Software stocks crashed at the start of 2026 amid growing fears that artificial intelligence would disrupt the growth of many enterprise software providers. But as many software companies seek to set themselves apart from the pack by demonstrating that AI benefits their businesses, the group has begun to recover. Atlassian (NASDAQ: TEAM), for example, is up 74% over the past month, as of this writing.
Even after that phenomenal growth, the stock has yet to recover its share price from the start of the year. What's more, it remains about 50% below its all-time high from the start of 2025. This Rare Signal Is Flashing Again.
In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » But Atlassian looks poised to use its broad software suite and AI to drive higher financial results, and its stock price should follow suit.
It can still climb much higher from here. Shares of Atlassian have benefited from a broader rotation from chipmakers to software stocks, but its rise was fueled by much better-than-expected fourth-quarter earnings. The company grew revenue 28% year over year, driven by strong results from its cloud segment, which accelerated to 31% year-over-year revenue growth.
That's important because the company is migrating customers from on-premises data center deployments to its cloud platform by 2029. Management pulled forward a lot of data center revenue into the third quarter and expects a significant drop-off in sales over the next year. Management's full-year outlook calls for a 17% decline in data center revenue, resulting in an overall 13% deceleration in 2027.
But Atlassian could outperform that guidance. It's worth noting that management expects its cloud revenue growth to come in at just 25.5% for the full year. That would suggest a considerable slowdown in the back half of the fiscal year.
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