A sharp sell-off in Atlassian (TEAM) shares has created an ‘attractive setup’ ahead of the company’s fiscal Q2 2026 earnings. That’s the view of Morgan Stanley, whose analyst Keith Weiss says investors are overstating the risks posed by AI.
Shares in the collaboration tools designer are down about 20% already year to date, having lost 35% in 2025. This leaves Atlassian stock trading at a ‘deeply discounted valuation’, according to the analyst.
AI disruption ‘exaggerated’
Morgan Stanley argues market concerns around AI disrupting Atlassian’s seat-based pricing model are exaggerated. On the contrary, the bank views AI as a structural tailwind for the company.
| Atlassian (TEAM) | Price: $126.20 | Market cap: $34.3bn |
Weiss says AI proliferation should increase developer numbers and drive more complex application advances, requiring greater coordination across teams. Combined with Atlassian’s growing suite of AI-enabled products, these trends should support higher customer retention, increased migrations to its platforms and incremental upselling opportunities.
The investment bank also pointed to what it sees as underappreciated strengths in Atlassian’s business, including solid enterprise momentum, rising adoption of its broader solutions portfolio and a diversified user base that extends beyond developers alone.
Conservative guidance
From a financial perspective, Morgan Stanley believes current topline guidance is conservative. It cited steadier IT spending, accelerating product cycles and improving go-to-market execution as reasons to expect upside. The bank forecasts year-on-year total revenue growth of more than 22% in the fiscal second quarter, up from 21% in the prior quarter, alongside an operating margin of around 26%.
Atlassian has a long track record of meeting and beating quarterly expectations going back to its IPO in December 2015. It has only missed revenue forecasts once and earnings twice, in 44 reporting quarters.
In Q1 2026, Atlassian posted EPS of $1.04 on $1.43 billion of revenue, versus estimates pitched at $0.84 and $1.40 billion. Analysts have $0.73 EPS and $1.21 billion of revenue for Q2, due 5 February.
Price ‘‘penalized twice’
Weiss added that Atlassian has been ‘penalized twice’ by investors — first for being categorised as an application software vendor, and second for its perceived reliance on developers. He noted, however, that roughly half of the company’s users are non-technical, while Jira Service Management accounts for an estimated 15% to 20% of total revenue.
With estimates set conservatively, demand trends improving and AI-related fears viewed as overstated, Morgan Stanley said the recent pullback presents an attractive entry point for long-term investors seeking exposure to a high-quality business operating in a large and expanding software category.
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