Atlassian is aggressively expanding its footprint in the IT service management (ITSM) market, reporting a significant surge in customers migrating away from established competitors. During the company’s fiscal third-quarter 2026 earnings call on April 30, 2026, CEO and co-founder Michael Cannon-Brookes highlighted a pivotal shift in market share, specifically targeting legacy providers.
The company’s financial results reflect this momentum, with total revenue reaching $1.8 billion, representing a 32% increase year over year. This growth is underpinned by a strategic push into the enterprise sector and the rapid adoption of AI-driven productivity tools, positioning Atlassian as a direct challenger to dominant players like ServiceNow in the ITSM space.
The rivalry has intensified as Atlassian leverages its “Service Collection” and AI capabilities to attract large-scale organizations. This strategy is yielding tangible results, with the company reporting that 75% of the Fortune 500
now use its Service Collection, while 60% of those users have deployed the tools outside of traditional IT functions.
Market Displacement and the ITSM Battle
The most striking claim from the earnings call centers on the displacement of legacy IT service management systems. Cannon-Brookes explicitly linked the company’s growth to the erosion of competitors’ market hold.
“This is our largest-ever quarter for competitive displacements from a major ITSM provider.” Michael Cannon-Brookes, CEO and Co-Founder of Atlassian
This trend suggests a growing appetite among enterprises for a more integrated “system of work” that bridges the gap between development, IT operations and business teams. By offering a more flexible, cloud-native alternative to the rigid structures of legacy ITSM providers, Atlassian is successfully capturing a larger slice of the enterprise market.
The financial impact of this expansion is evident in the company’s cloud performance. Cloud revenue surpassed $1.1 billion, with growth accelerating to 29% year over year. The Service Collection segment has reached a critical milestone, with its Annual Recurring Revenue (ARR) surpassing $1 billion.
The Role of AI and ‘Rovo’ in Growth
A central driver of this competitive edge is the introduction and scaling of Rovo, Atlassian’s AI-powered agent. The company is seeing a direct correlation between AI adoption and increased customer spend. According to the earnings report, customers utilizing Rovo are growing their ARR at roughly two times the rate of those who are not using the tool.
The adoption of Rovo is accelerating quickly, with AI credit usage growing more than 20% month over month. Atlassian is incentivizing this adoption through its pricing bundles; for instance, customers of the Teamwork Collection receive 10x more credits on Rovo compared to standalone subscribers, which has led to those users consuming more than twice as many credits per user.
Financial Stability and Enterprise Scaling
Beyond the aggressive pursuit of market share, Atlassian’s internal metrics indicate a highly stable and expanding customer base. The company’s Net Revenue Retention (NRR) has remained above 120%, a figure that has reportedly ticked upward for three or four consecutive quarters. This suggests that existing customers are not only staying but are significantly increasing their investment in the platform.
The company’s Remaining Performance Obligations (RPO) also showed a strong upward trajectory, rising 37% year over year to reach $4 billion. Although, the financial picture includes some complexities regarding how revenue is recognized.
CFO James noted a $50 million increase in upfront term license revenue, which was driven by a combination of deal pull-forward and a pricing change implemented in March. While this provided a short-term boost, James cautioned that this could create lumpiness
in reported revenue and RPO moving forward. He specifically warned that data center expansion from customers transitioning to the cloud may be more muted as those organizations prepare for full migration.
Regional Momentum and Sector Expansion
While Atlassian’s growth is global, the EMEA (Europe, Middle East, and Africa) region has emerged as a standout for the expansion of the Service Collection. The company has secured an increasing number of strategic and enterprise-level wins in this region, signaling that the displacement of legacy ITSM providers is a worldwide phenomenon.
The expansion is not limited to IT departments. The fact that 60% of Fortune 500 customers use Service Collection for non-IT functions indicates that Atlassian is successfully positioning its tools for broader “Enterprise Service Management” (ESM), allowing HR, Legal, and Facilities departments to utilize the same ticketing and workflow logic used by IT teams.
Key Takeaways: Atlassian’s Strategic Shift
- Aggressive Displacement: Atlassian reported its highest-ever quarter for taking market share from a major ITSM provider.
- Financial Milestones: Total revenue hit $1.8 billion (up 32% y/y), and Service Collection ARR surpassed $1 billion.
- AI as a Catalyst: Rovo AI users are growing their ARR at twice the rate of non-users, with credit usage increasing over 20% monthly.
- Enterprise Penetration: 75% of the Fortune 500 now utilize the Service Collection.
- Cloud Dominance: Cloud revenue has exceeded $1.1 billion, reflecting a 29% year-over-year growth rate.
What Happens Next
As Atlassian continues to challenge the ITSM status quo, the company is moving toward greater transparency regarding its revenue streams. To address the “lumpiness” associated with data center license recognition, management has announced plans to disclose historical subscription ARR during the upcoming Investor Forum.
This move will provide analysts and investors with a clearer view of the underlying growth trends, stripped of the timing effects of upfront payments. The industry will be watching to see if the momentum in “competitive displacements” continues to accelerate as more enterprises seek to consolidate their toolchains into a single system of work.
Do you think Atlassian can fully displace the legacy ITSM giants, or will ServiceNow’s deep enterprise roots hold firm? Share your thoughts in the comments below.