Atlassian (NASDAQ:TEAM) released third-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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The full earnings call is available at https://events.q4inc.com/attendee/335366525
Summary
Atlassian reported a 32% year-over-year revenue growth to $1.8 billion, with cloud revenue reaching $1.1 billion and showing a 29% year-over-year growth.
The company's strategic focus on AI and the System of Work has led to increased adoption, with significant expansion in major enterprises like Siemens Energy and Wayfair.
Strong operational performance is highlighted by the largest competitive displacements quarter ever, particularly in ITSM, and a milestone of $1 billion ARR in the service collection.
The company continues to see robust demand for its Teamwork and Service Collections, with AI-driven advancements contributing to seat expansion and cross-sell opportunities.
Management emphasized durable, profitable growth and the role of AI in enhancing operational efficiencies and customer offerings.
Future guidance indicates continued cloud migration and strategic investments in AI and enterprise sales, with disclosures on subscription ARR expected to clarify revenue dynamics.
Full Transcript
OPERATOR
Good afternoon and thank you for joining Atlassian's earnings conference call for the third quarter of fiscal year 2026. This conference call is being recorded and will be available for replay on the Investor Relations section of the Atlassian website. Following this call, I will now hand the call over to Martin Lamb, Head of Investor Relations
Martin Lamb (Head of Investor Relations)
welcome to Atlassian's third quarter fiscal year 2026 earnings call. Thank you for joining us today. On the call with me today we have Atlassian CEO and Co Founder Mike Cannon Brooks and Chief Financial Officer James Chong. Earlier today we published the Shareholder Letter and press release with our financial results and commentary for our third quarter of fiscal year 2026. The shareholder letter is available on the Investor Relations section of our website where you will also find our other earnings related material, the Earnings Press Release and Supplemental Investor Data Sheet. As always, our Shareholder Letter contains management's insight and commentary for the quarter. So during the call today we'll have brief opening remarks and then focus our time on Q&A. This call will include forward looking statements. Forward looking statements involve known and unknown risks, uncertainties and assumptions. If any such risks or uncertainties materialize, or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward looking statements we make. You should not rely upon forward looking statements as predictions of future events. Forward looking statements represent our management's beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update or revise such statements should the change or cease to be current. Further information on these and other factors that could affect our business performance and financial results is included in filings we make with the securities and Exchange Commission from time to time, including the section titled Risk Factors and our most recently filed annual and quarterly reports. During today's call, we will also discuss non Generally Accepted Accounting Principles (GAAP) financial measures. These non Generally Accepted Accounting Principles (GAAP) financial measures are in addition to and are not a substitute for or superior to financial measures of financial performance prepared in accordance with gaap. A reconciliation between Generally Accepted Accounting Principles (GAAP) and non Generally Accepted Accounting Principles (GAAP) financial measures is available in our Shareholder Letter, Earnings Release and Investor Data Sheet on the Investor Relations section of our website. We'd like to allow as many of you to participate in Q&A as possible. So out of respect for others on the call, we'll take one question at a time. With that, I'll turn the call over to Mike for opening remarks.
Mike Cannon Brooks (CEO and Co-Founder)
Thank you all for joining us today. As you've already read in our Shareholder Letter we delivered some incredible Q3 results. Total revenue grew 32% year over year to $1.8 billion. Cloud revenue surpassed $1.1 billion and accelerated to 29% growth year over year and RPO grew again 37% year over year to $4 billion. These are largely thanks to our team's excellent execution and clear momentum across our key strategic priorities, Enterprise AI and the System of Work. this quarter, some of the world's largest enterprises, including Siemens Energy, Rheinmantill and Wayfair, deepened and broadened their commitments to Atlassian in AI. We continue to add millions of monthly active users to Robo and our AI Robo credit usage is growing more than 20% month over month. Customers using Robo are also growing their ARR at roughly two times the rate of customers who are not using Robo, contributing to our strong cloud outperformance and expansion in the quarter and more and more enterprises are embracing our platform wide vision, using Atlassian System of Work to see the full picture of their organization. This is because the teamwork graphs connects knowledge, work, people and code, giving our customers one of the richest enterprise context graphs in the world. Context is a clear differentiator for us and we're seeing this as our competitive momentum builds. This is our largest ever quarter for competitive displacements from a major ITSM provider. We're taking share from rivals as customers move away from legacy systems and choose Atlassian for a more modern AI native and much better value service platform. As I've said before, I believe AI is one of the best things that has ever happened to Atlassian. In a world where humans will run teams of agents, context is the only anchor to avoid chaos and we believe that companies who prioritize context will become truly AI native. With Atlassian, our customers aren't just choosing software, they're choosing the kind of company that they want to become. This is a time of significant change in our industry and we're moving forward with strong conviction and discipline. We're focused on executing, delivering customer value and driving durable, profitable growth. With that, I'll pass the call to the operator for Q and A.
OPERATOR
We will now begin the question and answer session. If you have a question, please press Star followed by the one on your phone. If you'd like to withdraw from the queue, please press Star followed by the two. Your first question comes from Arjun Bahatia from William Blair. Please go ahead. Your first question comes from Keith Weiss from Morgan Stanley. Please go ahead.
Arjun Bahatia (Equity Analyst at William Blair)
Excellent. Thank you guys for taking the question and congratulations on a really solid Q3 print. It's great to see all these investments and all this innovation really starting to come to fruition within the numbers. I think that's important, getting investors more confident in the stock. I think another sort of important part, and I think Mike, you do a good job of this, is helping people better understand how the existing software that Atlassian brings to the equation plus AI brings a better result. And there was one line in the shareholder letter that I thought was really interesting when you're talking about the teamwork graph and how it makes the AI investments not just smarter and we've been talking a lot about context and how it makes the AI better, but you're also talking about cheaper and more valuable. So one, I was hoping you could dig into that and how the teamwork graph and the broader system lowers the cost of these AI investments. Particularly as we're hearing more and more pushback on these credit costs really starting to rise and the token costs starting to get get really big. Then maybe as a follow up for James, again in the shareholder letter you mentioned data center outperformance driven by some pull forward of some of the some deals from future quarters. Any kind of view you could give us into what that means for FY27 and what we should be expecting from Data center in the year ahead.
Mike Cannon Brooks (CEO and Co-Founder)
Thank you guys. Hey Keith, Sure. Thanks for the question. Not what I expect from the start, but a great question. Very, very savvy, as I would expect from you. Look, the teamwork graph and the Atlassian platform is certainly delivering amazing results to customers. You can see that that customers using Robo are growing their ARR at twice the rate of non Robo customers. Their credit usage continues to grow strongly with strong results of over 20% month on month. And they're upgrading the teamwork collection to get more of those credits included in their in the base offering, but also using many more agents. Right. And that agent usage is I think what you're referring to. Whether that agent usage are Robo agents or whether there are other platforms agents that are accessing Atlassian's context through the teamwork graph, that usage is increasing markedly and that's the compounding effect of intelligence for customers as the models continue to get better. But to really accelerate a business, the intelligence compounding is only one aspect. What you also need is the context. That is your knowledge, your work and projects and goals, understanding of your people so your org chart their skills and everything else as well as knowledge of the code. We have a lot of huge announcements coming up next week at team 26 around this area. But what you're seeing in the teamwork graph is the world's best context graph across all aspects of the business. So whether that's a service team, a marketing team, a technology team, or a business team, bringing that context to bear in all of those AI surfaces is what's the most important. Now, when we say it makes it better, faster and cheaper, why is that? Well, we have a lot of statistics and proof points that not only do you get higher quality AI answers because of our search, the teamwork graph, everything put together in the knowledge that we have about your business, but you also get cheaper answers. Those are cheaper answers because you use far less tokens to get to an answer in the same amount of time. And fundamentally, using less tokens reduces your cost of AI or allows you to do far more AI investment, whichever way you look at it. So customers are seeing that, you're seeing that in their usage and it's then showing up in our financial results. James, do you want to follow on in the second half?
James Chong (Chief Financial Officer)
Yeah. Q. Thanks for the question. So on the data center side, the Q3 revenue beat, as we mentioned, was primarily driven by recognizing greater than expected upfront term license revenue within that quarter. You know, since our announcement of the data center end of life back in September, you know, we've had a couple quarters now to really better understand some of the signals that we're seeing from our customers in terms of their buying behaviors, especially with Q3 being the largest expiry base for us. So let me unpack that a little bit more for us here. So first, I would say that the migration to the cloud is on track and continues as expected. Really pleased with what we're seeing seeing there. We still expect that to contribute mid to high single digits on cloud growth. And second is that the retention rates on our data center business remain incredibly robust, in fact, actually outperforming our expectations in the quarter. And third, for some of our largest customers with more complex migrations, they remain committed to transitioning to the cloud, but it's going to be a multi year journey for them. Right. They've got a lot of deep customizations, change management. You know, it's going to take these customers time, right. Often many of these have tens of thousands of users, some with over 100,000 users. So this category of customers, we saw a pull forward of purchasing and expansion activity into Q3 from future periods. And we also had a pricing change in March that further catalyzed this dynamic. So as a result, you know, that drove greater than expected upfront term license revenue recognized in the quarter. In fact, relative to our expectations for Q3, we recognized approximately 50 million more in upfront term license revenue. And you know, that's some of the trends that we've been seeing since our announcement of End of Life back in September, but More pronounced in Q3 given the size of the expiry base and the pricing catalyst that I mentioned. And maybe lastly the cohort of DC customers that are actively planning and transitioning to the cloud. You know, we're seeing these customers moderate their seed expansion versus historical trends we've seen. Again, I'll mention that retention rates remain incredibly high but now expecting a more muted level of data center expansion from these customers going forward as they prep to move to the cloud. You know we're still seeing really nice uplift when we when customers move from DC to cloud. So net net, you know what we're seeing is that our largest strategic customers continue to deepen their commitment to lasting, whether that's on DC or cloud. And we're working hard to meet them where they are and help them accelerate that transition so they can unlock all the AI and agent capabilities in the cloud. So that gives you a little bit of color there Keith, and maybe I'll just share that with these dynamics sort of playing out across the year on Data Center. With Q4 yet to play out where revenue rec is being pulled into FY26 from FY27, you know we recognize that there's lumpiness in that pull forward effect in data center and having the timing of, you know, and that that does impact the timing of reported revenue, RPO and crpo. So internally of course, you know we look at a variety of metrics to performance manage our business including a really healthy ARR. So next week you know we're going to be holding that investor Forum at our Team 26 conference and to help guide investors through the revenue recognition timing dynamics on the data center side we'll look to enhance our disclos disclosures and share historical subscription ARR which will help normalize some of those timing effects and help everyone better understand the underlying strength of the overall business. So all up feel really good about our execution the Runway that we still have ahead of us. So more to share next week at the team event and the investor forum.
OPERATOR
Your next question comes from Arjun Bahatia. From William Blair, please go ahead.
Arjun Bahatia (Equity Analyst at William Blair)
Hey guys, sorry about that but congrats on the strong quarter here. I was curious on just Robo, how you're thinking about positioning that against some of the Third party agents. It seems like you're having a lot of success in your existing customer base. I'm curious, you know, are customers evaluating other agents against Robo or is this sort of an easy add on given how integrated it is into the rest of the platform with Jira and Confluence and JSM and the rest of the suite? Thanks Arjun, I can take that one. Look, there are a lot of places that customers can access. Robo is maybe the simplest way to phrase it. Think of Robo as the AI part of the Atlassian platform that shows up in all of our surfaces. Whether those surfaces are on the Atlassian platform, inside of Jira or Confluence, in our chat app, on the mobile, on the desktop, or whether those surfaces are in other agent platforms, right? Be that from Google, Salesforce or any of the foundation model vendors. We want to make sure that Atlassian's workflows, processes, the teamwork graph show up wherever is most relevant for the customer. Now that has required us for a number of years to bush bash through a huge amount of R and D work, really hard R and D work to make sure that our context graph in the teamwork graph is the best out there. It has the most amount of context about your organization. It's the most deeply connected. We do the inference up front to make sure that you get those better, cheaper and faster results that we talked about. Better quality answers at lower cost that run your agents faster is an amazing offering to customers and they're realizing that whether or not that happens on the Atlassian platform or off the Atlassian platform, what we want to make sure is that the customers see value in the platform overall. There is no doubt that agents existing in native contexts in our automation frameworks, if you have a huge amount of business processes running through JIRA or the service collection, the agents that are natively integrated have the largest access to that platform and they're right in the sidebar. They appear in the JIRA ui. That's a huge advantage. At the same time, we've shipped a whole series of features that allow third party agents from Gamma and Canva, to Cursor, and Claude coding in each of our different types of teams. We want to make sure that third party agents also surface in Atlassian's context, whether that's on a conference whiteboard, whether that's in a JIRA work item, but they all use the teamwork graph of the core so customers are really seeing it. We certainly get evaluated against other platforms. I'll tell you that customer reaction is amazing. We've done A phenomenal amount of R and D to give you great quality answers. We see that in the increasing usage of our robo platform on and off Atlassian, both of which benefit us. And you can see that in the customers increasing their seats and expansion rates as well as using our AI technology. So all AI is not built equal. We build fantastic AI and we get it into the customer's hands. That's what's most important.
OPERATOR
Your next question comes from Greg Moskowitz from Mizuho. Please go ahead Greg.
Greg Moskowitz (Equity Analyst at Mizuho)
Thank you James. Welcome to Atlassian. Mike. You may recall my high level of frustration one quarter ago when, you know, after I thought was a pretty good quarter of acceleration, your shares proceeded to go materially lower. Continue to go materially lower. And I don't want to minimize that. There's a lot more work to be done. But clearly this is an impressive result. My question relates to a comment in the shareholder letter that strong seed expansion in JIRA was a key driver of the cloud revenue acceleration this quarter. And you know, given that there is so much fear about meaningful seat compression at Atlassian being on the horizon, can you unpack the drivers of the seat growth for us? And secondly, this is a dynamic that you think can be durable. Great, thanks for the question on that. Yeah, you know, on the cloud side again saw strong performance re-accelerating to 29% year over year there. And maybe I'll start with the fact that, you know, D.C. migrations again to the cloud were in line with our expectations and not the real sort of contributor to that $50 million beat on the print. It's progressing well and we still expect that to contribute that mid to single high digits growth to cloud like we mentioned. So the real two primary drivers that we talked about on the outperformance was really that cross sell and seed expansion. So on the cross sell side, you know, we saw outperformance in our collections business across service collection and in particular Teamwork Collection. We've got JIRA and Confluence Loom and Rovo. And just keep in mind that right now Teamwork Collection is really the best vehicle for our customers to buy and unlock AI and all the agent capabilities across the Atlassian platform.
James Chong (Chief Financial Officer)
Customers are upgrading to TWC because of the increased Credits. We're giving 10x more credits on Rovo versus the standalone subscription. And I'm sure Mike can touch a little bit more on some of the progress that we're seeing there. But importantly, we're also the other driver here is that we're seeing that growth in twc while also seeing continued seed expansion in our core JIRA standalone offering. Right. And I think that really speaks to how, you know, in the AI driven agent world, JIRA and the Atlassian platform really remain core to enabling customers to manage their workflows and collaboration to fully unlock that value of AI. So whether it's TWC or standalone JIRA offerings, you know, we're launching a ton of new value and that's really enabling our customers to deploy agents to do the work, capture that agent activity alongside work history for permissions and audit trails and admin governance. So a lot of great traction here as you can see in our Q3 print.
Mike Cannon Brooks (CEO and Co-Founder)
Yeah, Greg, thanks for that and calling it out. I hope we've been very consistent on our views in that world. We are not seeing any signal of seed compression from customers. If anything, we are seeing the opposite. We are seeing strong expansion numbers, strong cross sell numbers between collections, strong usage of AI and strong commitment to the Atlassian platform. Many, many competitive wins. A huge amount of consolidation happening into the teamwork collection. So we have a lot of green lights in a lot of different places. Summarily you can see that, you know, our NRR maintained north of 120 and even ticked up again for I think the third or fourth quarter in a row. We have a lot of reasons why that is. Firstly, I would go to high R and D investment in just great quality software. Right, that does matter. It always gets ignored in a lot of contexts. Wrong choice of words in a lot of quarters. But we build amazing applications that deliver great value for our customers. Secondly, the context we have in the teamwork graph and the critical business processes continue with AI to blur the boundaries between teams and between roles. That means our platform and our offering, between service teams on one side that connect to finance and HR marketing and in through ops teams to technology teams with business teams and leadership teams. The same context across all of those teams allows us to expand into those non technical roles at an increasing rate. Right. Which shows why we are getting that seed expansion in different collections in different areas and just the continued strength in our business. Fundamentally, customers are opting for more and more workflows on the Atlassian platform.
OPERATOR
Your next question comes from Brent Till from Jefferies. Please go ahead.
Brent Till (Equity Analyst at Jefferies)
Mike. You call out the largest competitive replacements. I think. I don't know if you've seen or just you were mentioning that. What are you seeing? What's driving this now where you're seeing that increasing rate?
Mike Cannon Brooks (CEO and Co-Founder)
Thanks, Brent. Yes, we had a great quarter for competitive displacements. Especially in the service collection especially. Look, we continue to be incredibly strong in the mid market area. As you can see from many years of investment in the enterprise pillars of our business, we are starting to grow really, really strongly in the enterprise and strategic segments across service management in particular. That's not just in itsm. Although in ITSM we are growing really strongly. It is in broader employee service management. We're seeing that we get the statistic now. 75% of the Fortune 500 user service collection, 60% of service question customers use us outside of it. So in HR and marketing and other areas, this is just a fantastic example and why we're getting those competitive displacements. It was our largest quarter ever for those and it's because again I would go to the quality of the software. The speed with which you can get up and running on the service collection continues to be a strength. The high level of user experience quality continues to be a strength. The comprehensiveness of our data and the teamwork graph and bringing that to bear in service collection fundamentally allows you to operate those services cheaper, quicker, better answers because we have access to a better knowledge graph across your organization. And our AI continues to win every which way. We're incredibly AI forward. It's one of the largest areas of usage of agents in automations and automated workflows because it allows those service teams to run more quickly. And we're only just getting started in customer service and had a great quarter in that area as well. And our asset management platform, again assets moving into the platform as a whole part of that overall teamwork graph. It's just an incredibly strong customer story. And so we really excited about how we keep taking share in that space. And $billion ARR is a great milestone. We thought it was worth celebrating. That's just a fantastic milestone for that business while continuing to grow incredibly fast.
OPERATOR
Your next question comes from Alan Verkhovosky from btig. Please go ahead.
Alan Verkhovosky (Equity Analyst at BTIG)
Hey there. Thanks for taking the question Mike. It's great to see the AI momentum here. I'd be curious if you could share what drove the decision to announce the data collection changes you're making and what are you looking forward to from a product capability perspective on the other side of this. Thanks.
Mike Cannon Brooks (CEO and Co-Founder)
Yeah, thanks Alan. Look, opatlassian continues to be incredibly driven by its values and its long term philosophy. I say that because our data collection, the largest part of that is clarifying exactly how it is that we use customer data, what the data is in the different segments. I think we have an absolutely world class Policy there. We are as clear as any vendor out there about what the different categories of data are, where they are used, what the benefit is to the customer for that, and what the customer's option sets and other things are. So think of it as broadly a large clarification of what it is that happens at different points and the value that's delivered to the customer from those. The increasing usage of AI allows us to build ever more powerful features. We are seeing a lot of customers. If you look at the DX business, for example, one of the greatest advantages is being able to see how my engineering organization compares to others in my industry, compares to others of my size, et cetera. And this requires a lot of those changes. Similarly, the usage of different types of SaaS tools is how we build the teamwork grass. So it's all about that open company, no bullshit, being very clear with customers, what it is, what the advantages and trades are. And we've had, I would say, a really positive customer relationship, customer response because we put trust and openness at the core of that relationship and explain to them what they get from that. And those, those usage patterns of customers are incredibly important to building fantastic software, which is, which is our highest level goal.
OPERATOR
Your next question comes from Raymond Lynchau from Barclays. Please go ahead.
Raymond Lynchau
Perfect, thank you. In your letter you talk a lot about momentum in itsm. Can you talk a little bit about what you're seeing there, what's driving it and you know, how scaled up our customers, like, you know, how meaningful is this for you? Thank you.
Mike Cannon Brooks (CEO and Co-Founder)
Sure. Right now, yeah, we are seeing great momentum in the service collection again, as I mentioned earlier, celebrating the milestone of passing a billion dollars in ARR. We try in the shoveled letters to put a different focus each quarter. So last quarter you saw us talking about the TIMWA collection when we passed a million seats and 1,000 customers less than six months into that offering. So showing some momentum in that area that continues. This quarter we've chosen to focus on the service production because of the milestone that it passed, which is a great milestone. The strength listing is across the regions. So we had a great quarter in EMEA at the business, but also in the service collection. A lot of large wins in that Europe, Middle east and Asia region of increasing strategic customers and enterprise level customers. We are seeing a big strength, as we've mentioned, in non IT use cases as well in the service collection. So that blurring of roles is really, really important to understand in the Atlassian platform and important to business as you're having less one tool for the IT team, one tool for the employees, one tool for the HR team. Our ability to connect the teams in an organization is really powerful as your organization becomes increasingly service driven. And lastly, as I mentioned, we have a huge amount of AI features that are delivering real value from AI ops in the IT area to be able to diagnose and fix problems more quickly all the way through to how you can use ROVO as a broad platform and are increasing adoption by customers of our MCP servers and our CLR command line interfaces. We'll talk a lot more about this next week, but especially in the service collection, you're seeing that enabling customers to get access to the context graph that's built in their service offerings which lets them just get again fantastic results, a better value proposition for the customer and those service parts of the business execute more quickly and at a lower cost.
OPERATOR
Your next question comes from Alex Zukin from Wolf Research. Please go ahead.
Arsenian
Hi, this is Arsenian for Alex. So Mike, what is working best with customers when adopting service and teamwork collections that's kind of driving that stronger cross sell growth contribution in cloud and then brief follow up. James, I think you mentioned it earlier, but when we're thinking about next year and the DC revenue growth decel comment, do you think we could get more color on how DCAR is trending or clarify whether we'll get any DCAR figure exiting the year to better understand core growth when we kind of lap some of these tougher comparison periods next year? Thanks.
Mike Cannon Brooks (CEO and Co-Founder)
Thanks. What is working best? Good question. It's all working really well. Look, I think I've covered our the teamwork graph as a whole and the data we have, the speed of adoption and user experience. Again, we have customers that have 500 plus different service desks running around their organization. For example, the ability to get new service desks up and running with all of the data from your organization to create incredibly efficient offerings for your finance team, for your operations and workplace teams, for your HR teams that is going really, really well. It's because of our investment in user experience overall we continue to go really strongly in the HRSM space. So in service management around HR and other business functions, that continues to be a source of strength for the service collection and our traditional connectivity between the dev team and the IT team, between your technology teams and your business teams has always been a source of strength for historically for JIRA service management. We've seen that continue to deepen and improve with the service collection because both of those two teams are getting more and more AI driven and that AI driven nature of things and our ability to connect different teams across the organization with a single context graph, with a single AI offering and take that offering out to all of the other products that a customer uses makes all of those service driven parts of their business just quicker to operate and faster to run. So I would say we're seeing strength across the board. And lastly, our newest addition to the service production in customer service management. Internally we're having huge success there. Right. Again, we gave the statistic that more than 70% AI resolution rates are being hit internally across hundreds of thousands of conversations in our internal adoption of customer service management. So it lets us run our business more efficiently and customers are seeing that too as the customer service offering continues to roll out with fantastic features.
James Chong (Chief Financial Officer)
Thanks for the question. As it relates to FY27 right now it's too early to decide discuss any guide at this point. We'll of course provide that guidance out in August our Q4 earnings. But as it relates to ARR, as I mentioned a little bit earlier, right, we're seeing that lumpiness in the revenue recognition in the in the year on the data center side. And next week we're going to be able to share some of the historical subscription ARR across the overall business to help really smooth out those timing effects that we talked about. And I think that will give folks a better understanding of the underlying strength in the business. But maybe just as a reminder too, you know, for the data center and the LIFE announcement, right, we began to recognize greater upfront term license revenue and that results in greater upfront revenue recognition in the period. But there's a corresponding drawdown in RPO and in particular CRPO as well. So you know, it's worth sharing then that when we normalize for the impact of ASC 606 here, our RPO would have been north of 40% in the quarter in Q3 and our CRPO would have been north of 30% year over year in Q3. Much more in line with some of the recent trends that we're seeing and again underscores the strength of the backlog that we're continuing to build.
Fatima Balani (Equity Analyst at Citi)
Your next question comes from Fatima Balani from Citi. Please go ahead. Good afternoon. Thank you for taking my questions. Mike, I wanted to ask you about thoughts on diversifying some of your pricing strategies. Collections has been a huge step in the direction of consolidating adjacent capabilities into more intuitive selling motions, but a lot of your peers in the broader enterprise software complex are sort of investigating or testing the path of usage based pricing. So I'm curious what you think about that approach and particularly how pertinent it could be for the service collection, for instance. And to the extent you're ab testing any of this with certain products, I love the perspective. And then a quick one for James. There has been a tremendous amount of focus on driving efficiencies in the business and especially leveraging AI to help Atlassian become even more efficient. So was curious about what type of qualitative learning and quantifiable yields you're seeing as you more assertively move down the path of deploying AI internally. Thank you.
Mike Cannon Brooks (CEO and Co-Founder)
Hi Fatima. Look, I'll take the first one on pricing and James can talk about efficiencies next. Although efficiency is incredibly important to us, we'll discuss pricing broadly. Look, our philosophy has always been to meet customers where they're at. Let me start there. Customers in general like the way we price our offerings and we wish to continue to be customer led and meeting them where they are. The largest amount of value we deliver today is through the seat based pricing model. The collections have been a major transformation in how we do that for sure. And in that you are getting a broader amount of value that you can see there. So we talk about that, you know, when people move to the Teamwork Collection, which we're seeing great momentum in. We talked about the cross sell and the expansion earlier. The Teamwork Collection gives you an amazing amount of software value across jira, Confluence and Loom and all of the platform asset goals and projects, et cetera. Gives you access to rovo, but it gives you an increased ROVO credit allowance. And we see that in the Teamwork Collection customers using more than twice as many ROVO credits per user. Right. We want to make sure that we're building amazing features that use those robo credits that the customers see value in using those credits. They also have more than twice as many active agents. So the TIMO collection comes with a larger pool of credits which customers are then using increasingly and that's leading, you know, robo driving customers to have twice the ARR growth rate of non robo customers, which is all a good set of long term lines, directions and arrows for us. We have a series of consumption or usage based pricing meters Now I think we're over 10 or 12 meters from assets to customer service, indexed objects, extra robo credits. Forge has a series of different offerings for extensibility BitBucket pipeline. So I would say that we continue to be customer led in how we Deal with that pricing. As long as customers continue to consume our AI offerings and continue to grow, which I believe they will, we have a great track record of doing that. Growing that token usage of 20% core on 20% month on month is an incredible achievement by our team and it shows the value of the offerings that we are delivering. And fundamentally it's about selling the outcome to the customer, them understanding the value that they're getting from our software. You're seeing that in them broadly increasing the length of their commitment to the Atlassian platform and increasing their overall dollar based commitment can see that in our strong RPO growth. As James pointed out, you know, normalizing for the ascend revenue recognition north of 40% that is customers voting for the long term for the Atlassian platform with pricing models continuing to adapt to their needs underneath that. So I feel we are really strongly placed for that. James, I'll leave it to you to talk about the second half of
James Chong (Chief Financial Officer)
that. You know, as it relates to margin expansion, I think we're just in this unique opportunity right now where we're seeing a lot of demand signals and we're going to continue to reinvest I think on the side on enterprise sales side where we see a lot of opportunity. But at the same time we're going to do that while balancing a very disciplined fiscal approach. You saw that in the shareholder letter where we elevated driving durable profitable growth as a strategic priority for the company alongside AI, enterprise and system of work. So again that margin expansion is going to come twofold through those types of efficiencies as well as continue to drive value for our customers on that top line.
Timur
Timur, if I might just add on that, look, we're seeing an amazing result of investments in the business, right? James talked about durable profitable growth. That's been a long term Atlassian aim. We've run an incredibly capital efficient business for our entire history. And I appreciate you calling out. We've had some great quarters about as we look to continue the durable profitable growth story as one of our strategic priorities. At the same time we've had a number of wins across the R and D investments that we've had in terms of engineering at scale. You can see that in our continued strength in our COGS numbers in the cost of operating our platform, which is an incredible achievement because that platform is operating with larger customers that are also expanding at larger and larger scale than ever before. And we are running the platform at a cheaper and cheaper rate without any reliability hiccups. So that's a huge credit to our engineering team and the work that we've done across every level of the stack to continue to build that durable, profitable business. Every reason that we should do that in the future. And we're seeing that in the fantastic results that we have. So just wanted to add on there's an R and D story. It is a finance story and we feel really strong about that in terms of a durable, profitable future.
OPERATOR
Thank you. That's all the questions we have time for today. I will now turn the call over to Mike for some closing remarks.
Mike Cannon Brooks (CEO and Co-Founder)
thank you all everyone for joining us on the call today. Thanks to the Atlassian team for a fantastic quarter. As always to all of you, we appreciate the thoughtful questions. I believe one of our longtime friends, Keith Weiss, is retiring after this call. So Keith, thank you very much for all the questions over time, in person and virtually. We appreciate your thoughtful questions, especially today and to everyone else, hopefully. Keith, we hope you'll join us next week in anaheim for Team 26. We have a series of incredibly exciting announcements as well as an investor forum. So whether we see you online or in person in Anaheim, we'll see you next week and otherwise hope you have a kick ass weekend.
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