million seats sold.

Those customers that have upgraded Teamwork collection have expanded their seats versus their stand-alone footprint on Jira by double or by more than 10 percentage points of seats expansion, which is great to see that drives additional kind of attach of Confluence in Loom and then ultimately, the 10x amount of AI credits. So there's a lot of compelling kind of package within Teamwork Collection.

Super exciting. Could you want to maybe share with us what you've seen some of your customers using with regard to AI, you talked about the product side. I didn't ask direct about Rovo. And just -- because I think a question that investors have are what are folks -- from a stickiness perspective, from a growth perspective, what are folks doing on the Atlassian platform where they are.

Yes. So we have over 5 million monthly active users of Rovo today, which is great to see. That has grown considerably over the past year. When we look at kind of the agent invocations as we call them or kind of business process automations, like that's been really encouraging because it's basically speeding up people's daily business processes. We talked about tens of millions of business processes flowing through the platform. And so to the extent we can speed those up, that's great to see. I think a really interesting one is of those agent invocations, 40% are within Jira Service Management. So it's clear strength within Jira Service Management of those service management Rovo automations.

Okay. Any questions in the audience by chance?

Just on the -- [indiscernible] the other side of the equation that's easier or not positive [indiscernible]. Can I have [indiscernible] are you using that over time? Or is that something [indiscernible]?

It's a great and very relevant question. So the question was in regards to stock comp, how do we think about that?

Yes, I think we've been thinking about this very seriously for over 6 months now where there's a lot of energy around this. We take it very seriously. I think if we look at our stock-based compensation as a percentage of revenue, we are on the high side. I think we recognize that. We need to bring that down over time. So we're looking at different ways that we can perhaps modify our stock comp program, how do we distribute stock comp. Because it is an important part of compensation, but in perhaps a more disciplined way and do we look at different levels. Like these are things that we think have to think about as we move forward. And yes, like it's priority for us to kind of accelerate GAAP profitability. And so we hear you, and we think about this quite a bit.

Is that something that we should [indiscernible]? How does it [indiscernible] as but is it something [indiscernible]?

I guess I won't -- the question was like how do we think about timing on this?

I won't provide a specific timeline. I would say there's different actions that we look at and how do we think about -- again, part of the balance is, of course, retaining and hiring key talent. So that's the balance of this all that we have to contemplate. I think two things that I would, I guess, play out. Number one is part of what's driven that is the significant hiring that we've done over the past several years, both in terms of investing in AI as well as building out our platforms, that's been central to our three strategic priorities.

I think we've cracked the back of a lot of those platform investments. And so you're actually seeing us moderate the pace of head count growth and you're actually starting to see that play out. And so we're able to reallocate some of that R&D talent that's been exclusively focused on platform initiatives into other product-specific areas. And so that rate of hiring as that starts to moderate and slow, that should help in some regards.

The other aspect, as we move into the enterprise that Tom talked about earlier is we've talked about R&D as a percentage of revenue coming down. Meanwhile, sales and marketing will continue to tick up slightly. Structurally, that should help. Now we'll always be R&D and product-led first. So those will never cross. But as they come down and come closer together, that should structurally help from the stock-based compensation perspective since R&D tends to be where that's concentrated. And on sales and marketing, you tend to not have to give as much.

That's helpful. And maybe jogs the question about, what did they say? Drinking your own champagne or reading your own dog food. Given you have these great AI tools and from a workflow management perspective and the new coding tools coming out. Talk to us about where you are in the journey of benefiting from AI efficiencies internally.

Yes. It's a top priority of ours across the company. So for R&D, I think that is where a lot of the focus is, but even within areas like HR, marketing, even within finance, we're looking at ways how do we continue to drive productivity with adoption of AI tools, our own products as well as third-party products. So actually really pleased with the adoption across the company, but you always can do more. Some of it is just change management, right? Like there's a lot of exciting capabilities available. I have a lot of agents today at my disposal that I've built, but there's always opportunity for more. So it's taking the time and thinking kind of creatively about where I can apply agents into my daily work life and kind of speeding up processes, which would have taken me longer from a manual perspective.

Interesting. You have your own agents. I like that. But from a journey perspective, are we early...

Still quite early.

I guess everybody is quite early.

Again, a lot of it is just thinking about how do we reinvent certain workflows to utilize and leverage AI. I think, like one of the interesting ones is we get asked a lot about our R&D team, right? Are you using some of these co-gen tools? I think what people miss is coding is only about 30%. We do surveys. You can look at third-party surveys. Coding's only 30% of the developer's time today, hands on keyboard development time coding time.

So where we try to apply our AI capabilities is on that other 70% as well. Like how can you speed up some of the other 70% of what they do in collaborating, how do you figure out what we're trying to build? On the whole, we use cursor. We use cloud. We use a lot of tools, Rovo dev in the mix. Kind of the net-net of that is our developer is about 25% more efficient, which I think shows there's a lot of opportunity.

Yes. And you addressed the 70% too, so that could be your secret sauce. You mentioned like shifting some dollars from R&D to sales and marketing, that's a part and parcel to the enterprise initiatives that you've started and are being early successful early on with. Talk about some of your channel endeavors, too. I think Atlassian is a multifaceted growth story to me, there's the DC to cloud. There's the new channel initiatives, there is the enterprise movements? Does the seat growth even still that nobody wants to talk about. So this would be the fourth or fifth. I don't know what number am I. On the fourth row of growth opportunities for Atlassian. And maybe again, share some history with the team, with the audience about how dependent you used to be on the channel, and where your kind of initiatives are.

Yes. The channel plays an important role for Atlassian's go-to-market effort. So today, the channel touches about 50% of our revenues. So they've kind of -- many of them have grown up alongside us. However, many of them have also driven a lot of their business purely by just reselling Atlassian products. And as part of the evolution that Tom was poking at is, we're trying to evolve channel from just purely reselling Jira seats, adding your licenses into the mix to more value-added services.

So we've been trying to paint the opportunity for our partners of hey, there's actually a significant dollar size just as much dollar opportunity, but you have to earn it in a different way by value-added services. Some of it is actually pretty compelling from a change management perspective, AI adoption perspective that we just talked about. How can that help our customers be more successful? Especially as we push more into the enterprise, some of that relationship may be more direct with us as we grow our quota-carrying sales force.

And so we've -- I think I've asked you this before, Martin, so I apologize, has there been like any like size of appropriate -- can you put a number on what you think that the benefit to like the longer-term sustainable growth of this company could be from those channel initiatives? Because it is a large piece of your business, over 50%. The channel speaks very highly viewed. So -- but is there -- for the reason you're doing it, is there a calculable number that you think that, that can be added to the sustainable growth rate from moving some of these from account ownerships in-house. And managing the reselling of extended cloud service?

The evolution with the channel is a multiyear journey as well, right? Some of these channel partners are a little more resistant to the change. Some partners are much more on the forefront and they've been adapting actually even ahead of us announcing some of these channel initiative changes. And so this will be a multiyear journey with them, again, as they more move into value-added services. I think of this as this benefit that you're pointing at is kind of a multiyear process plan.

Any more question from the audience?

[indiscernible].

So the question was, do we see the need for different -- or new products into the mix evolve into this Agentic world. I think we'll look hard at how our customers are using products. I think like actually one exciting development with Jira that we just announced, I think, 2 weeks ago now is the ability to assign work to agents directly in Jira. That includes not only our first-party Rovo agents, but third-party agents as well. So for example, we're working on something, and I say, let's spec out and drop the product specs.

You can assign that to a sigma agent today. You can sign that to a Rovo agent today. So that, I think, is an exciting step back to that point that we talked about earlier of you still need to track and manage where all this work is happening. And even if third-party agents are doing some of that work, you still need a place to track all that complexity, especially with -- as this continues to grow. And so I think that's an exciting aspect of Jira placed as kind of this pane of glass of tracking where all those agents are doing and what are they actually working on? And are they actually delivering the results that we wanted.

I know I only have 15 seconds left, but I'd like to maybe ask about the M&A strategy. We get a lot of questions from investors, relatively acquisitive at the end of last year, some cool companies like the browser company. Maybe just kind of update us on the M&A strategy and where there maybe are some more holes in.

I don't know if I can do that 15 seconds. Two sizable acquisitions last year for us, DX and the browser company of New York. So DX is a product that is kind of a natural product to cross-sell into our software team or software collection, as we call it, where you can measure the ROI of different AI tools that your teams are adopting. You can see where kind of the bottlenecks start to appear within development process. So it's a very valuable tool, especially in this moment in time. But even beyond this, like understanding, especially as teams get more efficient at perhaps the coding aspect, where is the next bottleneck in their development process.

The browser company is a very different type of product and very strategic approach. I think most of you probably do most of your work in your browser today. So we can envision a world where you can offer a lot of compelling AI added to features into the mix, especially when you think about all the different SaaS applications that you have in the tabs across your browser and how can you string together different context across that? How can you provide compelling AI capabilities by pulling in data from those various tabs in the browser that most of us sit in all day. So that's typically the kind of the first port of entry into a lot of our daily work. And so I think that's actually a pretty compelling possibilities that we can give to our customers.

You did that well in a short period of time. Thank you so much, Martin. Thank you for coming.

Excellent. Thank you, everyone, for joining us on late afternoon, day 3 of the Morgan Stanley TMT Conference, but Keith Weiss. I run the equity research franchise here for software at Morgan Stanley. And very pleased to have with us from Atlassian, Brian Duffy, Chief Revenue Officer. So Brian, thank you for joining us.

Great. Thanks for having me.

So maybe to sort of level set for investors who haven't got a chance to meet you, you've been on board with Atlassian for about a year now. Maybe talk to us about a little bit about your background and what made coming to Atlassian interesting, especially in the light of like we've always looked at Atlassian's product-led growth model, and you've been big company CEO and CRO. What did you see as the opportunity here at Atlassian?

Sure. So yes, I spent around 18 years, almost 19 years in my career at SAP. While I was at SAP, I ran Europe for around 5 years. My last role at SAP was I launched and ran the RISE with SAP business, which was SAP's ERP and the Cloud business, which was responsible for -- still is responsible for the majority of its cloud backlog and was a very successful business. And there's a lot of correlations, honestly, between Atlassian's Cloud journey and SAP. After that, I was the CEO of a partner, SoftwareONE, a very big Microsoft's partner where we helped many customers in terms of their cloud journey as well.

And then specifically, why Atlassian? Myself, I was always impressed by the product-led growth journey that Atlassian has been on. I think many of us looking from the outside always looked, amazed at how Atlassian acquired companies -- customers. In addition, from speaking to customers, the relationships that Atlassian had with customers was -- always struck me has been really amazing, considering that they didn't have a large go-to-market team, how customers really love us. And then lastly, the size of the opportunity that I felt we had if we were to invest into the go-to-market team.

Got it. And can you dig in a little bit or you piqued my interest with that the Cloud journey SAP being similar to the cloud journey of Atlassian. Could you sketch that a little bit for me?

Yes. So why similarities? Number one, we have customers -- we have a lot of customers, 350,000. SAP had a lot of customers as well. Secondly, we had customers who had done a lot with their estate. SAP had customers who have done an incredible amount. And when you've done a lot with your estate, you have very often customized the estate as well. Customers have done customizations with theirs as well. That's a good thing. When they have customized, means that you are needed.

We have customers who have -- and I just spoke to this customer yesterday, in fact, the German automotive customer who has a north of 400,000 seats of -- with Atlassian. So obviously, we are mission-critical to that particular German automotive customer. Now in order for that customer to move to the cloud with us, we need to help them move away from the customizations and move more to standard cloud. That's very similar to the SAP journey.

Also, similarity is we're very reliant on the ecosystem, which SAP was as well. In many respects, I think we're ahead of SAP in that journey because we actually launched a program called FastShift around 2 years ago, which our CTO Rajeev launched it, which delivered tools to the ecosystem to help them move customers from data centers to the cloud in rapid pace. So it really allowed us to get the ecosystem ready earlier. Those would be the main similarities to SAP.

Got it. So the German automotive company with 400,000 seats, that must represent sort of a success story of like a broad deployment of Atlassian because I'm sure that's not 400,000 developers that's using it more broadly. But when you talk about the big opportunity, Atlassian is in 85% of the Fortune 500, but it represents less than 10% of the revenue. So it feels like there's a lot of big companies that become much bigger to become that 400,000 seat opportunity. And I think you guys have sized it out at about like a $14 billion opportunity just within that like installed base. Can you talk to us about how you plan to take that 85% of the Fortune 500 and make it maybe look a little bit more like that German company that's using you guys across the board?

Yes. So you're right, 85% of the Fortune 500 are our customers, only represents 10% of our overall revenue. Pretty amazing that Atlassian did this without a massive go-to-market team. I always remind myself that every single one of our customers entered through the exact same door that is they swipe their credit card online and then they came in as a customer.

And now my role is to build out our go-to-market team. By the end of this year, we will have approximately 400 sellers, which again is not a huge go-to-market team. That has pretty much doubled from where we were last year. The approach that we have is we need to continue to hire more capacity so that we can increase our coverage. We continue to revitalize the ecosystem so that we have them better aligned with our goals. We continue to focus on moving our customers to the cloud, which obviously is going to unlock more potential for us and moving our customers to higher addition values, which also is going to help us unlock more value.

And to your case in point around the German automotive customer, one area that's a massive focus for us is moving from IT to the business. So exactly that German automotive customer of 400,000, they clearly don't have 400,000 developers because half of our users are actually in the business, and the business is actually our fastest-growing segment. I know many always think that we're only in dev and IT, but we are beyond dev and IT, and we're going to continue to focus on growing outside of dev and IT as we move forward.

Outstanding. So you talked about the scaling of the sellers. I think you have -- you talked about 400 sellers right now, covering about 500 -- a little over 500 customers paying over $1 million annually. How should investors think about the scaling function of that sales capacity at the same time as maintaining what has always been a really efficient go-to-market for Atlassian?

Yes. So obviously, Mike and Scott built an amazing model, a super efficient way to acquire net new names that many are jealous of. We're going to continue to have that PLG motion. And at the same time, we are going to continue to build out the enterprise motion that we have.

The model that we have now is customers come in and then they will graduate into, let's say, being served by an account executive, and we will continue to have that motion in place. Within my team, we don't have a net new name sales motion. The motion that we have is they graduate from the PLG motion, and that serves us extremely well.

And then from my side, we will continue to hire quota carriers and account executives, and we will be looking at placing those in the areas that are going to give us the highest rate of return within the segments, strategic and enterprise, and then also within the geos that are going to best service as we look forward.

Got it. All right. That ends the easy stuff. Now we're going to get into the hard stuff. This software market overall has come under a lot of pressure. I would argue it is under pressure through most of 2025, and that's only become exasperated on a year-to-date basis as people have seen an expanded capability of what these AI models could do and some of the agents on top of that.

Maybe from a high-level perspective, just from a totality of Atlassian, what do you guys see as the opportunity there? Like you guys have been front-footed in terms of incorporating these models into your platform. You've been front-footed about creating an agentic layer. So maybe we'll start on the positive, like what's the opportunity for Atlassian and being able to take this expanded capability, utilizing it through your platform to do more for your customers?

Sure. So one, we firmly believe that AI is a great thing for the world. We believe that AI is a great thing for Atlassian and a great thing for our customers. Just last week, we announced that we now have agents which are available in Jira, available in Jira Service Management, which means that our customers can now assign tasks to agents. Therefore, that means that developers, business leaders, et cetera, will have to spend less time on certain tasks and the agents will be able to do the work. That obviously is going to mean that it's going to free up an incredible amount of time for those individuals and allow them to spend more time being more productive in other areas. That is obviously going to unlock a huge amount of time for those developers as well. And ultimately, that's going to be a game changer. Developers actually only spend around 30% of their time coding, in fact, which I think always come as a huge surprise to everybody. And as we move forward, we're going to look at more and more ways that we can continue to embed more agentic features into our products.

If anything, what's going to happen as we move forward, we firmly believe that all of this is going to lead to more software. More software leads to more projects. More projects leads to more demand for Atlassian. That's what we've already seen happen and pretty sure that that's going to be the -- what the future is going to look like as we move forward as well.

Yes. So let's drill into like the software developer side of the equation. I think that was initially one of the focal points of investors' concerns. Atlassian and Jira development, in particular, being a seat-based model, there was this very kind of first order argument of developers to get more productive are going to need less developers. I think we're seeing the opposite actually, initially, Aaron Levie from Box had a post not too long ago, pointing to that we've actually seen an acceleration in developer hiring. Are you -- two questions for you. Like one, are you seeing that in your base? Like basically, Jevons paradox playing out, the developers are more productive. We're using more of them. And then two, how important is it that like the headcount grows? Or is there other ways that you can monetize Jira, you can monetize the value proposition of managing more software and more software development?

Sure. So I would say, firstly, we're not seeing a reduction in the number of seats, right? The conversations that we're having with customers are not around that. We're not seeing that in the conversation. We're not seeing that at the time of renewal with our customers. Instead, the conversations that we're having with our customers are very different.

I'll give you an example. Just earlier today, I spoke with a large U.S.-based consumer tech company that was talking to us about a long 7-year term agreement that they wanted to enter into us, and this is a company that has over 100,000 seats with us both in the developer and the IT space. We firmly believe that having the ability for developers and nondevelopers to create software leads to more software.

And same as what Aaron said, this means that there will be, one, the hiring of more developers and the creation of more software. And more software leads to more projects. What we have found, in fact, is that we see -- and for companies that are utilizing these cogeneration tools, there actually is a 5% increase for us in seats. And a 5% increase in fees obviously leads to expansion with our customers. And I know that's contrary to the headlines that you just gave there, but this is having a tailwind for us rather than a headwind. And that is what is leading to the headlines that we made around $1 billion -- our first $1 billion quarter in Q2, the 600 customers that are now paying us over $1 million and an RPO growth that is north of 40%. If we were facing all of these headwinds, we wouldn't be able to deliver numbers consistently like this quarter-over-quarter. So if anything, like I said at the beginning, AI is actually a tailwind rather than a headwind for us.

Great. So it's not evident today, and it's not happening today in terms of the number of software developers coming down. But even besides that, like the value proposition of what Jira brings to the organization, to your point, is it's not making a developer more productive. It's organizing and managing the software development process. And if we're increasing the volume and velocity of software, it seems like the value proposition of that is expanding. So if agents start to come into the scenario if maybe software developers becoming more productive, there's not as growthy, is there an evolution in the pricing against that value that Atlassian has to go through to ensure you're capturing that additional value that you're providing to the customer?

Sure. So as we a couple of things. Firstly, like Jira within customers has consistently been an orchestration layer within customers. And as we move forward in the world of AI, it's going to continue to be an orchestration layer. If that's with humans and if that's with customers using agents, firmly, I can continue to be that orchestration layer. And now as we move forward in terms of the monetization, we obviously have the opportunity to monetize in terms of agents as well. That's something, obviously, that we're looking into how we're going to monetize in terms of agents. That's a debate that we and others are having. And we will see how we're going to move forward in terms of how we're monetizing that in the future and that I know a debate that others are having as well.

Right. I think one last investor concern and debate. I'm going to put out and then we could talk about some more positive and constructive things is the idea of DIY, right, with cogeneration tools and the vibe coding, if you will, there's a concern of like why can't organizations now kind of just vibe code their own orchestration layer or their own management solutions for this? And I think from my conversation with Atlassian customers, particularly the larger enterprises you work with, I think there's a real underestimation of the complexity of the workflows, the complexity of that orchestration layer. Can you help us better understand how complex some of these implementations are? And why would it be difficult to vibe code a Jira-type solution?

Yes. I think like sometimes the best thing I can do rather than talking like in generic about us, like the generic headlines, is actually talk to you like where the rubber hits the road with real customers. So in the past 48 hours, I told you I talked to a technology-based West Coast company, who's clearly entering into a long-term agreement with us. I told to -- I talked to a German automotive customer that has 400,000 seats. Clearly, that is extremely complex and heavily customized, and we will work with that customer to migrate them to the cloud, but they have managed Jira in a way that is supporting their business very, very uniquely.

I also spoke this morning to a defense company that told me that we are in every nook and cranny of their business, and we are a mission-critical application to them. When they had a system down, I was speaking to them because they had a system down scenario for their ERP instance, not us, their ERP instance. And when they have that down, they call their GSI, they call their ERP company, and they called us. And they called us because we are mission-critical.

We have seen as we've moved more and more companies to the cloud that we're engaging in more conversations with them around topics like SLA. You're engaging in topics around SLA because you are mission-critical. That's a very good position to be in even though these customers are then testing us and pushing the limits in terms of what our service level response time are going to be, et cetera. But this is all because we are very critical to these organizations.

Now when you look at customers like the ones that I just explained to you there, when we are so mission-critical, they -- could they do certain things in the periphery to Atlassian? Absolutely. Are there organizations that could vibe code certain pieces? I'm sure there are. However, when we look at scalability, reliability, orchestration management, these are the things that Atlassian brings to the table and has been doing for 23 years. And that's why so many customers, like the ones I highlighted, place their trust in us. And we're very confident that they are going to continue to do so as we move forward, hopefully for another 23 years.

Okay. And I think another part of the equation that investors often overlook, there's the complexity of the workflows. There's how broadly you're automating workflows for our customers, but there's also the data underneath that. You've started to talk more and more about Teamwork Graph. There's now over 100 billion objects in Connect and the Teamwork Graph that's up over 150%. Can you talk about the role that this proprietary data plays in what your customers are doing already but also how it's going to better enable them to adopt AI going forward?

Yes. So the Teamwork Graph is we think of like everybody in this room. If everybody in this room works for the same company, everything is interconnected to each other. So a spec is connected to a Jira ticket, a Jira ticket is connected to an engineer, an engineer is connected to a team, and a team is connected to a company goal. Therefore, you can trace back how the company goal is connected ultimately to that spec. So you can trace why the engineer was working on the spec and how it supports the company goal ultimately. So therefore, there is a way to trace who is working on what, why they're working on certain things and how -- and it just increases the overall visibility for work ultimately within organizations, which without this organization's net-net do not have that visibility.

Now as you said, we have over 100 billion objects, which obviously is a huge amount and increases the value of the Teamwork Graph for our customers. That has been a huge unlock value for them. And now with Rovo, allows our customers to ask questions like, have you seen an incident like this before happened with system down for XYZ? What has the response time been for ABC? And then it will pull on the Teamwork Graph for similar incidents that have happened, pulling on these 100 billion objects. And it is only Atlassian with the platform that we have with 100 billion objects and the 23 years of experience that is able to pull in these. And that is where we are seeing a huge amount of traction with our customers given the database that we have that is so rich that they're pulling on this information from.

Got it. It's a good segue to Rovo, the agentic platform that you guys put into the marketplace almost 2 years ago. I think it was in the summer of 2024. But growth has really started to take off. You guys talked about 2.3 million monthly active users at the end of FY '25. 2 quarters later, it's over 5 million monthly active users, so more than doubling over that 6-month period. Can you talk to us about what's driving this adoption? What are the commercial outcomes that your customers are seeing from the usage? And then how is this going to translate into like even better monetization for Atlassian going forward?

Yes. And so as you said, we have 5 million monthly active users at the end of Q2. We took a very different approach than other companies. We chose not to sell Rovo. Instead, we said that any customer who is moving to the cloud with us will get Rovo, specifically any customer that moves to Teamwork Collection, which is what I call our hero motion. Teamwork Collection includes Jira Confluence, Rovo and Loom. They get 10x the Rovo credit.

We have been very successful with Teamwork Collection. It is really propelling our -- overall, our Rovo revenue stream, let's say. We have over 1 million seats in the cloud, and we have 1,000 customers that have moved to Teamwork Collection since April of last year. That is beyond what we expected. And we are very happy with the traction that we have received there. Specifically, what we have experienced is customers who have moved to Teamwork Collection who have embraced Rovo, we have seen a 20% increase in addition -- expansion as they have embraced Teamwork Collection, and we have seen an uptick in the Rovo usage as well.

Just in the month of February, we had a large semiconductor company here on the West Coast go live with over 40,000 seats. Following their go-live 10 days later, there was an expansion to the tune of 8,000, the 20%. And that trend, we continue to see. We are consistently seeing more and more use cases emerging from our customers around the world.

One thing that we are doing to drive more usage and more monetization is every one of our Teamwork Collection transactions that we were doing has a use case for Rovo embedded into it from our sales team, which means that our customer success team at the time of closure of that transaction will then pick up the use case and work with the customer and our forward deployed engineers that are embedded with the customer to help them activate the use case so that they can then get the journey started. And usually, what we see is that this leads to the creation of 3-plus agents at each of our customers.

Got it. Could you dig into that Teamwork Collection motion. It is a relatively new motion for Atlassian. But to your prior point, you talked about the business solutions outside of IT and development being the faster growing part of the business. I think Teamwork Collection is a big part of that. Can you talk to us a little bit about what are the customers using it for, right? And to certain extent, it reminds me a little bit of ServiceNow, right? When they move from ITSM into the broader business, but they had a very discrete solution. They brought out an HR onboarding solution or a legal compliance solution. How do you guys look -- how does Teamwork Collections bring you guys into those broader business use cases? And what are they?

Sure. Great question. So Atlassian is very interesting because like I said before, we entered into organizations and we entered into a department and then we spread within an organization. And now as customers have moved to Teamwork Collection, it's made the selling process for us within sales a lot easier because we've moved from product. And obviously, we're coming from a product-led growth motion to positioning outcomes. That's a journey that we, as an organization, are on to move more toward solution selling and less focus on the product motion. So as we position the Collection in total, we now focus on the outcome that we are driving for the business.

We have champions within organizations that are within dev and IT. We now focus in on the business, and we talk to the business around the outcomes that we're going to be driving for them and how we can best support their particular area of the business. We have invested into our business value advisory team that helps us drive quantifiable results for the business in terms of dollar savings for the business as well. And at the same time, we also have a specific persona-based approaches that we also adopt, which is, again, new to Atlassian coming from a product-led motion.

And when we look at the customers who have embrace Teamwork Collection, we have customers like Workday. Just recently in Q2, Workday, Tripadvisor, a large ride-hailing app, which I'm not allowed to tell you the name of them. And Publicis Sapient also and many, many more. As I said, 1,000 customers who have done this. And as we move forward, we expect the majority of our customers are actually going to embrace the Collection because that is the direction of travel, one of Atlassian, and that is where they received 10x the credits for Rovo, and that is where the majority of our customers are heading towards.

Got it. And what -- and sticking with the theme of like the go-to-market and the evolution of that go-to-market, what role are partners going to play in that and helping you guys become more solution focused? And how are you shifting like the partner channel to become more value-add rather than just maybe fulfillment-type partners?

Yes. So the partner ecosystem has done around 50% of our revenue in total. And the ecosystem when I arrived was compensated from a transaction-based approach. So we implemented a fair degree of changes to have them compensated more on outcomes-based. So there was various categories, let's say, of partners. There were partners at the top of the pyramid, who really already had transformed and these changes weren't significant. There were other partners, let's say, in the middle of the pack who had to make certain investments into services, and they knew this. And then we had partners at the bottom that were purely transactional. Some of these partners are clearly going to struggle. But honestly, those partners are not the partners that are going to bring us to the next stage.

We have a great thriving ecosystem and a great community that is very passionate about Atlassian. I was just recently with some of them because we see a massive opportunity for us around Jira Service Management. And we want to expand our footprint in this space. And I was very open saying we're going big in one particular part of the world, which partners are going to come with us. And our partners very quickly leaned in, and they're going to lean in Asia with us. And it's great that we have that relationship with the partners.

We've made investments into them in terms of the right partner managers for them. We also have the correct KPIs in terms of tracking success for them and tracking success for us. And I would say that we have a very open and transparent relationship with them, and we are also rewarding them for the right type of behavior and support that they give us also.

Got it. Let's double click on the Jira Service Management opportunity. Service Management, $18 billion market. Atlassian, you guys have talked about 14x faster implementation times, 15% lower TCO compared to some of the incumbent solutions. Previously, it's been more of a together with some of the higher-end existing solutions. Does this turn to be more of a competitive dynamic than an ability to replace some of those existing more expensive solutions? And how are you thinking about the right to win for Atlassian in these broader service management deployments?

Yes. So myself and the team are very passionate about Jira Service Management. Since I arrived, we've doubled our specialized sales force that is focused on Jira Service Management. Jira Service Management is our fastest-growing business at scale within Atlassian, and we will continue to hire in that particular space at a significant clip as well.

We have 65,000 customers that are Jira Service Management customers. We have a massive opportunity to cross sell because when you look at Jira, we have 125,000 customers. Confluence, we have 100,000 customers. We are win in mid-market in this space. When we go up head to head against competitors, we win 7 times out of 10 in that space. The challenge we had purely was a capacity problem. We did not have enough capacity. And now we are really double down in terms of capacity in this space. So I anticipate that we're going to continue to make progress in mid-market.

As we look at enterprise and strategic, there are certain gaps that we have from a product perspective. We will finish out those gaps. When we finish out those gaps, we will be completely competitive. That will allow us to go head to head with the competitors who you know. And that will mean that it will be game on in that space.

We have had a rip and replace of competitors as well. We also have a scenario whereby we are actually running side by side with some of those competitors. So for example, at Mercedes-Benz in Germany, we are running side by side with ServiceNow. ServiceNow has a bigger footprint than us, but we are running side by side. Our goal, we're going to prove it out. We're going to prove that it works, and then we are going to expand.

We have had a rip and replace for ServiceNow at CLEAR, the folks in the airport that gets you through nice and fast, where we had similarly at Saint-Gobain in Europe and many, many more. The goal that we have is we're going to continue to hire in that space. We're going to continue to expand our ecosystem as well. And then we're looking at new rights to market, for example, around managed service providers as well but very bullish on the opportunity and look forward to as we move up the pyramid in terms of enterprise and strategic as well.

Got it. I'm going to try to sneak one last one in, in 4 seconds. And really ending up where we started off on sort of the cloud transition, you guys have transitioned the server business successfully, much lower attrition than was originally anticipated and starting to see the expansion of those server customers now that they're in the cloud environment.

Can you talk to us about on the data center side of the equation? You now have an end of life. You have the Ascend program to help people do that migration. How should we as investors think about 2 components? One, that time frame for migration, what's going to be some of the factors that will speed it up or slow it down? And two, what's the pot of gold at the end of the rainbow, if you will? What's the opportunity for a data center customer now that they're in the cloud environment? Is there that same type of broader expansion and upsell capability in the cloud for that data center customer?

Sure. Great. So firstly, we obviously announced this, and we -- I think it was a matter of when we were going to announce this, not if we were going to announce this. There was not a massive amount of turmoil in the market when we announce it, firstly. We obviously have various cohorts of customers in terms of complexity who are ready to move to the cloud and then some that we need to work closely with, like I said at the beginning, because of their complexity.

We have spent a lot of time with the ecosystem to ensure that they are ready to support us from a capacity perspective to move to the cloud, and I feel very good about where we are now and also good about the ecosystem and the hiring that they are making, which is why we have the incentives that we do in place because we will reach an inflection point here with more and more customers moving. We track very closely when we sign to when a customer actually starts that project to when it's actually adopted to the point that we're tracking monthly active users down to daily active users now to literally see where they are in their journey.

And then when a customer does move to cloud, obviously, the experience that they have from everything from a user interface, it's completely different to innovation is completely different because the ability to consume and adopt Rovo is there in the cloud. Their ability to do so from an innovation perspective is really limited in data center. So they will experience something completely different. And then from a sales perspective, it opens up a lot more opportunities from cross-sell and upsell perspective for us.

I will say, at the same time, there is a fair degree of work for us to be done for some of our larger customers, no doubt. However, we are also working with some customers in terms of isolated cloud already. And I have no doubt that we're going to continue to make progress in terms of supporting these more complex customers who are also leaning in heavily with us as well.

Outstanding. Look, a lot of exciting stuff going on Atlassian in terms of an evolving go-to-market strategy, expanding solution portfolio, expanding scope of what you're able to do with the customers. So thank you so much for sharing that story with us at the Morgan Stanley TMT Conference.

Great. Thanks for having me.

Awesome.

Good afternoon, and thank you for joining Atlassian's earnings conference call for the second quarter of fiscal year 2026. As a reminder, this conference call is being recorded and will be available for replay on the Investor Relations section of Atlassian's website following this call. I will now hand the call over to Martin Lam, Atlassian's Head of Investor Relations.

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Welcome to Atlassian's Second Quarter Fiscal Year 2026 Earnings Call. Thank you for joining us today. On the call with me today, we have Atlassian's CEO and Co-Founder; Mike Cannon-Brookes, and Chief Financial Officer, Joe Binz. Earlier today, we published the shareholder letter and press release with our financial results and commentary for our second quarter of fiscal year 2026. The shareholder letter is available on the Investor Relations section of our website, where you will also find our other earnings-related materials, including the earnings press release and supplemental investor data sheet.

As always, our shareholder letter contains management's insights and commentary for the quarter. So during the call today, we'll have brief opening remarks and then focus our time on Q&A. This call will include forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events.

Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made, and we undertake no obligation to update or revise such statements should they change or cease to be current. Further information on these and other factors that could affect our business performance and financial results is included in filings we make with the Securities and Exchange Commission from time to time including the section titled Risk Factors in our most recently filed annual and quarterly reports.

During today's call, we will also discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and are not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. A reconciliation between GAAP and non-GAAP financial measures is available in our shareholder letter, earnings release and investor data sheet on the Investor Relations section of our website.

We'd like to allow as many of you to participate in Q&A as possible. So out of respect for others on the call, we'll take one question at a time.

With that, I'll turn the call over to Mike for opening remarks.

Thank you all for joining us today. As you've already read in our shareholder letter, we closed out Q2 with very strong enterprise sales execution and incredible momentum across our business. We surpassed $6 billion in annual run rate revenue delivered our first ever $1 billion cloud revenue quarter, up 26% year-over-year and grew our RPO 44% year-over-year to $3.8 billion.

We have strong momentum across our enterprise, AI and system of work transformations, and you can see this in our numbers. Customers are choosing us for their future in bigger ways and bigger numbers than ever before. Enterprises like Cisco, Expedia, Reddit and Synchrony Financial, rely on Atlassian to power their most critical business processes and workflows.

Rovo surged plus 5 million monthly active users of our AI capabilities. We're seeing firsthand every day how AI is transforming the way that work gets done, and we are directly benefiting as a business. When we look at the thousands of customers in our software teams using AI cogeneration tools, we found that they create 5% more tasks in Jerome, a 5% higher monthly active users and expanded 5% faster than those who don't use these AI coating tools.

As I've said before, AI is the best thing to happen to Atlassian and the results we're seeing today are no accident. As a long-term focused company, we're now benefiting from years of thoughtful investment across product, R&D and GTM, which have positioned us to capture this moment. These investments are creating what we believe is a truly differentiated customer experience. First, the data and domain expertise living inside our teamwork Graph, which is now well more than 100 billion objects and connections across first and third-party tools, enables Rovo to deliver real business value that's context aware and actionable for customers across their search, chat and agentic experiences.

Second, our decade-long investments in enterprise-grade security, data governance, permissioning capabilities and compliance enable every organization to securely move work forward at scale while deploying these fantastic new AI capabilities with the trust that they need. We provide a system of work built on deep integration into customer workflows with that compliance, security and support that enterprises trust built in. Lastly, our unique distribution engine enables us to seamlessly deliver those incredible experiences to over 350,000 customers, including more than 80% of the Fortune 500 and 60% of the Forbes AI 50.

Customers are realizing the value of our unified system of work and want to continue to partner more closely with us than ever before. And all of this is driving our results. We closed a record number of deals greater than $1 million ACV in Q2, nearly doubling year-over-year again as enterprises are choosing to standardize on the Atlassian system of work. In less than 3 quarters, more than 1,000 customers have upgraded to our main AI monetization driver, the Sor Collection, purchasing more than 1 million seats to get the best AI platform and many more AI credits for their agents. As I look across our business, 2 things are clear.

We've never been more of a strategic partner to the biggest businesses in the world, empowering their AI and future of work transformations. -- and our momentum is continuing to grow. This gives us confidence in our road ahead and our long-term opportunity. We are truly transforming how work gets done and solving the toughest human AI collaboration challenges for our customers, and we're doing it every day. We're pushing ahead with strong conviction, and I could not be more bullish about the massive opportunities in front of us as we advance our mission to unleash the potential of every team. With that, I'll pass over to the operator for Q&A.

[Operator Instructions]

Your first question comes from Rob Oliver from Baird.

I appreciate the clarity and conviction in the letter. Obviously, a ton of fear in the market right now on software. So I thought I'd address it by asking you about some of the conversations you're having with your buyers right now. Clearly, the numbers show, whether it be cloud NRR, million deals, Rovo adoption that existing customers are expanding with you -- and in the letter, you called out some of those reasons. Cisco around data, Expedia around customer familiarity.

But can you talk about how those conversations have changed, if at all, recently with your customers? And driving this motion towards Atlassian right now? And if AI is all changing those conversations?

Thanks, Rob. I appreciate the kinds words in there. Well, customer conversations have changed a lot over the last year. There's no doubt about that, Brian. And I would say all of those changes have been incredibly positive for us. The customer conversations we're having are at a higher level than we've ever been having on before. And those customers are looking for strategic partners to help them through AI.

They continue to appreciate our delivery of that AI value to them inside their processes and work for us. They will call this out directly. We get called out directly that AI capabilities are the reasons people moving to the tumor collection. There are the reasons that people are upgrading to the cloud. They're the reasons they see our R&D investments, they use our chat capabilities, our agents in millions of workflows now per month, they're able to deploy them, get them up and running and get value from them quicker. We have so many customer quotes and examples where they see this, right?

We've long put software in our customers' hands for them to use and deliver on. That in turn, makes those customer conversations about longer-term commitments, right? As you pointed out, you see that in our numbers right -- our RPO at 44% growing accelerating for the third quarter in a row, is a really fantastic vote of confidence, I believe, from those customers, right? Those are tens of thousands of seats signing multiyear deals that are voting on not the platform for 2026 for them in AI, but the platform in '27, '28 and '29. And those customers are seeing what we're doing, seeing our progress and voting with their feet.

There's a lot, obviously, of noise out there in the market, as I said in my shareholder letter there's no doubt about that. But when I talk to customers, they believe that we are helping them through a lot of that noise. We're delivering for their software teams, their business teams and their business process, and they're able to get efficiencies and improvements today. And I would say they want all the same things they've wanted in the past.

Sometimes these type of times when there's a lot of nuance, right? We can forget the fundamentals, right? Enterprise customers want a platform they can trust. They need it to be compliant and secure and all the things they've always needed. They want great ROI, they want efficiency in their business. AI enables us to do that better than we ever had before in our domain of helping their teams to collaborate and be better. I think we're seeing it in all of our numbers across the Board.

So again, that's where you hear us feeling incredibly bullish, right, about what we're doing each quarter and seeing that reacceleration.

Your next question comes from Keith Weiss from Morgan Stanley.

Yes. This is Sanjit Singh for Keith Weiss. Congrats on the $1 billion quarter in cloud and the progress with teamwork collection is really nice to see wanted to follow up on Rob's question in terms of kind of the reality on the ground in terms of what the market is sort of asking and calling forward versus what customers want and specifically around pricing.

And like I'd love to hear your take on where does pricing go to and evolve over the next 1 to 3 years, market seems concerned on seat-based models, seat-based pricing. Customers probably like seat-based pricing. And so what's -- or do you think this all shakes out in terms of where we're headed in terms of the pricing monetization story for Atlassian?

Sure. Thanks, Sanjit. Look, a totally valid and important question. When you start with the numbers that you can see it and then I'll talk to our philosophy. You can see in everything from the IPO to our NRR number, again, 120% ticking up for the third quarter in our 120-plus north of 120% and ticking up for the third quarter in a row. The pricing we currently have is delivering, right? For the customers, they are opting for more of what we are doing. And price is not a huge part of any of these conversations that we're having with our customers.

It always is they want to get good value. They want to understand, but we're a very good value option. We always have been and we continue to be so. The conversations around consumption-based pricing and pricing models changing. Again, our philosophy has always been to deliver the best value we can in the overall ROI sense to our customers. It is our job, I believe, as an application vendor, not an infrastructure vendor, but an application vendor, a platform vendor to manage the costs of everything that we have in the envelope of what the customers pay.

We've done that in storage. We've done that in network costs. We're now doing it AI costs. And the customer's preferred method of payment is still an understandable predictable pricing pattern, which tends to be a seat-based model in our category of software in terms of delivering collaboration tools for teams of people -- how many people are collaborating is a best proxy at the moment for value, and I believe, continues to be so. you could worry about our AI costs.

Again, you can see in our gross margin improvements for, I think, probably the third or fourth quarter, don't quote me on that, continuing to improve our gross margin that we're able to deliver those 5 million rovo seats and continue to improve gross margin. That's a huge achievement on behalf of our engineering teams but it shows that we can manage those AI costs inside for the vast majority of customers.

Now we do have consumption-based offerings, as you can see, everything from forge to extra AI credits, if you go over the limits to bid backer pipelines like there are consumption-based offerings. So we are very clearly in a hybrid model of that. But we do try to make our pricing philosophy what is best for those customers, right? They want to buy their applications, not on a consumption basis but on a familiar predictable basis, it goes into the total cost of ownership that they look at for that equation. So we feel really good about where we're seeing it.

Lastly, you would see the million seats we've passed into more collection in under 9 months is a huge achievement on behalf of a lot of teams at Atlassian. That has a predictable pricing pattern that is there, that's gone from 0 to 1 million seats another 9 months. on this pricing pattern. And those are customers that are upgrading why because of the pricing philosophy, but also because of what the tumor collection gives them as an AI platform and gives them significantly more AI credits, right?

So when they look at that upgrade, AI is on of the reasons, but it's baked into the pricing plan that we have on. And I think at 1 million seats, we'd argue it's working really well. It's still early in that business.

Your next question comes from Gregg Moskowitz from Mizuho.

Well, we are in a software twilight zone of sort. So when a company who stock is down almost 40%. And 5 weeks on no company-specific news just reports a strong quarter. Rates guided and makes a significant commitment to accelerate the buyback. And yet the shares are right now indicated down lower or an additional 10% -- so I really do sympathize with how frustrated you all must be.

Now as to my question, it's for you, Mike. And what are your thoughts on the medium to longer-term prospects of Anthropics co-work as a competitive alternative to Jira. Also, I think it's important to get your perspective on coworks new plug-ins. And so if we were to compare this to the most common cases, what could something like a cohort plug-in automate for JIRA, but also where would it fall short.

Thanks, Gary. Again, I appreciate the sound, the kind words you see as frustrated as we are. So that's great.

Look, firstly, I would say Entropic is a great partner of Atlassian. We use a lot of their models. We use a lot of their coating tools and working tools. We've just both become partners of Atlassian Williams racing, which is wonderful.

We're both helping that team to get to the front of the grid with the combination of all of our software and tools. And I think that's a great example, Brian. There are going to be new tools that arrive with -- and those new tools are going to deliver new capabilities. We're seeing that every week, every month, and that is great for our customers. Those tools continue to require data, they continue to rewire places to exchange one of the greatest users of our MCP server, as an example as a way to get to Atlassian's offering and the teamwork Graph and the context we have in those other tools is through things like coworking use of Atlassian MCP server. That is really good for us, right, because it enables you to see how you can utilize and contribute back to the team of graph from lots of different tools used in lot different contexts.

There is no doubt some of these tools are going to exist in different places with some overlaps. There are significant value, I think, between our offerings and those offerings. So we don't see that as being perhaps the challenge that others do out there. There's a great partnership opportunity there, and we continue to explore that. We continue to use their offerings really strongly internally.

There are always going to be a lot of differentiations out there. Our teamwork graph is very differentiated. The context we have across our applications and other applications is very useful for any of those agenetic tools.

At the same time, you're still going to need human beings in the process in lots of different places. Approval workflows, business processes, they can be accelerated in motorsports. That's exactly what we see customers doing with robo agents and with all of the other agents that can now operate inside of Jira. Those agents are accelerating business process in lots of different ways. They're not eliminating the human impact, right? The human AI collaboration is incredibly important, and I think it continues to be so.

Lastly, I would just say that, that's not new for us. Our philosophy of integration goes to listening to customers. The history of enterprise technology is about integrating with various different offerings, right? We work with lots of different products to make sure that our data and our workflows are integrated with what the customers are using. We'll continue to do that. That is a very strong part of our philosophy, and I believe what customers really resonate with that we are -- we're integrated with deeply and matched in their processes and workflows, and we'll continue to help those workforces get more efficient.

Your next question comes from Karl Keirstead from UBS.

Maybe I'll direct this one to Joe. I noticed in the shareholder letter, you talked about next year, just warning the Street that the DC segment, obviously, on the back of a tough comp would be down meaningfully. I guess the spirit of my question is, if we go back to the medium-term guide that you offered 1.5 years or so ago, I think we would get to sort of an implied total revenue growth, if my math is right, of 19%, 20% next year. If DC is meaningfully down, I guess I just wanted to test your confidence that the cloud revenue can be up enough such that you still feel comfortable with hitting that previous guide through fiscal '27?

Yes. Thanks, Karl. We do continue to have confidence in the long-term cloud guide. If you think about the short-term guidance, we've taken the same approach in Q3 and FY '26 that we followed last year. The growth drivers for the cloud business going forward continue to be very consistent with what we shared at the last Investor Day.

We expect to tap into large market opportunities to drive healthy revenue growth through our strategies around enterprise AI and system of work. All of that drives a great number of users, higher ARPU and more opportunity for cross-sell and upsell to higher value additions. And with AI, we believe we have a unique and differentiated position at this critical pivot point in the market with our teamwork graft around high-value mission-critical workloads, combined with our cloud platform, and there's a lot of long-term opportunity in that space as well.

So overall, those are the big drivers, and we continue to expect to drive healthy revenue growth over the next 2 years in cloud.

Your next question comes from Alex Zukin from Wolfe Research.

I guess in the spirit of the first 2 questions. Mike, it feels like you guys are continuing to see really solid growth and really solid progress on all the initiatives you've laid out. But I guess my question would be given the fact that you're probably already both benefiting from within TeamWorks collection, a number of AI consumptive drivers. You're seeing rovo and you're starting presumably to see your customers use agenetic interactions even from other systems to enhance the value that both Jira and Confluence provides a teams.

At what point would you at some point expect to see monetization increase, improve and that greater value proposition to result in acceleration, and stability of the cloud number specifically? And when do you think that will actually happen?

Alex, I can definitely talk to that. Look, I want to reiterate, firstly, what Joe just said in the last answer, we have our long-term guide. We firmly believe in reiterating our confidence in that guide. And hopefully, you can see in things like our IPO numbers and NRI numbers, so our retention and our remaining performance obligations that there is a confidence in that long-term future that comes across.

And both of those RPO and NRI numbers are across both cloud and DC competitive. So that's important. I think you're seeing it today. So we run into this tricky bond. You are seeing that acceleration today. Our RPO number has ticked up for the third quarter in a row and is growing significantly faster than our cloud revenue growth and the cloud revenue growth also accelerated this quarter.

So I believe you're actually seeing that today and it will flow through. These customers are signing multiyear 3-year live scale deals. So in terms of at what point do we expect to see monetization, we're already seeing it and we'll continue to see it, Brian? It's one of the #1 reasons to move to the cloud and to upgrade to our cloud platform.

AI is one of the #1 reasons to choose the TO collection as a higher offering, and that is a great economic equation for our customers and for us. You're seeing more than 5 million AI -- as you pointed out, and millions of Agentic workflows now running every single month. All of that is leading to our customers continue to expand their commitment to the Atlassian platform.

AI is a huge part of that platform. Like we should not mistake that. It's one of our 3 big transformations. We're heavily invested in delivering at AR to our customers. That monetization is coming through in the 2 more collection numbers we're seeing in those long-term customer commitments. They understand what we're building today. I see the road metal of what we're building tomorrow. Customers have faith in our delivery. Again, the things we announced at our conferences, we ship. We ship those very, very quickly now increasingly quickly after those conferences.

What that does is build this long-term customer trust. We invest heavily in R&D, as you all know, and we build great AI solutions. Our agents often in customers are the quickest thing that can get deployed with the highest value and so I think we're actually -- we're seeing that today. It won't be a singular moment like a step change or a single thing, we'll continue improvement, right? Continued improvement every quarter, but we are seeing that today.

Your next question comes from Ryan MacWilliams from Wells Fargo.

The second question for Mike, as new models get released, we're hearing examples of developers switching between different models and different coding agents as they see better model improvements. How do you view your position outside of the large AI labs working to Atlassian's advantage as customers can use Jira across their organization for the long term and then while still enabling their developers to use their favorite coating tools.

Thanks, Ryan, because there's a lot of answers to that question. Firstly, we are big fans of model delivery. Every time new models come out, we take those capabilities. We've long set our strength is in adapting and delivering those models to our customers through the value. Again, our customers don't use models, they use applications, right? We don't sell chips. We sell apps, and those apps have to deliver value in those models that has delivered better value.

We have a very good AI team, world-class in adopting new models, working out where they're stronger, where they're cheaper, where they're faster, where they deliver better quality results and getting those into our products really quickly. That is our job to do. The customers may not even notice that. They probably don't. They may notice that check out a little better today than yesterday. We continue to do that. We've continued to improve chuckquality, agentic quality, et cetera. And we are able to use all the models again.

We use models from multiple foundation labs within the customers' preferences and choices. And our ability to do that if we can pick the best model for the best purpose across multiple labs. That is a good thing. And that's a good thing for our customers like fundamentally, right, in terms of their ability.

We take the same position when it comes to agents. Again, we are shipping a whole set of capabilities for Jira directly that includes Jira Service Management, discovery and JIRA itself to assign work to agents inside of any existing workflow or business process.

Now you can assign work to a Rovo agent out of the box, you can build your own agents, but you're also able to assign work to agents from all of the other big Agentic platforms. And I think that's a real strength of ours because you can model your business process in Jira, you can model your workflow in Jira and you can involve other agents from your agent platform of choice or as most enterprises we end up with multiple agent platforms, and we have an out-of-the-box offering that works for you for a simple quick cases. This is a real strength for our customers because it means that they have one workflow, and they can take the best of the best that makes sense, maybe that one set of agents in finance and a different set in sales fine.

We're able to help them across the board, again, to our view of helping integrate with the tools they have.

Now lastly, you mentioned some of the software capabilities of those agents. I just wanted to stress as we said for 20 years, we solve human problems. We don't solve technology problems. We've never solved technology problems. And when we solve human problems, JIRA is about the human reference to work. It is a piece of work that is going through a workflow, a set of changes. We use our own rovo dev tool sure. We use old school coating where you just type to characterize in, and we use many of the new AI cogeneration tools in our engineering team, which is very large and very world class.

We use all of these things. We still use a lot of Jira. Again, the statistics we're showing is that the more people use those tools, they create more issues. They have more workflows. They actually have more mariner, 5% more now at least, and they expand our seats at a faster rate because those are the most cutting-edge companies. Those are growing the fastest, road. And I think that shows that the world of collaboration and human challenge of teams getting together to decide what to do is still really important, even among all of those technologies.

So I think we have a unique position to take all those models into our customers as they need to value from them.

Your next question comes from Jason Celino from KeyBanc Capital Markets.

Maybe switching topics a little bit more of a simpleton kind of question, but curious to hear how migration activity is going, D.C. to cloud? And if you're able to quantify how much that benefit was for the quarter.

Yes. Thanks for the question. We saw very healthy cloud migrations in Q2. It contributed a mid- to high single-digit impact to cloud revenue growth rates. So given this, we continue to expect migrations to drive mid- to high single-digit contribution to cloud revenue growth for the full year. So happy with the progress, and it continues to go very well.

Your next question comes from Ittai Kidron from Oppenheimer.

Joe, for resetting there on 27 data center. I wanted to dig in into the seat expansion. It clearly was an upside driver exceeded your expectations in the quarter. But Joe, I was wondering if you could break down the seat expansion, if there's a way that internally, you look at this in the context stuff, new customer additions, expansion with existing customers whether it's developers out of corporate functions.

I mean every day, we're hearing what companies laying out more and more and more people, you're getting more and more seats. I would love to get any insights as to the flavors. Where is it that you're gaining seats -- where are you still seeing kind of good momentum over there and your confidence level about your ability to sustain the seed growth?

Yes. Thanks for the question, Ita. In terms of where we see the expansion, I'd say it's broad-based. It's across both tech and nontech users. We are making a lot of progress on what we call nontech or business users, particularly with the TWC product. Those seat expansion rates both across the enterprise and SMB remains stable -- that's been the case for 4 to 6 quarters now.

So we feel really good about the continued progress on that. And that's the way I would describe from a paid seat expansion perspective, sort of the color in terms of what we're seeing on that front.

If I can just chime in at sort of a nonfinancial and high level. Look, we're very clear that the system of work is about a continued growth of Atlassian into the knowledge worker population, right? When we talk about unleashing the potential of every team, our mission for over 2 decades, I would stress the every team part.

We've got the software collection, which does very, very well with DX and a lot of other things Encompass and a bit once pipelines like there's a lot of great areas of that software collection. We've also got the service can -- so we're seeing great growth in service collection across HR teams, finance teams, other areas outside of its traditional market in IT and operations teams but that's certainly an area of growth for us. So there's HR and finance teams. We're seeing a lot of in the service question, for example, when you've seen a ship a lot of features.

We also launched customer service this quarter as an application within that to go after a new set of teams. We haven't been able to get to as well, you would say. In the core teamwork production, look, as we said in our letter, we were seeing double-digit seat expansion more than double-digit seat expansion compared to people who buy the stand-alone applications.

And that's baked into the tumor collection packaging, but it's also because of the AI offering and how it works, right, in terms of getting you get you equate your loan Confluence and Jira seats along with your additions, which often gains expansion. But given the nature of our applications and our continued growth in business teams across an enterprise sales, marketing, HR, finance, et cetera. What that licensing structure allows us team to do is to elaborate more and collaboration is a very sticky and kind of viral activity.

So that's where you're seeing that expansion coming through in our Mal and in our AI now and also ultimately ending up in our NRR and RPO numbers in terms of long-term commitments from customers that is where they're seeing expansion across business teams of all strums.

Your next question comes from Koji Ikeda from Bank of America.

I wanted to follow up on the point about customers that are using AI cogen tools are increasing JIRA uses by 5%, 5% on the task, on the MAU and expanding faster. And so what I'm trying to get at is understanding how the squares with the productivity gains that we're hearing from the cogen tools, like 30% more developer efficiency driven by cogen, does that equate to 5% more Jira usage.

Maybe I have that completely wrong, but what I'm trying to understand is how 1 helps catalyze use of the other and how we can maybe use that plus 5% increase of Atlassian usage when Gen AI is being used as a good read for other parts of the Atlassian growth opportunity.

Great question. I get into some specifics here. Firstly, that's obviously within sort of the software team and software collection. So the first thing I would say is to its host question previously, that is a subset of our user base, right, in terms of software teams, and those are generally broad technology teams as well, right?

So not just developers, but security folks and network analysts and operations teams and product managers and designers. There's a lot of different roles involved in the software team well beyond just the coding itself, but it is a subset of our total audience. And again, service question had an amazing quarter in a totally non-software sense. I think what we're saying there is it's 5% higher or at least 5% higher than non-AI code generation based company. It doesn't mean it's a 5% expansion rate. It means they're expanding 5% higher than the rate of expansion of the other groups.

So that's where you see that it's not necessarily a 5% total expand rate. You can see in NRR and other stats, it's higher than that, right. Secondly, there's a lot of reasons for that, I believe. Firstly, these are the cutting edge companies. These are the companies that are pushing the boundaries the most. They tend to be growth-oriented companies, they tend to be companies that are growing, which is great but guess who those largest companies are going to be the future is those ones that are pushing the boundaries and driving forward in a generalized economic sense. So that's really good. Those are the leading companies for us.

Secondly, yes, they're getting more efficiency. If you look at the actual delivery efficiency, floating speed is, again, 20% to 30% of the developer's job. And so you may be getting 10%, 15%, 20% improvement in the overall productivity of your organization if you have 1,000 people in R&D or something like that. But that innovation moving quicker, it doesn't mean you're finishing your road map. You're coming up with more things to do. So you're adding more tasks.

You're also creating a lot more technology, a lot more software and services, which makes your architecture more complicated. It gives you more things to manage with something like Compass in terms of the different software code bases and models and pipelines and all the different data structures that you have to deliver your technology products and services as an organization as a customer of ours.

And lastly, you create more complexity, right? The security and compliance of a bank, the governance functions that have to happen. The structuring and the downtime, the operating of that software. All of these things create your issues at large volumes, right? So if you create more software, you're going to have more management, more overhead, more collaboration. Some version of that is what we believe is happening underneath, right? You have more collaboration to do because you end up with mortallogy, and that's a good thing.

More software in the world is a good thing for Atlassian if we've said that for a couple of years now. That is I believe that we -- AI is unlocking sort of human creativity at the highest level, right? It's allowing them to create more. That means those humans have to interact and collaborate more and those creative objectives to be managed, operated, maintained and that's generalized, a good thing for Atlassian across software and non-software teams.

Your next question comes from Keith Bachman from BMO.

Mike, I wanted to direct this to you, if I could. And I wanted to get your perspective and update on JSM specifically. And I'll break that into a few parts. -- if any kind of metrics you could give us on growth and what the trajectory is, there's a lot of consternation about workflow, broadly speaking. Masco's mentioned your stock going out, and it's not the only one.

ServiceNow goes down almost every day, given concerns around the underlying fundamentals of JSM. The second part is just anything on the competitive dynamics. And then the third is really, I wanted to focus on seats for a second within the context of JSM. And is there any update you can give us on like-for-like. What I mean by that, if you have a JSM workload customer has, is that -- is there a seat degregation within the confines of a given workload I understand you're still grabbing customers. So seats are probably going, but really on a like-for-like basis, just wanted to understand some context on seats.

Sure. Thanks, Keith. Great question. A lot of questions about service collections doing fantastically. Look, we gave some stats in our. In our shareholder letter, right we cost 65,000 customers, which is a big milestone, 50% of the Fortune 500 as a business in and of itself and the enterprise side of that world growing over 60% year-on-year.

So hopefully, from those sort of high-level statistics, service question is doing very, very well. It is definitely our fastest-growing product at significant scale. And that's a really important milestone for that business. As I said earlier, yes, that growth is happening on a like-for-like customer base, like your sort of same-store sale analogy, I get what you're asking there.

You're certainly seeing efficiencies coming in some of those customers. At the same time, as a challenger brand, we are seeing great growth in HR. We shipped to 12 months ago, our whole sales of HR Service Management. -- blueprints and other areas. We're growing really well in that sort of part of helping operate a business, same in finance, same in other areas of operations, often like workplace management, these types of things.

Service collection is doing very, very well in, and we feel very confident that we have a lot more growth to go get there.

Secondly, on the asset management side, you've seen us take assets out of the service collection and put them into the core platform. That continues to be a big growth driver for us as we have a far more modern CMDB like system as a graph compared to a lot of the legacy competitors.

And as we connect the assets graph that you have of physical objects often to the teamwork graph, we're seeing our agents and our AI capabilities get significantly more powerful, and we're seeing great growth there. As such, in the last 6 months, more than 40% of the Agentic workflows that have been built are actually in service collection customers and service workflows.

It's a very natural area to deploy agents -- AI agents into your service workflows to help improve the human genic experience or the human agents experience of delivering value to the customer or the customer just getting the value directly themselves. So that is going very, very well. More than 2/3 of our service question customers are using it for non-IT use cases at the moment, which is a great sign that, that is happening.

Two other things maybe one, you see we're a leader in our enterprise service management wave. The analyst community continues to recognize us as a leader and a visionary but also a significant challenger and growth brand. And we continue to see a lot of migration from legacy service management platforms onto service collection for much higher ROI, much better cost equation with a much more modern stack and user experience, and that's really bright for us.

Lastly, it shouldn't be asked, it's definitely not the most minor. We only get our customer service management at inside the last quarter. So that's delivering great efficiency results for us in running parts of our customer service, as we've said, and very early in that journey, but really excited about how that can continue to grow the service collection as it continues to power a large part of license growth.

Your next question comes from Raimo Lenschow from Barclays.

Thanks. I have a question on the DC price increases and the gap we have to JuraCloud now. Like how do you think about that in terms of server incentives to move? Do you think there's further action that can help you there to kind of accelerate that journey. And then I had 1 quick follow-up.

Yes. Thanks, Raimo. From a pricing perspective, on the cloud, we invest quite a bit in R&D, and we're consistently delivering a lot of innovation and value to our customers. And that fundamentally allows us the opportunity to increase prices over time commensurate with that value delivery. We made that do that through pricing or packaging of premium SKUs or through list prices -- in either case, our prices today are remained significantly below many of our software peers and competitors across our portfolio.

And because of that and the pace of innovation and value delivery on mission-critical workflows, we still feel we have plenty of headroom for further pricing -- in terms of data center, we will ensure that any price changes on data center going forward fit into the deliberate and planful approach we're taking in providing the right incentives at the right time to help customers upgrade to the cloud. Overall, however, we believe we remain competitively priced just relative to the value we deliver and competitive alternatives in that space as well. So that's how we think about the pricing perspective in terms of the interplay between cloud and data center.

Yes. Okay. Perfect. And then I have 1 question. I might have missed it, but did you talk to the 20% revenue growth CAGR? Or could you clarify that because I had a couple of questions from the other audience if you kind of reiterated it or not?

Yes, sure, Raimo. There's no change to our midterm outlook calling for 20% plus compounded annual revenue growth through FY '27. And I'd say the same thing for our 25%-plus non-GAAP operating margin commitment in FY '27.

We remain confident in our ability to deliver healthy and accelerating cloud revenue growth as we expand operating margin over time. And I'd also highlight that with respect to our short-term guidance for FY '26, we do continue to take a conservative and risk-adjusted approach. So that's the way to think about that.

Thank you. That's all the questions we have time for today. I will now turn the call over to Mike for closing remarks.

Thank you, everyone, for joining our call today. Thanks to all of the Atlassian teams for delivering a truly fantastic quarter. And as always, we appreciate all your thoughtful questions and continued support from the investor and shareholder community. Have a kick-ass weekend to everybody.

Good afternoon, and thank you for joining at Atlassian Earnings Conference Call for the First Quarter of Fiscal Year 2026. As a reminder, this conference call is being recorded and will be available for replay on the Investor Relations section of Atlassian's website following this call.

I will now hand the call over to Martin Lam, Atlassian's Head of Investor Relations.

Welcome to Atlassian's First Quarter Fiscal Year 2026 Earnings Call. Thank you for joining us today. On the call with me today, we have Atlassian's CEO and Co-Founder, Mike Cannon-Brookes; and Chief Financial Officer, Joe Binz. Earlier today, we published a shareholder letter and press release with our financial results and commentary for our first quarter of fiscal year 2026. The shareholder letter is available on the Investor Relations section of our website where you will also find other earnings-related materials, including the earnings press release and supplemental investor data sheet. As always, our shareholder letter contains management's insight and commentary for the quarter. So during the call today, we'll have brief opening remarks, and then focus our time on Q&A.

This call will include forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management's beliefs and assumptions only as of the date such statements are made, and we undertake no obligation to update or revise such statements should they change or cease to be current.

Further information on these and other factors that could affect our business performance and financial results is included in filings we make with the Securities and Exchange Commission from time to time. including the section titled Risk Factors in our most recent filed annual and quarterly reports. During the call today, we will also discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and are not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliation between GAAP and non-GAAP financial measures is available in our shareholder letter earnings release and investor data sheet on the Investor Relations section of our website. We'd like to allow as many of you to participate in Q&A as possible. Out of respect for others on the call, we'll take 1 question at a time.

With that, I'll turn the call over to Mike for opening remarks.

Thank you all for joining us today. As you've already read in our shareholder letter, we're off to an incredible start to FY '26 with total revenue in Q1 growing 21% year-over-year to $1.4 billion. Our strong execution fueled cloud revenue growth of 26% year-over-year to $998 million and accelerated growth in RPO to 42% year-over-year to $3.3 billion. We continue to make great strides across our strategic priorities of enterprise, AI and the system of work. Not only do our results reflect this, but our customers are taking notice. All up over 300,000 customers, including Databricks, Expedia, Ford and Wells Fargo rely on Atlassian's AI-enabled cloud platform to power their business processes and mission-critical workflows.

We're proud of our ability to continue to deliver AI into the hands of those customers to use today. We've amassed over 3.5 million monthly active users of our AI capabilities across the platform, once again, up over 50% since last quarter. This usage is widespread across both business teams as well as technical teams. I'll repeat what you've heard me say in the past, AI is one of the best things that's ever happened to Atlassian. They need to track, plan and manage work while harnessing your organizational knowledge are things that don't change in this era. And I'd argue those things become even more important as more software is created and more people have the ability to create amazing technology that changes our lives.

AI is also directly driving demand for our cloud offerings. Customers are choosing to migrate to the cloud and they're upgrading to the Teamwork collection to take advantage of our AI-powered cloud platform. In fact, in less than 2 quarters since we launched Teamwork collection, we've seen it drive a double-digit percentage increase in users. -- as well as upgrades to higher value additions and the consolidation of competitive tools as our customers standardize on Atlassian. We're putting world-class AI at the center of our platform and throughout our entire set of collections and apps.

We've showcased our relentless pace of innovation just a few weeks back at our sold out [indiscernible] Europe event in Barcelona with AI still in the show. Of course, you can read more about all these announcements in our shareholder letter.

I want to take a moment to thank Atlassian for their tremendous execution and dedication this quarter. Without them, none of these exciting opportunities would be possible. I've talked to hundreds of customers this past quarter from all over the world, small to the biggest enterprises on the planet. And what I'm most proud of is how they're turning to us as a strategic partner to help them transform how work gets done, during a time when AI is changing their world. Collaboration becomes even more important as more creation is enabled as work evolves and as new opportunities are created for their businesses. And our customers are looking for our help. I feel incredibly bullish about how we're partnering with them and helping their businesses thrive.

With that, I'll pass the call to the operator for Q&A.

[Operator Instructions] Your first question comes from Keith Weiss from Morgan Stanley.

And congratulations on a really strong start to Q1. A lot of coding impressive product innovation, a lot of impressive numbers. I was hoping we could drill into the total revenue guide for the full year. And just to better understand the moving parts in this, and I'm looking at the chart that you guys put forward in terms of total revenue guidance going from 18% to 20.8%, but 3.2% of that coming from data center end of life, which means you're effectively lowering the non sort of end-of-life impact by 50 basis points. So given all of the strength that you're talking about in the letter, the product momentum, why is the full year absent [indiscernible] is an under life coming down by 50 bps?

Keith, this is Joe. I'll go first, and Mike will follow on with additional context. I'd say the key development that we saw in Q1 was that we had significantly stronger-than-expected cloud migrations from data center, which is a great thing for our business. As you know, this has been a big area of investment for us. It's a key strategic priority. It allows us the opportunity to provide more value to customers in ways that we simply can't on data center, and we can offer capabilities such as automation, analytics and AI, and so basically, it's definitely the most valuable and secure experience we can offer to our customers. So it's a great thing for the business.

Cloud migrations also, however, have an impact on the timing of revenue recognition because cloud revenue is recognized ratably and data center has a combination of upfront recognition and some ratable. And then lastly, the move to cloud also impacts marketplace revenue because we have a lower take rate on cloud app sales than we do on data center apps. All other organic growth drivers in our business in Q1 were either slightly better or in line with our expectations. And we've maintained that same guidance approach on those factors that we held 3 months ago. So we continue to hold a very conservative and risk-adjusted outlook for all the other variables in the growth equation outside of migrations.

So with that Q1 performance and momentum, we've adjusted our full year outlook for a greater cloud migration forecast. And we've left all other organic driver assumptions in place. And because of those revenue recognition timing differences between cloud and data center and the impact to Marketplace, this drives the 0.5 point decline in our organic revenue growth outlook for the rest of the year. And so that's the math underneath the guidance that we're giving for the full year on the organic part of the business. Mike?

Keith, I just wanted to follow on. Joe has laid out the math for you and how it pencils out. I just want to reiterate, this is a really good thing. Increased migrations is good for Atlassian, and it's great for our customers. And you can see that coming through in our results, 26% cloud growth rate this quarter, 42% RPO growth rate and an increase -- significant increase in cloud guidance, right? All while reiterating our long-term 20% CAGR growth rate that we gave out at the end of FY '24. We feel just incredible confidence in our ability to deliver against that. And I think all of the movements that Joe laid out are incredibly positive for Atlassian of the business.

Your next question comes from Kasthuri Rangan from Goldman Sachs.

I have to applaud you on your decision to do data center end of life. I think this is likely to accelerate the cloud transition, something that personally I have been waiting for, for a few years now. So Kudos on that on pulling the plug there. So the strategic question is, given that we've got line of sight into cloud migration, we're not finding multiple good battles. I wonder if, Mike, you can talk about the playbook -- the clean playbook for cloud migration in the years ahead. What are the things that you have learned from the last quarter or so in terms of tactics, especially with the new COO coming on board? How are you tackling the field engagements and partnerships with the systems integrators to take this full on because I do think it's pretty exciting what you're on to.

Thanks, Kash. I always appreciate the applause, I guess. Let me say a few things about Ascend and cloud migrations. Firstly, the partner and customer reaction has been fantastic. I think that's because we have well telegraphed to our customers, our partners, the entire community, that cloud is the future. It's the best experience for our customers. So we had very little surprise. We're very thoughtful and long term about how we've managed the transition, I think, and the reaction has been very positive as a result.

I think the removal of technical barriers and the delivery of innovation in the cloud has been a combination of effects that's really bringing that through. You see that in the number of customers that mentioned to me, for example, AI is 1 of the big reasons that they are moving to the cloud. We've learned an awful lot about how to help those customers manage that upgrade through the fast shift program, through our amazing partner network through a lot of different things over the last 5-plus years. And you see that in doubling the number of migrations seats that were upgraded in the last quarter that doubled year-on-year. That's a huge achievement for us. And it is thanks to those partners that you talked about and everybody else, and you see it in us raising the cloud revenue outlook.

So I think cloud is ready for our customers. You see that in Federal moderate in government cloud, isolated cloud, multi-cloud strategy. So we feel incredibly bullish that we have the experience to do this. We feel that it's the right experience for our customers, and we are thoughtfully managing that migration as you pointed out. So I don't think the playbook has necessarily changed as much as every year and every quarter that goes by, we get better at it. We did lots and lots of large migrations last quarter across different geographies, different industries, pretty much any country that I go to. Any city, I can point to a large customer in that geography in their industry that has already moved. So that's what gives us a lot of that confidence going forward. and allows us to reiterate those long-term targets that we laid out.

Your next question comes from Arjun Bhatia from William Blair.

Yes. Perfect. I'll let my congrats on a great quarter here. Mike, maybe I'm curious just -- obviously, we kind of knew the end-of-life on data center was coming at some point. I'm curious kind of what made you decide to do that now? Or is it just sort of the technical advancements in cloud that you've talked about comfortable -- more comfortable customers with cloud. And then just -- you're seeing the -- maybe the second part of this question, you're seeing the migration impact already, but I'm curious how you think it impacts cloud migrations for the rest of this year. and through 2027. When do you think we start to see the next step of acceleration in data center to cloud migration? Is it going to take some time? Or is that more immediate?

Look, thanks, Mike. Look, I would say that we've -- it's a continuum. So we've been investing in building an enterprise-grade cloud platform with AI and all the compliance and governance and scalability and data residency and government cloud. All of the amazing technical achievements that we've invested in over the last 5-plus years are continuing. We will continue to invest in those. But we feel like good about the ability we have right now to accommodate the vast majority of remaining data center customers in the cloud that we have today. We feel great about our execution of the cloud road map that we've laid out in front of us in things like isolated cloud. And we fundamentally spend a lot of time with our customers. We feel like now is the right time for that, that we have prepared. They are ready, that our partners are ready. We've said many times on calls, we no longer get the -- if we're moving to cloud. It's a WAN conversation with every single customer that I deal with. So I would say we just feel very good about the delivery we've had, and so now is a good time for that.

In terms of the expectation of migration, look, I would say that's all obviously, we've opened company not bullets at core customer value. So we've laid out what we see in front of us for those customers. The multiyear period of that DOL giving them time to migrate, giving them the partnerships and everything else that we need. And we have included that into our guidance and into our results. So the confidence that we feel is included in the guidance that we've given now.

And then Arjun, I'd just ask -- I'd add one other point that while we expect more momentum on migrations in the short term, there is going to be variability in the pace of these migrations quarter-to-quarter, and they will take time to move, and we expect most customers will migrate as we get closer to the data center end of life date in March 2029. So we expect migrations to accelerate in the '28-'29 time frame.

Your next question comes from Ryan MacWilliams from Wells Fargo.

Mike, this is kind of like a high-level question, but there's been a lot of user conversation around like a super app world where AI interacts with multiple different parts of your software stack from 1 pane of glass. But Atlassian has always made it easy to integrate era with some of the other software solutions. And I thought the browser company acquisition was interesting that it also makes it easier to use the last of some other your tools. So -- how do you think about a future where you try to use AI across a bunch of different software solutions and how Atlassian fits in the world.

Thanks, Ryan. Great question. Firstly, I would say we are making amazing progress in our AI capabilities and delivery to customers. I think the company broadly should be incredibly proud of shipping AI to our customers. It turns up as one of the reasons that they are migrating to the cloud when you talk to them. It shows up as 1 of the reasons that they're moving to the more collection. It shows up as 1 of the reasons they are deepening their relationship as a strategic partner with Atlassian is our core investment in AI, which is world-class. We are doing an incredibly good job at delivering AI to customers to give them the benefits today and giving the confidence that we will continue to deliver that into the future.

JIRA has always been an incredibly integrated tool. We're very proud of that. The Atlassian platform is incredibly integrated. You can see that there are a number of partnerships that we've signed up in the last quarter, a lot of which are listed in the letter to integrate our platform with other offerings that customers have. It's a core part of our customer value proposition is we believe that your best technology, well, your best software world, is a deeply integrated and deeply connected world. You can see that in the ability to use Atlassian's AI off Atlassian from within other tools. and vice versa to use other tools from within the Atlassian world. And I think that will depend on where the customer workflows are and where they are working. Most prominently, recently, you can see that in Jira's ability to assign work items to agents. Whether those are technical agents from [indiscernible] Gerhard or cursor or whether those are nontechnical agents from [indiscernible] CanbaorBox or someone else.

This is about taking your Jira workflows and business processes assigning parts of them off to AI or agents as that world evolves and then bringing it back in for collaboration with further users. So I think we will continue to be integrated. I think that's the best outcome for our customers. And I think that our -- everything from the teamwork graph to the design expertise that we're putting into our AI offerings to just a world-class set of capabilities that come with Rovo is showing up in our customers, and it is a reason that they are more deeply partnering with us. So incredibly proud of the delivery we've had there and a lot of work to do every single quarter as we go forward. We're rolling.

Your next question comes from Alex Zukin from Wolfe Research.

Sorry about that. I was just having some voice issues. Maybe guys, just -- some of the most interesting commentary from the letter, I think, was your commentary about looking at your cohort of customers that are also using some of these AI coding tools and how they're up those customers are adding seats to the tune of 5%. What other anecdotes do you have to share in terms of other product attainment and adoption trends that you're seeing from that kind of super user cohort? And then maybe just a quick one on DX, specifically, how you maybe see that accelerating some of the uptake in expansion with respect to the cloud portfolio. .

Thanks, Alex. Look, I'm well on record at this point as saying I firmly believe there will be more developers in 5 years' time. There'll be far more people creating software and a far greater amount of technology in the world, which is great for all of us. And that significantly expands Atlassian's opportunities. Why do I have such conviction maybe important to note. We have the best data. We have amazing visibility right now, 300,000 customers, 80% of the Fortune 500, 60% of the Forbes AI, 50 Atlassian customers, right? We're mission critical and central to their business processes. We have tens of millions of developers, engineers, product managers, designers that use our applications across millions of temps. So we have some pretty phenomenal insights into how customers get work done, how they build software and how they build technology.

And as we said in the shareholder letter, we continue to see really healthy user growth. The statistic you gave. We look at a cohort of our customers that were using co-generation tools, GitHub CoPilot, [indiscernible] cursor. We excluded Rovo on purpose, so as to remove bias of our own sort of customer base. And those customers using those cogeneration tools or expanding their paid seats on Jira at a rate 5% faster than those who didn't. They were managing more than 20% more projects than those that didn't. And importantly, all of those 3 and others are working with us in partnership to bring their agents into Jira, into the business processes and workflows that they are using because that's where customers are doing work.

The other anecdotes that we might have. Look, we've given a lot of statistics here, right? The Teamwork graphs is phenomenal. It's up over 100 billion objects in connections and continuing to grow at a really incredible clip. Our AI interactions are up almost 150% in the last 6 months. We've tripled the number of tokens we processed quarter-on-quarter. So millions of workflows, which involve automation and agents. We are doing a really good job in AI. AI is a fantastic thing for Atlassian's business. And for our customers, it creates lots of great opportunities for us.

You mentioned DX. I think as customers are changing the way they build technology and software, they want to make sure that they are getting the right amount of productivity, where their investment is going and where they're getting back from this increasing engineering force that they have. Every business is becoming a software company at some point. And hence, DX doing a fantastic job at explaining the customers their developer productivity, where they can improve and how they can take actions on that. And especially when it comes to bringing in all of the AI coding tools we have today and the ones that are coming tomorrow and to show those customers how that is working. I think it will be a really great part of our portfolio. It's a fantastic team. So we're incredibly bullish about that when the deal closes, and we can move forward.

Your next question comes from Gregg Moskowitz from Mizuho.

Congratulations on a really good performance. Mike, I also, like Alex, was pretty fascinated by the data you provided that you just spoke to a moment ago. And I'm wondering if it's possible to give us a rough sense of the size of this cohort that might shed some light on data would, in fact, be a fair representation of what your customers may be doing, again, particularly the ones who are utilizing by coding. And then secondly, for Joe, just to clarify, because the guidance puts and takes are a bit confusing. Is your fundamental growth outlook stronger, weaker or unchanged as compared with 90 days ago?

Thanks, Gregg. Look, we wouldn't give out any statistics that we didn't feel were statistically relevant in terms of the size of the cohort that we are going through. Obviously, we are very invested in making sure that this is the case. And I think it's a fair representation of what the best companies in the world are doing, and we believe there will be many more companies that following those parts over the years ahead, as do we believe that AI will continue to improve those abilities and processes. We saw that in our Rovo Dev going GA this quarter, which is doing a fantastic job at a lot of different things, right? I believe, over half of the security incidents that occur at Atlassian, the findings are coming from Rovo Dev. So there are a lot of abilities for AI to continue to improve technical business processes in building software, but also in the service question and an AI ops and the ability to run and operate software, there is a lot of work to be done, a lot of amazing things to be built. But we do think it's going to be great for Atlassian's business.

And we think that human-AI collaboration, whether that's in a software team, whether it's in a business team, whether it's in a service team, is right at the heart of what we do for our customers. And at the same time, I will point out there's a lot of enterprise concerns when I talk to customers around governance, controls, auditability, traceability, permissions. There's a lot of new issues coming up with a lot of this AI technology. And we're right at the forefront of giving enterprises as we've shown in Rovo and in our AI cloud platform. the ability to have the right level of controls and governance that they need and the right level of those change and movement. So incredibly bullish from my point of view on what AI is doing for Atlassian's business, as I've said, and how our 3 big transformations, AI, enterprise and the system of work are delivering today in the cloud growth rates that you see in our RPO growth rates and our commitment to our long-term targets. So I'll let Joe answer on the financial question.

Yes. Thanks, Mike, and thanks, Gregg. Gregg, we fundamentally believe our business in FY '26 will be stronger today than we did 90 days ago. That will show up in better bookings. That will show up in better ROA and it's driven by the Q1 outperformance and the fact we expect greater volume of cloud migrations through the rest of the year. Hope that helps.

Your next question comes from Fatima Boolani from Citi.

Mike, you have AB tested effectively this concept of consumption pricing. There was some of that introduced last year under the confines of I'm wondering if you can share an update on how pervasive that modality is in terms of monetizing some of your innovation that's come down the pike in the last 12 to 18 months. And maybe more specifically -- how does VI coding and coding assistant and coding assistant related code generation that is poised to absolutely load software code generation. How do you get to capitalize on that as all of that gets shipped inside Jira environment that is held captive and worked out of a Jira environment. I'd love to get your perspective on how you can capitalize on that trend by way of consumption pricing. And again, how pervasive that is generally within the base today?

Thanks Fatima. Look, we have a series of different consumption-based pricing offerings as we have announced and shown from the Rovo and AI credit world to the service collection world of agents and assets to Bitbucket pipelines to Rover Dev to forge CDP, that is certainly something that we have as an option set for our customers. It's one of our elements of monetization. I think it is certainly, something customers are interested in. It's certainly something that they're also cautious about. I think the most important thing for us when it comes to your question about AI monetization, I would say we are already seeing it.

Our 3 strategic priorities, right? We reiterate them because they are so important to us, delivering a world-class AI platform, continuing to grow our enterprise capabilities and the system of work across our customers' teams and enterprise. We're making amazing progress in all 3, and I will say that it's directly driving the results we see in Q1. it's directly driving the cloud growth rate of 26%. It's behind accelerating our RPO to over 40%. So we are already seeing that in everything from cloud migrations to the AI stats we have to the edition upgrades. So this question of monetization, Teamwork collection, right? Customers that move there, talk about AI. Every customer I talk to mentions AI is one of the reasons that they're moving to the Teamwork collection to the cloud, et cetera. And we have a huge number of customers that presented [indiscernible] a couple of weeks ago in Barcelona from Mercedes Benz to Sonos to [indiscernible] FanDuel, the 24-hour fitness, all giving amazing feedback on our AI capabilities across business teams and technical teams and our ability to connect both of these is at the core of the system of work.

I think this question of cogen and capitalizing, we've a lot of stats on how it improves Jira. And I think the fundamentals there are about human and AI collaboration you will still need and you will have work items that are assigned to various AI agents that come from probably a lot of different platforms, ours and others. We solve human problems. We always have. And at the core of those human problems is collaboration and that's why we're putting that at the core of our AI platform and making sure we deliver world-class capabilities in all of these ways. And I think we're already seeing that flow through in our monetization and bullishness as we head into the future on our ability to continue to build the R&D to do the world-class work and hence have greater customer partnership is very strong right now.

Your next question comes from Raimo Lenschow from Barclays.

Congrats from me as well. Mike, 1 question as we kind of evolve in this new AI world, how do you think about M&A or build versus buy in this for you. I'm thinking about the browser company. I got a lot of questions of people how that would fit into the new world, et cetera. Can you just speak to that, please?

Raimo, sure. I can talk to that question. Firstly, I would say that there's no change in our M&A philosophy when it comes to AI or anything else. That's a really important point. We've had the same philosophy for well over a decade now. We look for companies with a great strategic fit to Atlassian -- we look for great teams that feel like they belong in our trial, an opportunity that fits both sides. We have to have the capital to execute. And the timing has to be right. That philosophy hasn't changed. We don't believe all the innovations outside of Atlassian. We don't believe all the innovations inside Atlassian but last year, we take a very pragmatic and long-term view. I think you can see in some of the stats we gave in the shareholder letter from the Lunacquisition, it's just lapsed 2 years. and it's built a fantastic business north of $100 million ARR already. That's stand-alone. That's with no contribution from Teamwork collection, driven by AI, and the AI SKU, right, which is growing over 100% year-on-year.

Why is that well? If you go back 2 years ago and have a look at what we said at the time of that acquisition, younger people joining your workforce, video thecoming a bigger part of how they want to communicate and collaborate. remote work, distributed companies and AI changing the nature of how video collaboration can work for both consumption and creation. I think we've done a pretty good job of paying out all of those trends and movements as we've navigated through the last couple of years. And Loomis a fantastic part. It's a huge reason why customers are also talking about moving to the timber collection in terms of media recordings and the team has done an amazing job to continue to deliver on innovation. So we continue to think about that when it comes to our acquisitions.

The browser company and DX booked 2 very different acquisitions for different strategic rationales as we've tried to communicate. On the browser company specifically that you mentioned, I think our belief is that AI is going to continue to reshape how and where knowledge workers get their work done, that technical disruptions and changes if you look back at history, have tended to change and shift the enterprise layer, the points of interaction and today's browsers were built before we had this explosion of SaaS apps and well before we had any of this AI era, and they weren't really built for knowledge workers. And we think that by optimizing for knowledge workers and the SaaS as they use and building an amazing product that fits into today's world and the enterprise world, happening with AI skills and agents and the teamwork graph and all the things that we have as well as enterprise-grade security, compliance, governance, especially when it comes to AI, there is a fantastic opportunity for us and that [indiscernible] company fits all of those criteria I gave earlier in terms of M&A. They're doing an amazing job. And we think between the 2 companies, we can really make an impact here. So just closed, we'll get cracking on doing some amazing work and hope to have some similar results to report to you into his time.

Your next question comes from Robert Oliver from Baird.

Great. Mike, you guys have done a lot of preparation for this cloud move. And it seems like projects like Ascend are working really well, fast shift team. when you think about your extended partner network, how well developed is the cloud motion with them currently from Marchex, A lot of them have been out kind of early on that. But as you guys really accelerate end of life on D.C., how prepared is your extended partner network to help you guys manage this transition?

Thanks, Rob. Yes. Look, I would say we continue to be a long-term thinking company that makes these changes over the multiyear period. I think we've seen that play out over the last 5 years in this cloud migration and I expect it to play out over the next 5 years. The partner program and our channel broadly play a critical role in that transition. I spend a lot of time with lots of different partners all over the world. We have continued to communicate openly with that partner network. It's been well telegraphed to them. and they have continued to evolve their businesses to understand both how to help customers migrate to the cloud. FareShift is an additive element to those partners, and how to explain to customers the benefits of AI, for example, in their business, which is a positivity of moving to the cloud, but again, one of the areas where our partners can really excel and are starting to hit some real wins in terms of delivering those workflow improvements to customers on our cloud platform, which further incentivizes other parts of those large customers to move to the cloud.

So a very thoughtful and measured approach, long-term thinking from Atlassian at the same time with execution. I think the channel touching about 50% of our revenues, you can look at it that way are well mature in how to handle this over the last few years. And I believe that as I said, we are at the right point for the Ascend program to help continue that momentum in the channel.

Your next question comes from Brent Thill from Jefferies.

I know Brian Duffy is about 10 months in, but I think everyone's curious just to get an update on the go-to-market, some of the changes he's making, what's starting to resonate well and what's ahead. And Joe, if I can sneak one in for you, it's been a great couple of decades working with you. Just maybe the question of why now?

Brent, sure. Let me talk a few things about maybe go-to-market and the movement we have there. Brian, it's amazing to think he only arrived 9 months ago. I have to remind myself of that quite often. He obviously brings vast experience and to say he's hit the ground running is an understandment. Huge impact in continuing to evolve our go-to-market motions. It's not revolutionary, as I said. We've been on an enterprise journey for a decade. We continue to strive to be a better and better strategic partner to the largest organizations on the planet. And this is a part of our continued evolution.

We obviously have a massive serviceable -- addressable market, as we've talked to, right, a $14 billion opportunity in our existing customer base along with our existing products, 80% of the Fortune 500, representing just sort of 10% of our business, between DCD cloud migrations with the sand and the Teamwork collection, service collection, software collection, we have a lot of opportunities in our base. And I think Brian has done a fantastic job, along with all of the sales and marketing teams and go-to-market motions on continuing to execute this quarter, right?

We've made great progress with large enterprises. We have signed some of our largest deals in the quarter in almost every sector, industry vertical and geography, right? Some of the world's largest technology companies huge global financial institutions, large telecommunications companies have all come on board this quarter, multiples in each category. Moving to the cloud, moving to the Atlassian platform, consolidating on multiple tools into the Atlassian world and at the same time, excited by AI opportunities. And that's up to Brian and team to continue to explain to our customers and help them on that journey over a multiyear period. So I'd say the entire go-to-market team is executing extremely well this quarter, and we should be incredibly happy, and our customers are the beneficiaries of that.

I'll pass to Joe for the second half.

Great. Thanks, Mike. And thanks, Brent. It's been great working with you as well. I would make one clarification, as Mike reminds me, it's announced now but transition later. So I wouldn't say the timing is now. In terms of why the announcement now and the transition timing, Just -- I've got a lot of big life events coming up, and I really want to be fully present for those. And I'd say this is something my wife and I have been discussing pretty intensely over the last year. And from a work perspective, I feel like the finance team is in good shape. I'm a big believer in new energy and new ideas and those being a good thing. And I think that applies to me as it applies to just about anybody else. So -- that's sort of the logic behind it. And right now, I'm really focused on making sure there's a clean transition and a lot of work to do around that. And I'll be able to update you on what's going to happen next after that when we get down the road and I get a little bit closer to the transition date.

Your next question is from David Hynes from Canaccord.

Joe, one of the questions I've been getting is whether you're raising the cloud revenue guide only on the back of better than forecast data center to cloud migration. Can you just talk about what you're seeing with the non-migration cloud business? How you're feeling there? And what's actually contributing to the increased cloud outlook?

Yes. Great question. Thanks. And I'll try and clarify. So we are raising our cloud revenue outlook by 1.5 points to 22.5% year-over-year. is only to reflect the stronger migrations performance and the outperformance in Q1. So we now expect migrations to make a mid- to high single-digit contribution to cloud revenue growth in FY '26. And -- and for that migration upside to land in the back half of the year, just given the data center expiration base. And to your question directly, it's important to note we haven't made any changes to our other organic drivers of cloud revenue growth in our guidance. So we continue to maintain a conservative and risk-adjusted approach on all those other variables in the cloud and from a cloud revenue growth driver perspective for the rest of the year.

I can probably jump on DJ, just to say 1 or 2 things, if I might. Firstly, it's worth reiterating that our expansion rates 120% NER, et cetera, aren't changing. So when Joe says, we are continuing with our cloud, the guidance in other areas I think those are really strong numbers, and we should reiterate that. We feel great strength in the cloud, right? Teamwork collection going very, very well, only 2 quarters in our AI delivering our enterprise platform. All of these things lead to a very strong cloud business in and of itself that continues to grow.

And the ASCEND program and migrations are additive to that, which is really great. When I talk to our customers that are already in the cloud at scale, they are bullish about their continued adoption of more apps and collections. -- of more areas that they will move to Atlassian. And you can see that showing up in both our paid seat expansion rates, our cloud growth rate in and of itself. our RPO growth rate and our recommitment to our 3-year 20% CAGR that we gave out. So incredibly bullish about the cloud business as a whole. As a result of AI enterprise and the system of work, all the things that we've been saying for a while now continue to come do with our customers. And I'll tell you, having spent a lot of time with them. they're all incredibly excited about what we are delivering to them every single day, and it's a credit to the entire Atlassian team.

Thank you. That's all the questions we have time for today. I will now turn the call over to Mike for closing remarks .

Thanks, everyone, for joining the call today. As always, thank you to all of the Atlassian team for an amazing quarter to all of those on the call, we appreciate your thoughtful questions and continue to support and have a kick ass day, and let's go.