Marcelo P. Lima

$TEAM CEO MCB: "So you've probably familiarly heard a bunch of the AI is going to make devs redundant, we only serve devs, seat growth is going to die, seats are going to disappear, AI agents are going to make everything less critical, people are going to, I don't know, make their own SaaS by themselves, make their own operating system, probably make everything. AI-native startups are going to just kill everybody and we don't have the right monetization model. I'm sure you've heard some version of all of these things. Let's go through some of them. Fundamental problem, I would say, that's very much looking backwards, right? That might be looking at Atlassian 10 years ago and assuming we're a static company. We've never been a static company. We've probably always been underestimated and misunderstood. Awesome, bring it on. The platform we built, transformations we're delivering, I hope we're showing you every quarter that we are delivering the numbers that we say we're going to deliver, durable growth that you can see in those numbers. I do think it misunderstands our runway going forward and we'll try to give you some indication on that. Let me tell you what Atlassian's about, granted, in real numbers. So I know a lot of you, despite being extremely smart, struggle to model Atlassian. You see a bunch of apps and you usually talk a lot about Jira and Confluence, although I still don't know how many Confluence questions we've had in any earnings call. I think I've said this a couple of years in a row, like it's still amazing to me, so we'll get to that in a second. But Jira and Confluence is not how Atlassian works. It's really not how we work, right? We are building a singular platform. As you now see, we have all five collections. And plenty of companies claim they have a platform. Most of them, I would argue, as a technical person, do not have a platform, not like we do, right? We have a single platform that delivers a single system of work that continues to compound and multiply the more collections and apps that you have on top of it. It delivers a common way to do things through the flexibility for an organization. And the value is in not the data, but the graph, the ontology. We will spend a little bit of time talking about that. And that's why I'd argue we're becoming an operating system for work for a lot of the world's largest companies. Customers are increasingly committing on a platform level. Brian will go through that. We have more and more platform-level committed customers. I've talked to a bunch, even this week, that are making even greater commitments to us, which feels excellent. It's a justification of all the things that we've invested in. As they add collections, they deepen their investment in us. It also makes our AI smarter. I hope you say that. We'll have a lot of slides on AI. I'm sure there'll be at least a couple of questions on AI as we get there. Now, one of the reasons that our growth is so durable is that it's incredibly diversified. So we told you in our shareholder letter last week, the service collection has passed a billion dollars ARR and it's continuing to grow at 30%. That's ARR, not even revenue. Now, that's just a service collection. Confluence, by itself, has passed a billion and a half dollars in ARR. Jira has passed two and a half billion in ARR. So we've built multiple billion dollar business, billion dollar plus businesses, all of which work on a single platform, which is really important for our customers, that serve every industry and every team, from finance to HR to IT to software teams to designers. And that is an incredible set. And people keep asking, well, how did Jira and Confluence keep chugging? They must be slowing down, right? And it's not the case. Today, Jira and Confluence are accelerating, as we have said, in the cloud. And it's because of the platform, right? We serve more and more workflows and business processes, which I think people greatly underappreciate, right? With the teamwork collection, people aren't buying point products anymore. They're buying a collection of things that work together that are part of the platform. And that's a massive signal for us, as we've shared over a thousand customers. That was a quarter, a bit ago, I should say. That was in previous quarter's results and more than a million seats in the first six months. So those are some really, really strong numbers. But the point is diversified business, multiple large businesses, all of which are growing very strongly. And again, the collections make it easier to expand. The changes we've made from a set of products, three years ago to the apps and collections that we have today working on a singular cloud platform make it easier for customers to consume our software. We have less things for them to buy with far more value. And part of the reason we're seeing that runway ahead of us for durable growth and the growth we're seeing today. Now, you can see all of this diversification playing out in our numbers, right? Customers aren't just buying in, they keep expanding. So let me give you an interesting chart. I think it'll be interesting for you. Let's look at total cloud seats, excluding all migrations. No migrations involved. And despite the, oh, seek base, it's going to disappear. You can get at your rulers if you want. I know you do. You can see visually, it's not slowing down. It's a pretty amazing curve. Again, this is excluding all migrations. Cloud seats. They continue to grow every quarter, every year. Durable growth as we talk about. Why? Because workflows continue to get more complex, more intertwined. Teams and companies are buying more into the Alassian platform and getting exponential value as they increase their commitments. And that's really important. And we think that only keeps accelerating from here. As teams start orchestrating their AI agents alongside their people, you heard me talk just a little bit this morning about the same graph. I think we have more ahead of us that we can continue to do because of our investments in that platform. Right? Now, you might be asking, okay, they're adding those seats, but seats for whom? Right? This is where the old narrative, I think, breaks down. People pigeonhole Atlassian as a developer company. Now, I might argue there's going to be more developers in the AI era. I think that's going to be true. But fine. You think we're the developer company, or some people do. We love that heritage, I will say. Developers are awesome. Technology and business teams working together is the core of what we do. We think developers are incredibly important to the future of every single large business on this planet. Technology is the core strategic advantage of almost every single big company that you will talk to. If not, they have some sort of regulatory barrier, et cetera. But the growth we're seeing hasn't been driven by developers for a long time. The system of work is for the entire company. It's for finance teams, it's for HR teams, it's for marketing teams, it's for operations teams and service teams. When we talk about assets and buildings and laptops and everything else, we're talking about far more than developers. We're powering hundreds of millions of workflows every month. Now, you've heard us talk before about how half our users are not in technology teams and we've got a half technology, half non-business. We shared that before. So, how about this one instead? Break it down and let's look at developers versus everybody else, knowledge workers. In Confluence, seven out of ten users for that one and a half billion dollar plus business that's growing well, very well in the cloud. Seven out of ten of our users are knowledge workers, non-developers. In Jira Service Management, it's over three quarters. Even on Jira, it's roughly two-thirds of the users are non-developers. That's HR and finance and legal and marketing and operations staff and design. We've spent two decades connecting these business teams with their technology teams and we have a lot more to do. Again, a different way of showing that we are a well-diversified, durable growth business. Now, let's look at the customer segmentations. So when you're embedded across that many teams inside a company, customers are expanding and how do we see that? Well, we talk about having 350,000 paying customers. We know that. That's the bottom of this kind of pyramid illustration. How about at the top end? So our million-dollar customer base, which I believe we said a quarter and a bit ago, had passed 600 customers spending more than a million dollars a year. That has grown six-fold in the last four years. In the last year alone, it grew at 39% year-on-year, that category. These customers have more than a 99% retention year-on-year and they are almost all expanding. If we look at our $3 million cohort over the last four years, when we talk about the enterprise investments we've had on the technology side, on Brian's side, that $3 million cohort has grown tenfold in the last four years. 54% year-on-year in the very last year alone and we have quite a number now of those $10 million plus ARR customers. These are ARR numbers as well, not revenue numbers. Takeaway I want you to get is we're not a nice-to-have tool. We are part of how these organizations run. We are a strategic partner. That has been our goal, as we've said, in every shareholder letter for the last four years. That is our enterprise goal. We've been working on the enterprise for a decade now since Data Center launched a decade and a bit ago and I think that's reflected in the movement of our customer base. So the top end of the pyramid is going very well. The important part is we have an awful lot of customers in that bottom end of the pyramid who are moving up there. So the platform works. Customers stay. They expand. They deepen their commitment to Atlassian. Natural question is, but do you have all the businesses? What is the runway? So we've updated all our SAM numbers. The way we've recalculated it now, updated the calculations, is that our SAM is about $140 billion. We have a lot of runway as a simple thing to take away from this. See it broken down by different collections and other bits and pieces there. So there's a lot ahead of us. And then the question naturally is, well, how do you go after that? How does that actually happen? So we've broken out these four growth levers, which are the ways that we grow typically, right? Expanding inside the customers we already have. Those million-dollar customers have become $3 million customers, have become $10 million customers, that started as $10 customers. That is expanding inside customers we already have. When we move to new groups inside those companies, we don't count them as a new customer. They're the same customer that we've always had. Most of the customers you'll hear from today, and I'll show you some examples in a second, have been with us for 20-plus years. I routinely speak to customers who've been with us for more than two decades. None of them are spending less than they were two years ago, let alone less than they were 10 years ago, and their commitment to Atlassian keeps growing. We obviously cross-sell across our portfolio. I'll show you some stats about that in a second, but we obviously have far more apps, I think you can see, across the moonrise than we have ever had in collections. Upselling into new value tiers as we've added the premium and enterprise tiers in the cloud, and of course, winning brand new customers is still something that's incredibly important to us. When we look at that 350,000 customers across the globe, they're in literally every industry on the planet. I have spoken to customers in every single one of these industries in the last maybe quarter, at least year, every single one of these industries. And for every single one of these industries, they're driven by technology. But their technology and business teams connecting together is how they're trying to win in the future, and that's exactly where we sit with our platform. And it's a massive number, but we have barely scratched the surface of the opportunity in most of these accounts. How do we know that? Again, we talk about the Fortune 500 that are already Atlassian customers, 85% of them. But again, representing only 10% of our business today, and I think we're only just past 10% very recently. We have a huge amount of growth in that Fortune 500 cohort alone. But the headroom inside all the other companies we serve is massive. We are in the European equivalent of the Fortune 500, the Australian equivalent of the Fortune 500, the Asian APAC equivalent of the Fortune 500. So across the global enterprise landscape, we have a huge amount of runway ahead of us. How do we know that in terms of those knowledge workers? Well, if you look at the billion knowledge workers on the planet, about 900 million of them are outside of technology, about 70 million technical knowledge workers, and about 30 million of them are in development. Call these order of magnitude rough numbers, there's various surveys, they all end up about this sort of proportionality. If you think about the fastest growing segment of our customer base, which is that non-developer audience, we have an awful long way to go with our tens of millions of users today to that billion dollars. So a few different ways you can think about our potential. And again, when we land a new department, we don't add a new customer. Just two, three months ago, we landed a 200-person marketing organization that had never touched Jira in one of the 10 largest companies on the planet. What was important is those 10 largest companies, they said they had never used Jira. In fact, one of the people said, I didn't know this was Jira. I thought this was someone else. I won't say which competitor. And that was awesome. Right? That was amazing. And then when they use it, they're really happy. Why? Because it connected to their technology team. They almost literally repeated our core mission back to me in a meeting. And it was a truly amazing moment. So massive opportunity ahead of us. We do have significant cross-albity just in the Jira base. So how do I keep illustrating this in different ways? Here's a different way to look at it. If you look at the Jira base, in the clouds, 150,000-ish customers call this a sort of a round number. And again, as I said before, Jira is growing extremely fast in the cloud by itself. So this number keeps going up. However, if you look at service collection as an equivalent, it's only 65,000-odd customers. There is a huge runway just if service collection did nothing other than sell to the Jira base. Right? That's over... I should have done maths before my coffee. What is that? 80,000-ish? 85,000 Jira customers where service collection is not attached today. That is a huge number when you look at enterprises around the world. And these are only significant customers, I would say. So the reason is 150,000. I've excluded a lot of the smaller ones and stuff like that. So they're of size, let's say. The best part? Those aren't cold conversations. When Brian's team go in and say, look, your teamwork collection is going really well. Let's talk about the service collection. And you've got the same data, the same platform, the same teamwork graph. That's not a cold conversation. That is an amazing conversation. Part of the reason why the service collection continues to take, share, and do really well in a lot of those increasingly in the enterprise and strategic segments. I talked about upgrading additions. This gives you some interesting statistics on where we were. So if you look back five years again, this is Q3 number, so not quite the end of FY26 yet, but roughly a five-year period called four and a half to five years. You can see that our mix here has moved from the standard premium enterprise we had five years ago to where we are today. It's an example of our enterprise journey continuing. Now, I drew this chart for you so it was illustrative on the left to the right. The right-hand bar, obviously, in quantum is far larger than the left-hand bar. We have far more customers than we had five years ago, but just as a proportionality, it shows that our customers are increasingly opting for premium and enterprise as we continue to solve scale, security, regulatory, compliance, and other issues that they can opt into. At the same time, the standard continues to grow well because we get that broad base of millions of companies around the world. How big is that broad base? Well, there are about six million companies roughly that we would estimate are in our target market that aren't Atlassian customers today. We have a few hundred thousand free instances in businesses of any significant size. So again, we're not talking about a one-person instance, someone's created as a test, et cetera, we're excluding that. So it sort of shows you where some large amount of opportunity when you look through those different things. So we talked to the system of work, our growth, lots of opportunities. I thought it would be helpful if I broke it down into some actual customer examples. So this is real-world customer data I've anonymized. Neither of these are two customers that are coming to talk to you today. There are two examples of thousands of customers that I could pull out, literally, that show a multi-year journey. So I'm going to start with a global auto manufacturer, 100,000 plus employees, very big company. Let's look at their journey over 15 plus years with it last year. It's a bit of an eye chart, so let me walk you through it for a second. If you see the line at the bottom, the first line is their time on server for those who've been with us for a while. The second line is their time on data center and the third bit of the line is their time on cloud. So they're on cloud for the last five years, they spent three or four years on data center and what is that, six, seven years on server. So they moved our deployment options over time as this example of a customer. They've been with us for 15, 16 years at this point and you can see at the very bottom what applications they've bought. You're always asking where does all the R&D go? Well, here is a good example of where they've built things that we didn't have and they've bought things that we didn't have over time. They're now sitting, oh, and I should say at the top, sorry, that's probably the most important part that I missed. This is obviously their ARR in millions of dollars at the top. So, you know, they were at one to two million dollars five years ago, they're now sitting, what is that, sort of eight to nine, maybe nine and change, sorry, my eyes aren't that good anymore. But you can see as they've moved where those jumps in revenue relate to their movements. So you can see when they moved to data center it moved from what was actually an exponential chart for the first five years, it is actually exponential for the first five years, it's just, you know, on the left-hand side they were probably spending five grand, ten grand, like near, you can't see the bars. Moved to data center, they're getting to the 50 to 100 grand, they get to the million dollar in the data center range, and then as they move to cloud, they continue to ramp up. We've talked a lot about why that is, but it's fundamentally they have many more things they can buy, their expansion opportunities, their expansion speed in the cloud is a lot faster, and they've moved to many more users. Back here, they're in the five, 10,000 user range. At the end now, they have 70,000 users running on cloud enterprise, and the scale of what they're doing is absolutely wild, right? Millions and millions, in fact, more than 10 million automation rules running every quarter, hundreds of thousands of manual tasks disappearing, massive rovo adoption across the organization, agents running AI, rovo is their default for AI, they like it more than any of their other AI solutions, et cetera. So, and you can see when they've started to add strategy collection and your product discovery, albeit those are small and still have some growth. So, one example of a customer, auto manufacturer. So, I've got one more. Oh, no, I forgot something. Oh, no, I didn't. They're learning on rovo. I already said that. And it's all about the platform. When you talk to this customer, the platform is what has enabled them to keep going. A typical pattern that we'll see with the cloud, 21, 22, 23, they're actually adopting cloud, moving to cloud, moving users over. Once that two or three year period is done, you start to see that acceleration afterwards as they then take on JPD, service collection, and onwards to the strategy collection, which is now running their enterprise dashboard for this large organization. Here is a totally different customer. This is a major financial services firm. Different continent, different part of the world, different industry. Again, a second of many hundreds of customers I could show you that look exactly the same. They again have been with us for about 15, 16 years. I actually cut this one off. I think they actually have been with us since 2004 from memory. So actually 22 years as a customer, but the first few years are literally just blank from the scale. Very similar journey to show you this one. Again, I believe they're at 30, 35,000 users, something in that realm. So about half the size of the prior customer and users. However, very close in spend. And you see them in the last couple of years, again, once they've moved to cloud, a year or two of adopting and moving themselves to cloud, moving their data across after a long journey with us. And then starting adopted product collection three years ago. Rovo two years ago. They again have tens of thousands of AI mail. They're running with Rovo. They really, really like it. They use it in automations, in everything. It's one of their default things. They built a bunch of agents to do critical work inside compliance, in HR, and lots of other places that run natively on the Elasian platform. They're a big user of the Teamwork Graph CLI. They're in an alpha program for the Teamwork Graph CLI. So they're actually using the command line interface. They think it will unlock a whole lot more usage of the platform. They have an incredibly strong, responsible AI framework. They spent six months putting us through their AI paces, and we were one of the first AI tools that they turned on, which we're really proud of. We love customers that have very strict guardrails and barriers, and then we pass those parts. One of the biggest goals they have is what they call the connective spine of their organization. So Rovo is part of their connective spine, automating reporting, cross-team overhead, thousands of engineers. It's a really core part of what they do. And in the last 12 months, they've adopted DX and the strategy collection. So you can see that nice jump as they've come on board with those types of things. It's not entirely due to that, but just like a general movement. It's an amazing example customer, and it works because of the platform. So two of many hundreds of customer examples, I hope they were illustrative to try to show you what it is that we deliver for our customers. And I think they show you the power of being an R&D-led company. We've always been an R&D-led company. We've made a deliberate choice to build a true, large-scale platform, a single platform, not taking any shortcuts, even if that meant taking margins down temporarily as we invested in that platform, as I believe we've tried to explain every single time what it is that we do. We have certainly ramped R&D over the last few years in a very deliberate effort to build that multi-year period of time, to build that platform. What have we done in that period of time? Many shifts simultaneously, taking our largest customers and moving them to the cloud, building that singular cloud platform, which we're seeing the results of today as we saw this morning, delivering all the enterprise reliability, governance, compliance, scale of those world's largest companies to 50,000 person-plus companies right there, 30,000, 40,000, 80,000 seats, whatever it was, 70,000 seats, and moving from those point products to those integrated collections, a huge amount of work to do all of those. What does that deliver for customers?"