TEAM Q1 FY2027 earnings call transcript, November 5, 2026

Please go ahead.

Great.

Thank you for taking my question here. I 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?

Hi, Rob.

Yeah. 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 10 times as many credits in the teamwork collection. It's now over 3,000 customers up, you know, 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, you know, 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 UBP features with enforcement. Beginning in early December, we've been 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 able to... large revenue generation activity. We are focusing our monetization efforts on continuing to grow to the previous question, to Koji's question, growing your long-term opportunity of more and more workflows running on the Atlassian platform through teamwork collection and service collection.

UBP 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, in 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 FY27 at the moment. We're obviously continuing to work with customers, help them with their understanding. We've been very happy with the controls. 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 margins 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. We're helping improve the token efficiency of AI features that we are delivering to customers, improving quality and cost simultaneously. Our AI gateway continues to be there. We continue to show incredibly high quality in robo.

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 in 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, you know, those customers continue to grow really strongly as I've said. And Rob, I would just maybe add to that. You know, as Mike mentioned a little bit earlier, you know, from an AI monetization perspective, what we hear from our customers is that they're looking for predictability and 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, premium to enterprise editions, you know, they're receiving two to three times more robo credits at each turn. And ultimately, as they upgrade to teamwork collection, getting 10x more robo. credits, right. So we're seeing that in our ARPU uplift, we're seeing that in the seed 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. Please go ahead.

Thanks, Arjun.

How would I think about that? Look, I would say at the headline, there's a lot of parts of that question. Let me talk to the headline. I think demand is extreme. So we're seeing strong demand at the SMB level and at the enterprise level. We continue to see strong seat expansion. It's a very broad-based business team, software team. Service teams, which is, I think, excellent and reflects the, maybe not the thinking about growth, as you asked, but the where that demand of growth is coming from. Again, we're. Very patient and durable company in terms of building out real deep customer value over time. You can see that, you know, subscription ARR at 22 and a half percent, cloud growing north of 30 percent. As James mentioned, net net retention again. Being extremely strong, well over sort of the 120 mark, and obviously RPO at 44 percent. So very strong future growth indicators, I would say, and demand continues to be healthy. I think we're seeing extreme. Extremely strong. I'm not sure where we talk about net new customers. Again, we have an awful lot of customers that are 10K customer number and overall customer numbers continue to grow strongly. We're seeing very strong. Mentum, for example, in both collections. We talked about Timur collections, over 3,000 customers up 7X. Service collection now past 70,000 customers where they are growing north of 30%. And strongly taking share. So not necessarily new customer opportunities, but existing customers continue to grow strongly. There are many, 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. And 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 Loom 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 Itai Kidron from Oppenheimer. Please go ahead.

Yeah, thanks, Etai. No, you know, I would just say that and reiterate that our migrations continue to be on pace. You know, our customers are incredibly excited about the value they can unlock there, right? We talked about it earlier. Both threaded throughout, teamwork graph, all of the collections. And we see that in customers that move from data center to cloud, right? Three years hence, they're increasing their spend 1.75x. And so we feel really good about the migration pace that we're seeing. Right now. But again, 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 you know, 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 who've got me the numbers, I've seen more than 100 customers in the last quarter in more than 11 different countries, in four different continents. So I have a lot of customer detail and knowledge about these types of questions, right? I think one of the things that gives me the most strength on Datacenter, we talk a lot about customers talking about when and not.

I also think our history of delivery is incredibly impressive for those customers. Many customers who I saw a year ago or two 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, I've been in America, lots of countries in Europe. And whether that's in financial organisations, 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 their 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 the 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.

We've had a series of strong quarters there and 28% in current RPO as well. So that doesn't happen without recognizing that the value of that overall platform to continue to deliver for all of those customers around the globe. It's very exciting.