# Atlassian Corp (TEAM) FY 2026 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Atlassian Corp's 10-K for fiscal year 2026.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1650372/000165037226000036/team-20260630.htm
Accession: 0001650372-26-000036
Filing date: 2026-08-14
Report date: 2026-06-30
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/TEAM/
All MD&A years: /company/TEAM/mda/
Previous year: /company/TEAM/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section of our Annual Report on Form 10-K discusses our financial condition and results of operations for fiscal years 2026 and 2025, and year-to-year comparisons between fiscal years 2026 and 2025, in accordance with U.S. generally accepted accounting principles (“GAAP”). A discussion of our financial condition and results of operations for the fiscal year 2024 and year-to-year comparisons between fiscal years 2025 and 2024 that is not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended 2025, filed on August 15, 2025.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing under “Financial Statements and Supplementary Data” in Item 8 in this Annual Report on Form 10-K. As discussed in the section titled “Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” under Part I, Item 1A in this Annual Report on Form 10-K.

Overview

Our mission is to unleash the potential of every team.

Atlassian’s team collaboration software enables organizations to connect all teams through a system of work that unlocks productivity at scale.

Our deeply interconnected portfolio of apps, AI agents, and Collections, each with discrete value propositions, delivers solutions for software teams, IT operations and support teams, leadership and business teams. As an AI-first company, we have embedded AI capabilities across every surface of our platform, enabling organizations to orchestrate work effectively across both human and AI teammates. These apps, agents, and Collections are all built on the Atlassian Cloud Platform and data model: a common technology foundation that seamlessly connects teams, information, context, and workflows throughout an organization.

We generate revenues primarily in the form of subscription fees. Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to use our software apps in a cloud-based infrastructure that we provide (“Cloud offerings”). We also sell on-premises term license agreements for our Data Center products (“Data Center offerings”), consisting of software licensed for a specified period and support and maintenance services that are bundled with the license for the term of the license period. Subscription revenues also include subscription-based agreements for our premier support services. From time to time, we make changes to our apps and product offerings, prices, and pricing plans for our offerings, which may impact the growth rate of our revenue, and our deferred revenue balances, remaining performance obligations, and customer retention. Subscription revenue, through our Cloud and Data Center offerings, results in a large recurring revenue base.

In September 2025, we announced plans to end-of-life our Data Center offering. As of March 2026, we no longer sell term licenses to new customers, and we will stop selling term licenses and expansions to existing customers in March 2028. Subject to limited exceptions, we also plan to end maintenance and support for on-premises versions of our products in March 2029. In order to support customers who face unique requirements or challenges, we will offer an approximately three-year extended maintenance period for certain customers.

In the second quarter of fiscal year 2026, we completed the acquisitions of The Browser Company of New York Inc. (“BCNY”) and A Software Company (“DX”). We believe integrating these technologies into our offerings will enhance customer value. BCNY has built a browser for enterprises optimized for SaaS applications in the AI-era. DX offers market-leading engineering intelligence that provides leaders with data-driven insights to understand how their investments are helping teams accelerate and improve their work and enhances the value of the offerings in our Collections.

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Economic Conditions

Our results of operations may vary based on the impact of changes in the global economy on us or our customers. Our business depends on demand for business software applications generally and for collaboration software solutions in particular. We are subject to risks and exposures from the evolving macroeconomic environment, inflationary pressures, interest rate policy, changes in trade policies, political instability, and geopolitical tensions. We monitor the direct and indirect impacts of these circumstances on our business and financial results. The extent to which these risks ultimately impact our business, results of operations, and financial position will depend on future developments, which are uncertain and cannot be predicted at this time.

Restructuring

During the first quarter of fiscal year 2026, we initiated a restructuring plan to reduce capacity that was no longer necessary due to the increased ability, accessibility, performance, stability, and supportability of our products.

During the third quarter of fiscal year 2026, we initiated another restructuring plan to accelerate building the future of teamwork in the AI era. This includes self-funding further investment in key strategic priorities, such as AI and enterprise sales, reorganizing our teams to move with more focus and speed across the Atlassian System of Work, and optimizing for long-term operational efficiency and sustainability. This initiative resulted in the elimination of certain roles, which impacted approximately 10% of our workforce.

The execution of these actions, including cash payment of the severance and other termination benefits related liabilities, have been substantially satisfied as of June 30, 2026.

As a result, we recorded total severance and other termination benefits of $203.9 million, and additional stock-based compensation of $1.4 million for the affected employees during fiscal year 2026.

In addition, we exited certain leased properties to optimize our real estate footprint and have entered, or plan to enter, into sublease agreements for these locations. As a result, we recorded total impairment charges for the related operating lease right-of-use assets and leasehold improvements of $80.0 million for the fiscal year ended 2026.

A summary of our restructuring charges for fiscal year 2026, by major activity type was as follows (in thousands):

[[GREPCENT_TABLE]]
[["","Severance and Other Termination Benefits","","Stock-based Compensation","","Lease Consolidation","","Total"],["Cost of revenue","$","45,185","","","$","1,432","","","$","6,647","","","$","53,264"],["Research and development","108,844","","","\u2014","","","35,650","","","144,494"],["Marketing and sales","25,110","","","\u2014","","","26,421","","","51,531"],["General and administrative","24,778","","","\u2014","","","11,303","","","36,081"],["Total","$","203,917","","","$","1,432","","","$","80,021","","","$","285,370"]]
[[/GREPCENT_TABLE]]

Refer to Note 14, “Restructuring,” in the notes of our consolidated financial statements for additional information.

Key Business Metrics

We utilize the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.

Customer Base

We have a history of successfully growing both our total customer base and the spend per customer through growth in users, higher average price per user, and adoption of new apps or products. We believe our ability to attract new customers is critical, and expanding within the existing customer base is the primary driver of our success as a business. Typically, new customers begin their journey with Atlassian with a small footprint by either adopting our free editions or purchasing a single app or product for a limited number of users. We are focused on continuing to grow our total customer base, specifically the number of customers with more than $10,000 in annualized recurring revenue from our Cloud offerings (“Cloud ARR”), as it measures our ability to successfully expand within our existing customer base.

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We define the number of total customers at the end of any particular period as the number of organizations with unique domains with an active subscription for two or more seats. We define the number of customers with Cloud ARR greater than $10,000 using the same definition as total customers with the distinction of having an active Cloud subscription and greater than $10,000 in Cloud ARR. We define Cloud ARR as the annualized recurring revenue run-rate of Cloud subscription agreements at a point in time. We calculate Cloud ARR by taking the Cloud monthly recurring revenue (“Cloud MRR”) run-rate and multiplying it by 12. Cloud MRR for each month is calculated by aggregating monthly recurring revenue from committed contractual amounts at a point in time. Cloud ARR and Cloud MRR should be viewed independently of revenue and do not represent our revenue under GAAP, as they are operational metrics that can be affected by contract start and end dates and renewal rates. While a single customer may have distinct departments, operating segments, or subsidiaries with multiple active licenses or subscriptions of our apps, if the app deployments share a unique domain name, we only include the customer once for purposes of calculating a customer.

As of June 30, 2026, we had more than 350,000 customers. If we include single-user accounts and organizations that have only adopted our free or starter offerings, the active use of our offerings extends well beyond our total customer base. Through the extensive use of our software, we are able to reach a vast number of users, gather insights to refine our offerings, and generate growing revenue by expanding within our total customer base. Customers with greater than $10,000 in Cloud ARR represent the majority of our Cloud revenue. No single customer contributed more than 5% of our total revenues during fiscal year 2026.

The following table sets forth our number of customers with greater than $10,000 in Cloud ARR as of the dates presented:

[[GREPCENT_TABLE]]
[["","As of"],["","June 30, 2024","","June 30, 2025","","June 30, 2026"],["Number of customers with greater than $10,000 in Cloud ARR","45,842","","","51,978","","","57,334"]]
[[/GREPCENT_TABLE]]

Subscription ARR

Subscription ARR is the annual recurring revenue from subscription agreements to our Cloud and Data Center offerings at a point in time. It reflects the annualized value of active subscriptions, including recurring revenue from upgrades and add-ons, but excludes one-time fees. For monthly subscriptions, ARR is calculated by multiplying monthly recurring revenue by 12. ARR should be viewed independently of revenue and does not represent our revenue under GAAP, as it is an operational metric that can be affected by contract start and end dates, renewal rates, and the timing of invoices. Subscription ARR as of June 30, 2026 and 2025 were $6,606 million and $5,382 million, respectively.

Free Cash Flow

Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less net cash used in investing activities for capital expenditures. Management considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used to fund our commitments, repay our debt, and for strategic opportunities, such as reinvesting in our business, making strategic acquisitions, and strengthening our financial position. Free cash flow is not a measure calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for financial information prepared in accordance with GAAP, such as GAAP net cash provided by operating activities. In addition, free cash flow may not be comparable to similarly titled metrics of other companies due to differences in the methods of calculation. The following table presents a reconciliation of net cash provided by operating activities to free cash flow for the periods presented (in thousands):

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["","2026","","2025"],["Net cash provided by operating activities","$","1,353,135","","","$","1,460,393"],["Less: Capital expenditures","(34,060)","","","(44,850)"],["Free cash flow","$","1,319,075","","","$","1,415,543"]]
[[/GREPCENT_TABLE]]

Free cash flow decreased by $96.5 million for fiscal year 2026 compared to fiscal year 2025. The decrease in free cash flow was primarily attributable to a decrease in net cash provided by operating activities. The decrease in net cash provided by operating activities was primarily driven by an increase in cash paid to employees, including

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payments made under restructuring plans, vendors, and a decrease in interest received, partially offset by an increase in cash received from customers.

For more information about net cash provided by operating activities, please see “Liquidity and Capital Resources.”

Components of Results of Operations

Sources of Revenues

Subscription Revenues

Subscription revenues consist primarily of fees earned from subscription-based arrangements for providing customers the right to use our software in a cloud-based-infrastructure that we provide. We also sell on-premises term license agreements for our Data Center offerings, which consist of software licensed for a specified period and include support and maintenance services that are bundled with the license for the term of the license period. Subscription revenues also include subscription-based agreements for our premier support services. Subscription revenues are driven primarily by the number and size of active licenses, the type of deployment, and the price of the licenses. Our subscription-based arrangements generally have a contractual term of one to twelve months. For Cloud offerings, subscription revenue is recognized ratably as services are performed, commencing with the date the service is made available to customers. For Data Center offerings, we recognize revenue upfront for the portion that relates to the delivery of the term license, and the support and related revenue is recognized ratably as the services are delivered over the term of the arrangement. Premier support consists of subscription-based arrangements for a higher level of support across different deployment options, and revenue is recognized ratably as the services are delivered over the term of the arrangement.

In September 2025, we announced plans to end-of-life our Data Center offering. As of March 2026, we no longer sell term licenses to new customers, and we will stop selling term licenses and expansions to existing customers in March 2028. Subject to limited exceptions, we plan to end maintenance and support for these on-premises versions of our products in March 2029.

We expect subscription revenue, specifically from our Cloud offerings, to increase and continue to be our primary driver of revenue growth. We expect our revenue to fluctuate quarterly and within our quarterly financial results based on customer buying patterns.

Other Revenues

Other revenues primarily include fees received for sales of third-party apps in the Atlassian Marketplace. Advisory services and training services are also included in other revenues. Revenues from the sale of third-party apps via Atlassian Marketplace is recognized on the date of product delivery given that all of our obligations have been met at that time and on a net basis as we function as the agent in the relationship. Revenues from advisory services is recognized over the time period that the customer has access to the service. Revenues from consulting and training is recognized over time as the services are performed.

Cost of Revenues

Cost of revenues primarily consists of expenses related to third-party hosting fees, including expenses related to our Cloud infrastructure and AI inference incurred through our customer’s usage of our AI tools, compensation expenses for our employees, including stock-based compensation, amortization of acquired intangible assets, such as the amortization of the cost associated with an acquired company’s developed technology, payment processing fees, consulting and contractors costs associated with our customer support and infrastructure service teams, and facilities and related overhead costs.

We expect cost of revenues to increase as we continue to invest in our cloud-based infrastructure and AI to support our Cloud customers and their related AI usage.

We allocate stock-based compensation based on the expense category in which the employee works. We allocate overhead such as information technology costs, rent and occupancy charges in each expense category based on headcount in that category. As such, general overhead expenses are reflected in cost of revenues and operating expense categories.

Gross Profit and Gross Margin

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Gross profit is total revenues less total cost of revenues. Gross margin is gross profit expressed as a percentage of total revenues. Gross margin can fluctuate from period to period as a result of changes in product mix.

We expect gross margin to decline slightly, driven by the mechanical drag on total revenue growth in fiscal year 2027 as we lap the greater upfront term license revenue recognized in fiscal year 2026, revenue mix shift from Data Center offerings to Cloud offerings and increases in cost of revenues to support our increasing number of Cloud customers and their related AI usage, partially offset by the continued optimization of our Cloud infrastructure and support costs.

Operating Expenses

Our operating expenses are classified as research and development, marketing and sales, and general and administrative. For each functional category, the largest component is compensation expenses, which include salaries, bonuses, stock-based compensation, and employee benefit costs.

Research and Development

Research and development expenses consist primarily of compensation expenses for our employees, including stock-based compensation, facilities and related overhead costs, third-party hosting fees, including expenses related to our Cloud infrastructure and AI inference, and consulting and contractor costs associated with our software development teams. We continue to focus our research and development efforts on building new apps and AI agents, adding new features and services, integrating acquired technologies, increasing functionality, enhancing our Cloud infrastructure, and advancing our artificial intelligence capabilities.

Marketing and Sales

Marketing and sales expenses consist primarily of compensation expenses for our employees, including stock-based compensation, marketing and sales program expenses, consulting and contractor costs, facilities and related overhead costs, and certain IT program expenses. Marketing programs consist of advertising, promotional events, such as user conferences, sponsorships, corporate communications, brand building, and marketing activities such as online lead generation. Sales programs consist of activities and teams focused on direct sales to customers, supporting our solution partners and resellers, tracking channel sales activity, supporting and servicing our customers by helping them optimize their experience and expand the use of our offerings across their organizations, and helping product evaluators learn how they can use our tools most effectively.

General and Administrative

General and administrative expenses consist primarily of compensation expenses for our employees, including stock-based compensation, for finance, legal, human resources and information technology personnel, facilities and related overhead costs, consulting and contractor costs, certain IT program expenses, and other corporate expenses.

Income Taxes

Provision for income taxes consists primarily of income taxes related to federal, state, and foreign jurisdictions where we conduct business.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions and such differences could be material.

While our significant accounting policies are more fully described in Note 2, “Summary of Significant Accounting Policies” to the notes to our consolidated financial statements, the following accounting policies involve

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a greater degree of judgment and complexity. Accordingly, these are the accounting policies that we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Revenue Recognition

Our contracts with customers often include promises to transfer multiple products and services to a customer.

We allocate the transaction price for each contract to each performance obligation based on the relative standalone selling price (“SSP”) for each performance obligation. We use judgment in determining the SSP for products and services. We typically determine an SSP range for our products and services, which is reassessed on a periodic basis or when facts and circumstances change. When observable prices are available for products or services sold separately in comparable circumstances to similar customers, we use those prices to determine SSP. In instances where performance obligations do not have observable standalone sales, we utilize available information that may include market conditions, pricing strategies, the life of the software, and other observable inputs to estimate the price we would charge if the products and services were sold separately.

Business Combinations

The allocation of the purchase price in a business combination requires management to make significant estimates in determining the fair value of acquired assets and assumed liabilities, especially with respect to intangible assets. The excess of the purchase price in a business combination over the fair value of these tangible and intangible assets acquired and liabilities assumed is recorded as goodwill. Critical assumptions used to estimate the fair value of intangible assets include forecasted revenue, revenue growth rate, and discount rate. These assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. We evaluate these estimates and assumptions as new information is obtained and may record adjustments to the fair value of the tangible and intangible assets acquired and liabilities assumed, but not later than one year from the acquisition date.

Income Taxes

We account for income taxes using the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to (i) temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and (ii) operating loss and tax credit carryforwards. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not applicable to the periods in which we expect the temporary difference will reverse. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income within the carryback or carryforward periods available under the applicable tax law. We regularly review the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. Our judgment regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute our business plans and tax planning strategies. Should there be a change in the ability to recover deferred tax assets, our income tax provision would increase or decrease in the period in which the assessment is changed.

In the multiple tax jurisdictions in which we operate, our tax returns are subject to routine audit by the Internal Revenue Service, Australian Taxation Office (“ATO”), and other taxation authorities. These audits at times may produce alternative views regarding certain tax positions taken in the year(s) of review. As a result, we record uncertain tax positions, which require recognition at the time when it is deemed more likely than not that the position in question will be upheld. Although management believes that the judgment and estimates involved are reasonable and that the necessary provisions have been recorded, changes in circumstances or unexpected events could adversely affect our financial position, results of operations, and cash flows.

New Accounting Pronouncements Pending Adoption

The impact of recently issued accounting standards is set forth in Note 2, “Summary of Significant Accounting Policies,” of the notes to our consolidated financial statements.

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Results of Operations

The following table sets forth our results of operations for the periods indicated (in thousands, except for percentages of total revenues):

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["","2026","","% of Total Revenues","","2025","","% of Total Revenues"],["Revenues:"],["Subscription","$","6,262,194","","","95","%","","$","4,930,604","","","95","%"],["Other","310,114","","","5","","","284,700","","","5"],["Total revenues","6,572,308","","","100","","","5,215,304","","","100"],["Cost of revenues","996,830","","","15","","","894,851","","","17"],["Gross profit","5,575,478","","","85","","","4,320,453","","","83"],["Operating expenses:"],["Research and development","3,269,257","","","50","","","2,669,312","","","51"],["Marketing and sales","1,541,178","","","24","","","1,134,535","","","22"],["General and administrative","754,688","","","11","","","646,998","","","12"],["Total operating expenses","5,565,123","","","85","","","4,450,845","","","85"],["Operating income (loss)","10,355","","","\u2014","","","(130,392)","","","(2)"],["Other expense, net","(8,565)","","","\u2014","","","(50,277)","","","(1)"],["Interest income","69,710","","","1","","","112,324","","","2"],["Interest expense","(49,450)","","","(1)","","","(30,550)","","","(1)"],["Income (loss) before income taxes","22,050","","","\u2014","","","(98,895)","","","(2)"],["Provision for income taxes","(75,878)","","","(1)","","","(157,792)","","","(3)"],["Net loss","$","(53,828)","","","(1)","%","","$","(256,687)","","","(5)","%"]]
[[/GREPCENT_TABLE]]

Fiscal Years Ended June 30, 2026 and 2025

Revenues

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Subscription","$","6,262,194","","","$","4,930,604","","","$","1,331,590","","","27","%"],["Other","310,114","","","284,700","","","25,414","","","9"],["Total revenues","$","6,572,308","","","$","5,215,304","","","$","1,357,004","","","26","%"]]
[[/GREPCENT_TABLE]]

Total revenues increased $1.4 billion, or 26%, in fiscal year 2026 compared to fiscal year 2025. Growth in total revenues was primarily attributable to increased demand for our offerings from existing customers. Of total revenues recognized in fiscal year 2026, over 90% was attributable to sales to customer accounts existing on or before June 30, 2025.

Subscription revenues increased $1.3 billion, or 27%, in fiscal year 2026 compared to fiscal year 2025. The increase in subscription revenues was primarily attributable to paid seat expansion from our existing customers and price increases.

Other revenues increased $25.4 million, or 9%, in fiscal year 2026 compared to fiscal year 2025. The increase in other revenues was primarily attributable to an increase of $21.4 million in marketplace revenue.

Total revenues by deployment options were as follows:

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[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Cloud","$","4,410,627","","","$","3,447,427","","","$","963,200","","","28","%"],["Data Center","1,830,941","","","1,467,167","","","363,774","","","25"],["Marketplace and other","330,740","","","300,710","","","30,030","","","10"],["Total revenues","$","6,572,308","","","$","5,215,304","","","$","1,357,004","","","26","%"]]
[[/GREPCENT_TABLE]]

Total revenues by geography were as follows:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Americas","$","3,166,368","","","$","2,516,901","","","$","649,467","","","26","%"],["EMEA","2,692,588","","","2,123,971","","","568,617","","","27"],["Asia Pacific","713,352","","","574,432","","","138,920","","","24"],["Total revenues","$","6,572,308","","","$","5,215,304","","","$","1,357,004","","","26","%"]]
[[/GREPCENT_TABLE]]

Cost of Revenues

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Cost of revenues","$","996,830","","","$","894,851","","","$","101,979","","","11","%"],["Gross margin","85","%","","83","%"]]
[[/GREPCENT_TABLE]]

Cost of revenues increased $102.0 million, or 11%, in fiscal year 2026 compared to fiscal year 2025. The overall increase was primarily attributable to an increase of $87.0 million in hosting fees paid to third-party providers, and an increase of $38.4 million in amortization expense, partially offset by a decrease of $56.2 million in compensation expense for employees (which includes a decrease of $12.6 million in stock-based compensation), and a decrease of $19.6 million in fees paid for consulting and other professional services. In addition, we recorded restructuring charges of $53.2 million in fiscal year 2026, which were comprised of $46.6 million of severance and other termination benefits, and $6.6 million of impairment charges for lease and leasehold improvements.

Operating Expenses

Research and development

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Research and development","$","3,269,257","","","$","2,669,312","","","$","599,945","","","22","%"]]
[[/GREPCENT_TABLE]]

Research and development expenses increased $599.9 million, or 22%, in fiscal year 2026 compared to fiscal year 2025. The overall increase was primarily attributable to an increase of $439.4 million in compensation expenses for employees (which includes an increase of $206.5 million in stock-based compensation). In addition, we recorded restructuring charges of $144.4 million in fiscal year 2026, which were comprised of $108.8 million of severance and other termination benefits, and $35.6 million of impairment charges for lease and leasehold improvements.

Marketing and sales

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Marketing and sales","$","1,541,178","","","$","1,134,535","","","$","406,643","","","36","%"]]
[[/GREPCENT_TABLE]]

Marketing and sales expenses increased $406.6 million, or 36%, for fiscal year 2026 compared to fiscal year 2025. The overall increase was primarily attributable to an increase of $225.3 million in compensation expenses for employees (which includes an increase of $38.1 million in stock-based compensation), and an increase of $78.5 million in advertising and marketing program expenses. In addition, we recorded restructuring charges of $51.5 million in the fiscal year 2026, which were comprised of $26.4 million of impairment charges for lease and leasehold improvements, and $25.1 million of severance and other termination benefits.

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General and administrative

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["General and administrative","$","754,688","","","$","646,998","","","$","107,690","","","17","%"]]
[[/GREPCENT_TABLE]]

General and administrative expenses increased $107.7 million, or 17%, in fiscal year 2026 compared to fiscal year 2025. The overall increase was primarily attributable to an increase of $59.2 million in compensation expenses for employees (which includes an increase of $10.9 million in stock-based compensation). In addition, we recorded restructuring charges of $36.1 million in fiscal year 2026, which were comprised of $24.8 million of severance and other termination benefits, and $11.3 million of impairment charges for lease and leasehold improvements.

Other expense, net

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Other expense, net","$","(8,565)","","","$","(50,277)","","","$","41,712","","","(83)","%"]]
[[/GREPCENT_TABLE]]

Other expense, net decreased $41.7 million, or (83)%, in fiscal year 2026 compared to fiscal year 2025. The overall decrease in other expense was primarily attributable to an increase of $25.3 million in net gains on public and private equity investments and a decrease of $20.4 million in expenses related to our share of loss from an equity method investment.

Interest income

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Interest income","$","69,710","","","$","112,324","","","$","(42,614)","","","(38)","%"]]
[[/GREPCENT_TABLE]]

Interest income decreased $42.6 million, or 38%, in fiscal year 2026 compared to fiscal year 2025. The decrease was primarily attributable to a decrease in investment income as a result of decreased invested cash balances and declining interest rates.

Interest expense

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Interest expense","$","(49,450)","","","$","(30,550)","","","$","(18,900)","","","62","%"]]
[[/GREPCENT_TABLE]]

Interest expense increased $18.9 million, or 62%, in fiscal year 2026 compared to fiscal year 2025. The increase was primarily attributable to the amortization of interest rate swap contracts.

Provision for income taxes

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands, except percentage data)","2026","","2025","","$ Change","","% Change"],["Provision for income taxes","$","(75,878)","","","$","(157,792)","","","$","81,914","","","*"],["Effective tax rate","*","","*"]]
[[/GREPCENT_TABLE]]

*    Not meaningful

The provision for income taxes decreased by $81.9 million in fiscal year 2026 compared to fiscal year 2025. This decrease was primarily attributable to the change in valuation allowance on Australian deferred tax assets related to deferred revenue recognition.

Our future effective annual tax rate may be materially impacted by the expense or benefit from tax amounts associated with our foreign earnings that are taxed at rates different from the federal statutory rate, level of profit before tax, accounting for uncertain tax positions, business combinations, changes in our valuation allowances to the extent sufficient positive evidence becomes available, closure of statute of limitations or settlement of tax audits, and changes in tax laws.

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A significant amount of our earnings is generated by our Australian subsidiaries. Our future effective tax rates may be adversely affected to the extent earnings are lower than anticipated in countries where we have lower statutory tax rates. Changes in our global operations could result in changes to our effective tax rates, future cash flows, and overall profitability of our operations.

We recognize the tax benefit of an uncertain tax position only if we conclude it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement with the taxing authority. We believe we have provided adequate reserves for income tax uncertainties in all open tax years.

On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act (“OBBBA”), which includes, among other provisions, changes to the U.S. corporate income tax system such as allowing the immediate expensing of qualifying domestic research and development costs and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. The legislation has multiple effective dates, with certain provisions effective in fiscal 2026 and others in the subsequent years. The changes had an immaterial impact on our provision for income taxes for our fiscal year 2026. We will continue to monitor any developments and guidance related to OBBBA.

The Organization for Economic Co-operation and Development introduced a framework for a global minimum corporate income tax of 15% known as the Global Anti-Base Erosion rules. This legislation has been enacted in certain jurisdictions where we operate and is effective for our fiscal year 2026. As of June 30, 2026, the global minimum tax did not have a significant impact on our financial statements. As additional jurisdictions enact legislation, transitional rules lapse, and other provisions of the global minimum tax legislation become effective, our effective tax rate and cash tax payments may increase in future years.

Liquidity and Capital Resources

As of June 30, 2026, we had cash and cash equivalents totaling $1.2 billion and accounts receivables totaling $1.3 billion. Since our inception, we have primarily financed our operations through cash flows generated by operations and corporate debt.

Our cash flows from operating activities, investing activities, and financing activities for fiscal years 2026 and 2025 were as follows:

[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["(in thousands)","2026","","2025"],["Net cash provided by operating activities","$","1,353,135","","","$","1,460,393"],["Net cash used in investing activities","(806,893)","","","(342,322)"],["Net cash used in financing activities","(1,800,485)","","","(782,582)"],["Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash","(10,233)","","","151"],["Net increase (decrease) in cash, cash equivalents, and restricted cash","$","(1,264,476)","","","$","335,640"]]
[[/GREPCENT_TABLE]]

Our primary source of cash is collections from our customers. Our primary uses of cash from operating activities are general business expenses, including employment expenses, cloud platform and other infrastructure services, income taxes, professional services fees, marketing expenses, software expenses, and facility expenses.

Net cash provided by operating activities decreased by $107.3 million for fiscal year 2026, compared to fiscal year 2025. The net decrease was primarily attributable to an increase in cash paid to employees, including payments made under restructuring plans, vendors, and a decrease in interest received, partially offset by an increase in cash received from customers.

Net cash used in investing activities increased by $464.6 million for fiscal year 2026, compared to fiscal year 2025. The net increase was primarily attributable to an increase in cash consideration paid for acquisitions, net of cash acquired, of approximately $1.2 billion, partially offset by an increase in net inflows of $689.8 million related to marketable securities activity, and an increase in net inflows of $49.4 million related to strategic investment activity. Net cash used in financing activities increased by $1.0 billion for fiscal year 2026, compared to fiscal year 2025. The net cash used in financing activities was primarily attributable to an increase in repurchases of Class A Common Stock of $1.0 billion.

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Material Cash Requirements

Debt

As of June 30, 2026, we had $500.0 million aggregate principal amount of 5.250% senior notes due 2029 (the “2029 Notes”) and $500.0 million aggregate principal amount of 5.500% senior notes due 2034 (the “2034 Notes” and together with the 2029 Notes, the “Notes”). The Notes will mature on May 15, 2029 and May 15, 2034, respectively. Interest on the Notes is paid semi-annually in arrears on May 15 and November 15 of each year. Refer to Note 11, “Debt,” to our consolidated financial statements for additional information.

On August 12, 2024, Atlassian US, Inc.’s prior credit facility was amended and restated to provide for a $750 million senior unsecured revolving credit facility (the “2024 Credit Facility”). We may repay outstanding loans under the 2024 Credit Facility at any time, without premium or penalty, and we have an option to request an increase of $250 million in certain circumstances. The 2024 Credit Facility replaced our prior credit facility entered into in October 2020, which provided for a $1.0 billion senior unsecured delayed-draw term loan facility (the “Term Loan”) and a $500 million senior unsecured revolving credit facility. The 2024 Credit Facility matures in August 2029. As of June 30, 2026, there were no borrowings under the 2024 Credit Facility. Refer to Note 11, “Debt,” to our consolidated financial statements for additional information.

Share Repurchase Program

In September 2024, the Board of Directors authorized a program to repurchase up to $1.5 billion of our outstanding Class A Common Stock (the “2024 Repurchase Program”). The 2024 Share Repurchase Program commenced in April 2025 following completion of the previous share repurchase program. The 2024 Repurchase Program was completed in March 2026. In October 2025, the Board of Directors authorized a new program under which we may repurchase up to an additional $2.5 billion of our outstanding Class A Common Stock (the “2025 Repurchase Program” and, together with the 2024 Repurchase Program, the “Repurchase Programs”). The 2025 Repurchase Program commenced in March 2026 following completion of the 2024 Repurchase Program.

During fiscal year 2026, we repurchased approximately 19.1 million shares of our Class A Common Stock for approximately $1.8 billion at an average price per share of $94.31 through the Repurchase Programs. The 1% excise tax instituted by the Inflation Reduction Act is excluded in the total repurchase cost and average price paid. All repurchases were made in open market transactions. As of June 30, 2026, $1.9 billion of our Class A Common Stock remained available for repurchase under the 2025 Repurchase Program. Refer to Note 16, “Stockholders’ Equity,” to our consolidated financial statements for additional information.

Contractual Obligations

Our principal commitments consist of contractual commitments for cloud services platform and other infrastructure services, and obligations under leases for office space including obligations for leases that have not yet commenced. Refer to Note 10, “Leases,” and Note 12, “Commitments and Contingencies,” to our consolidated financial statements for additional information.

Other Future Obligations

We believe that our existing cash and cash equivalents, together with cash generated from operations, and borrowing capacity from the 2024 Credit Facility will be sufficient to meet our anticipated cash needs for at least the next 12 months. Our other future cash requirements will depend on many factors including our growth rate, the timing and extent of spend on research and development efforts, investment in AI, employee headcount, marketing and sales activities, investment in enterprise sales, payments to tax authorities, acquisitions of additional businesses and technologies, the introduction of new software and services offerings, enhancements to our existing software and services offerings and the continued market acceptance of our offerings.

As of June 30, 2026, we are not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Non-GAAP Financial Measures

In addition to the measures presented in our consolidated financial statements, we regularly review other measures that are not presented in accordance with GAAP, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts, and make strategic decisions. The key measures we consider are non-GAAP gross profit and non-GAAP gross margin, non-GAAP

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operating income and non-GAAP operating margin, non-GAAP net income and non-GAAP net income per diluted share, and free cash flow (collectively, the “Non-GAAP Financial Measures”). These Non-GAAP Financial Measures, which may be different from similarly titled non-GAAP measures used by other companies, provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations. Management believes that tracking and presenting these Non-GAAP Financial Measures provides management, our board of directors, investors and the analyst community with the ability to better evaluate matters such as: our ongoing core operations, including comparisons between periods and against other companies in our industry; our ability to generate cash to service our debt and fund our operations; and the underlying business trends that are affecting our performance.

Our Non-GAAP Financial Measures include:

•Non-GAAP gross profit and non-GAAP gross margin. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, and restructuring charges.

•Non-GAAP operating income and non-GAAP operating margin. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, and restructuring charges.

•Non-GAAP net income and non-GAAP net income per diluted share. Excludes expenses related to stock-based compensation, amortization of acquired intangible assets, restructuring charges, and the related income tax effects of these items.

•Free cash flow. Free cash flow is defined as net cash provided by operating activities less capital expenditures, which consists of purchases of property and equipment.

We understand that although these Non-GAAP Financial Measures are frequently used by investors and the analyst community in their evaluation of our financial performance, these measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. We compensate for such limitations by reconciling these Non-GAAP Financial Measures to the most comparable GAAP financial measures.

The following table presents a reconciliation of our Non-GAAP Financial Measures to the most comparable GAAP financial measure for fiscal years 2026 and 2025 (in thousands, except percentage and per share data):

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[[GREPCENT_TABLE]]
[["","Fiscal Year Ended June 30,"],["","2026","","2025"],["Gross profit"],["GAAP gross profit","$","5,575,478","","","$","4,320,453"],["Plus: Stock-based compensation","70,385","","","83,017"],["Plus: Amortization of acquired intangible assets","78,906","","","40,508"],["Plus: Restructuring charges (1)","52,620","","","\u2014"],["Non-GAAP gross profit","$","5,777,389","","","$","4,443,978"],["Gross margin"],["GAAP gross margin","85%","","83%"],["Plus: Stock-based compensation","1","","2"],["Plus: Amortization of acquired intangible assets","1","","\u2014"],["Plus: Restructuring charges (1)","1","","\u2014"],["Non-GAAP gross margin","88%","","85%"],["Operating income"],["GAAP operating income (loss)","$","10,355","","","$","(130,392)"],["Plus: Stock-based compensation","1,605,129","","","1,362,222"],["Plus: Amortization of acquired intangible assets","101,486","","","55,517"],["Plus: Restructuring charges (1)","279,509","","","\u2014"],["Non-GAAP operating income","$","1,996,479","","","$","1,287,347"],["Operating margin"],["GAAP operating margin","\u2014%","","(3)%"],["Plus: Stock-based compensation","24","","27"],["Plus: Amortization of acquired intangible assets","2","","1"],["Plus: Restructuring charges (1)","4","","\u2014"],["Non-GAAP operating margin","30%","","25%"],["Net income"],["GAAP net loss","$","(53,828)","","","$","(256,687)"],["Plus: Stock-based compensation","1,605,129","","","1,362,222"],["Plus: Amortization of acquired intangible assets","101,486","","","55,517"],["Plus: Restructuring charges (1)","279,509","","","\u2014"],["Less: Income tax adjustments (2)","(406,084)","","","(185,107)"],["Non-GAAP net income","$","1,526,212","","","$","975,945"],["Net income per share"],["GAAP net loss per share - diluted","$","(0.21)","","","$","(0.98)"],["Plus: Stock-based compensation","6.16","","","5.15"],["Plus: Amortization of acquired intangible assets","0.39","","","0.20"],["Plus: Restructuring charges (1)","1.07","","","\u2014"],["Less: Income tax adjustments (2)","(1.56)","","","(0.69)"],["Non-GAAP net income per share - diluted","$","5.85","","","$","3.68"],["Weighted-average diluted shares outstanding"],["Weighted-average shares used in computing diluted GAAP net loss per share","260,163","","","261,787"],["Plus: Dilution from dilutive securities (3)","633","","","3,407"],["Weighted-average shares used in computing diluted non-GAAP net income per share","260,796","","","265,194"],["Free cash flow"],["GAAP net cash provided by operating activities","$","1,353,135","","","$","1,460,393"],["Less: Capital expenditures","(34,060)","","","(44,850)"],["Free cash flow","$","1,319,075","","","$","1,415,543"]]
[[/GREPCENT_TABLE]]

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(1) Restructuring charges include stock-based compensation expense related to the rebalancing of resources for the fiscal year 2026.

(2) We utilize a fixed long-term projected non-GAAP tax rate in our computation of the non-GAAP income tax adjustments in order to provide better consistency across interim reporting periods. In projecting this long-term non-GAAP tax rate, we utilized a three-year financial projection that excludes the direct and indirect income tax effects of the other non-GAAP adjustments reflected above. Additionally, we considered our current operating structure and other factors such as our existing tax positions in various jurisdictions and key legislation in major jurisdictions where we operate. For fiscal years 2026 and 2025, we determined the projected non-GAAP tax rate to be 24% and 26%, respectively. This fixed long-term projected non-GAAP tax rate eliminates the effects of non-recurring and period specific items which can vary in size and frequency. Examples of the non-recurring and period specific items include but are not limited to changes in the valuation allowance related to deferred tax assets, effects resulting from acquisitions, and unusual or infrequently occurring items. We will periodically re-evaluate this long-term rate, as necessary, for significant events. The rate could be subject to change for a variety of reasons, for example, significant changes in the geographic earnings mix or fundamental tax law changes in major jurisdictions where we operate.

(3) The effects of these dilutive securities were not included in the GAAP calculation of diluted net loss per share for fiscal years 2026 and 2025 because the effect would have been anti-dilutive.