Can Rising Adoption of Rovo Help Atlassian Accelerate Its ARR Growth?

Atlassian Corporation TEAM is seeing strong adoption of Rovo, which could help drive customer expansion and ARR growth. In the fourth quarter of fiscal 2026, subscription ARR increased 23% year over year. Rovo is now used by more than 80% of the Fortune 500, while Rovo-assisted actions increased 50% sequentially. Further, customers using Rovo are growing their ARR at more than twice the rate of customers that do not use Rovo. The strong adoption and higher usage suggest that Rovo is becoming an important part of Atlassian's efforts to increase spending within its existing customer base.

Rovo is also helping Atlassian increase revenues from existing customers. As Rovo usage rises, customers are buying more Rovo credits. Teamwork Collection offers about 10 times more Rovo credits and is encouraging customers to upgrade and add seats. Atlassian said these upgrades are helping increase average revenue per user. Teamwork Collection customers also have 4-5 times more paid seats per instance than stand-alone Jira or Confluence customers. This gives Atlassian an opportunity to convert higher Rovo usage into more seats, broader product adoption and higher revenue per customer.

Higher AI adoption is also helping Atlassian's cloud business. Cloud revenues increased 31% year over year in the fourth quarter. Management said cross-selling and seat expansion were the main drivers behind the strong cloud momentum. The company also saw strong adoption of Teamwork Collection and Service Collection, while customers continued to add Jira and Confluence seats. As customers use AI across more teams and workflows, Atlassian could have more opportunities to expand its platform within large enterprise accounts.

Atlassian has further room to grow within its existing customer base. Management estimates about $14 billion of opportunity from existing customers without changing products or pricing. These factors suggest that if Rovo usage continues to increase and drives more upgrades, seats and cross-selling, it could help Atlassian support ARR growth. The Zacks Consensus Estimate for TEAM's fiscal 2027 and 2028 revenues indicates year-over-year growth of 13% and 14.8%, respectively.

Atlassian Faces Stiff Competition

Atlassian faces stiff competition from other key players in the cloud software industry such as Salesforce CRM and ServiceNow NOW.

Salesforce competes with Atlassian through offerings such as Agentforce, Data Cloud and Slack, which together create a unified ecosystem that connects customer data with integrated AI across systems, apps and devices. In the first quarter of fiscal 2027, Agentforce’s ARR surpassed $1 billion, up in triple digits year over year. Salesforce expects this momentum to continue in fiscal 2027, on the back of robust customer demand for its agentic offerings.

ServiceNow is seeing strong demand for its Agentic AI products as enterprises look to automate more work and improve productivity. The company is expanding AI across IT, customer service, employee service and security. Management said customers now want AI that can complete tasks and deliver clear business value instead of simply assisting employees. This is helping drive adoption of the company's AI offerings. AI annual contract value (ACV) crossed $1 billion during the second quarter of 2026, and ServiceNow expects AI ACV to exceed $1.5 billion by the end of 2026.

TEAM’s Price Performance, Valuation & Estimates

TEAM shares have jumped 5.6% in the year-to-date period against the Zacks Internet - Software industry’s decline of 4.3%.

TEAM YTD Price Performance

Image Source: Zacks Investment Research

From a valuation standpoint, Atlassian trades at a forward 12-month price-to-sales ratio of 5.73X compared with the industry’s 3.93X. TEAM has a Value Score of F.

TEAM’s Valuation

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for TEAM's fiscal 2027 earnings is pegged at $5.52 per share, revised down by 6.6% over the past 30 days, indicating a year-over year decline of 5.6%.

Image Source: Zacks Investment Research

TEAM stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Radical New Technology Could Hand Investors Huge Gains

Quantum Computing is the next technological revolution, and it could be even more advanced than AI.

While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.

Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.

Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research