To The Moon

$Atlassian Corporation PLC(TEAM)$ $ServiceNow(NOW)$  $AppLovin Corporation(APP)$  

🎯 Executive Summary

I’m convinced Atlassian delivered a fundamentally strong quarter, yet markets punished the stock as forward guidance overshadowed execution. $TEAM is down roughly -3.4% today, making it one of the weakest performers on the Nasdaq, and earlier printed a seven-year low near $92.70. Shares are now down roughly -70% over the past 12 months as persistent pressure from the descending 120DMA and concerns around Data Center deceleration continue to dominate sentiment despite a clear Q2 revenue beat.

Revenue reached $1.586B, up +23% YoY, Cloud revenue crossed $1B in a quarter for the first time, and operating margin expanded to 27.1%. However, free cash flow margin compressed to ~10.6%, creating investor anxiety despite management guiding to stronger H2 cash conversion.

The bigger structural story remains intact. Atlassian now operates at roughly a $6B annual revenue run rate, enterprise adoption continues accelerating, and AI is being embedded across workflows. CEO Cannon-Brookes called AI “the best thing to happen to Atlassian,” framing AI as a transformation engine rather than an incremental feature.

Institutional positioning remains cautious across software amid sector outflows, and insider selling of roughly 551K shares over the past 90 days added sentiment pressure even as buybacks accelerate.

🐂 Bull Case

• Revenue beat: $1.586B vs $1.54B expected, +23% YoY growth sustained.

• EPS beat: $1.22 vs $1.14 expected, +27% YoY improvement.

• Cloud revenue reached $1.07B, +26% YoY, first $1B Cloud quarter.

• Cloud customers >$10K ARR rose +12% YoY to 55,369, confirming enterprise depth.

• RPO surged to $3.8B, +44% YoY, driven by multi-year enterprise commitments.

• Net new ARR reached $533M, +64% YoY.

• Non-GAAP operating income reached $430.2M with margins expanding to 27.1%.

• Teamwork Collection surpassed 1M seats in under nine months.

• Rovo AI MAUs exceeded 5M, driving workflow expansion across customers.

• Record >$1M ACV deals nearly doubled YoY.

• Buybacks accelerating while founders paused selling, with management reaffirming 20%+ revenue CAGR through FY27.

🐻 Bear Case

• Free cash flow margin fell to ~10.6%, with Q2 FCF dropping to ~$169M, down sharply YoY.

• Cash balances declined following ~$1.2B in acquisition spending and repurchases.

• SBC reached ~$453M or ~29% of revenue, resulting in GAAP net loss of ~$42.6M.

• Data Center growth expected to decelerate meaningfully into FY27.

• Insider selling of ~551K shares adds sentiment headwinds amid cautious institutional flows.

• AI monetisation remains early, with MAU growth not yet fully translating to revenue uplift.

• Acquisition integration adds execution complexity during migration and AI rollout cycles.

💰 Financial Performance Breakdown

Revenue: $1.586B, +23% YoY, beating ~$1.54B consensus.

Adjusted EPS: $1.22 vs $1.14 expected, +27% YoY improvement.

Gross margin: 87.5%, expanding YoY. FY26 guidance targets ~83.5%–84% gross margin range.

Non-GAAP operating margin: 27.1%, with operating income at $430.2M.

GAAP operating margin: remains negative near -3%.

GAAP net loss: ~$42.6M due primarily to SBC.

Free cash flow: ~$169M, down ~51% YoY.

RPO: $3.8B, +44% YoY acceleration.

Cloud revenue: $1.07B, +26% YoY.

Total customers: exceed 350K globally.

Management reiterated FY26 revenue growth near +22% and Cloud growth near +24%.

🛠️ Strategic Headwinds and Execution Risk

Billing model transitions and acquisition timing are pressuring near-term cash flow. Management expects H2 FCF to align closer to non-GAAP net income, but investors require confirmation. Data Center migration dynamics create FY27 revenue uncertainty, while integration of acquisitions alongside AI rollout and cloud migration raises operational complexity. Enterprise IT budgets remain sensitive to macro uncertainty, adding caution across software spending.

🧠 Analyst and Institutional Sentiment

Morgan Stanley maintains an Overweight rating with PT near $165, highlighting enterprise durability but flagging cash flow concerns. Goldman Sachs holds a Buy rating near $150, citing RPO acceleration and cloud stickiness.

Consensus PT clusters around ~$150 with a broad range near $120 to $200. Institutional ownership remains above 90%, though flows show sector caution rather than wholesale exits. Options activity reflects elevated protective hedging following earnings.

📉📈 Technical Setup After Earnings

The chart continues to show downtrend structure with price below the descending 120DMA. Multi-year support sits near $90–95, while supply zones appear near $120 and $150.

RSI remains compressed near oversold territory while MACD momentum shows early flattening but not yet reversal. Price remains below major moving averages, confirming trend pressure.

Base recovery target sits near $120 if support holds. Stretch recovery toward $150 requires confirmation via margin stability and FCF improvement accompanied by volume inflection.

🌍 Macro and Peer Context

Software multiples remain compressed as rates stay elevated and enterprise budgets moderate. Across SaaS peers, growth persists but valuation resets continue. Atlassian maintains stronger retention and margin expansion than many collaboration peers, yet sector rotation still pressures flows.

📊 Valuation and Capital Health

Shares now trade at significantly compressed multiples versus historical SaaS norms. Liquidity remains solid with ~$1.6B cash against manageable debt near ~$1B. Buybacks are helping offset dilution while operating leverage trends remain favourable if FCF normalises. Medium-term outlook still targets ~20%+ CAGR through FY27 with operating margins exceeding 25%.

⚖️ Verdict and Trade Plan

I remain constructive long term but cautious near term. Entry interest emerges near $95–100 support with risk management below $90. Base upside target sits near $120 while stretch recovery toward $150 requires FCF recovery and margin confirmation.

Upcoming catalysts include next earnings, FCF conversion improvements, enterprise migration progress, and AI monetisation traction.

🏁 Conclusion

I’m watching a platform still executing while markets price uncertainty, and the next few quarters will determine whether fundamentals or sentiment ultimately control the narrative.

📌 Key Takeaways

• Revenue beat: $1.586B, +23% YoY growth.

• EPS beat: $1.22 vs $1.14 estimate.

• RPO growth: +44% YoY acceleration.

• Cloud revenue: $1.07B, +26% YoY.

• FCF margin: ~10.6%, recovery key watchpoint.

• Key levels: $95 support, $120 recovery zone, $150 stretch target.

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