Atlassian Corporation ($TEAM)

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.