Atlassian Corporation (NASDAQ:TEAM) stock fell sharply in Friday's premarket trading after the software company forecast slower subscription growth and a steeper Data Center revenue decline for fiscal 2027.

The cautious outlook overshadowed strong first-quarter earnings and a higher full-year revenue forecast.

Management remains confident in cloud adoption and customer demand. However, economic, fiscal policy and geopolitical uncertainty continues to weigh on its outlook.

Atlassian Beats Earnings Estimates

Atlassian reported adjusted earnings of $1.65 per share, beating Wall Street's estimate of $1.44.

Revenue rose 24% year over year to $1.77 billion, topping the $1.71 billion estimate.

Cloud revenue grew 31%, while free cash flow surged 304% to $463 million.

Subscription annual recurring revenue (ARR) increased 23% to $6.8 billion. Remaining performance obligations (RPO) jumped 44% to $4.7 billion.

Customers spending more than $1 million annually grew by well over 30%.

Strong Results, Cautious Growth Outlook

Atlassian raised its fiscal 2027 revenue forecast to $7.48 billion from $7.43 billion, above the $7.44 billion consensus.

However, the company expects subscription ARR growth of approximately 18.5%, below the first quarter's 23% growth.

Cloud revenue is expected to rise 26%, while Data Center revenue is projected to fall 16%.

For the second quarter, Atlassian forecast revenue of $1.825 billion to $1.835 billion, above the $1.819 billion consensus.

The company expects cloud revenue to grow 27% and Data Center revenue to decline 14%.

Enterprise Demand And AI Adoption Strengthen

Enterprise demand remained strong as Infosys, SAP, Workday and Westpac expanded their platform usage.

More than 3,000 customers upgraded to the Teamwork Collection, a sevenfold increase from a year earlier.

The Service Collection surpassed 70,000 customers and $1 billion in ARR. Meanwhile, more than 87% of enterprise cloud customers adopted Rovo.

Customers migrating from Data Center to Cloud increased their spending by 1.75 times after three years.

Atlassian expects its Teamwork and Service Collections to drive AI-related growth.

Usage-based pricing enforcement begins in December, although management expects little revenue impact in fiscal 2027.

TEAM Price Action: Atlassian shares were down 14.63% at $156.47 during premarket trading on Friday, according to market data.