Atlassian Corporation (TEAM)

The value today by multiples ($107) is below the market price ($208). The present-value lens does not apply to this company, so the contrast between methods is unavailable.

Today — expensive, no margin of safety: at $208 trades ~94.7% above its value discounted to today (~$107); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$66.

Educational / informational. Does not constitute investment advice.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on NOPAT. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 is the fiscal year ended 30 June 2026, presented in the Form 10-K of 14 August 2026: since the fiscal year closes in June and the annual report arrived in August, the twelve-month window coincides exactly with the full fiscal year and no separate period is manufactured. The valuation metric is NOPAT, that is accounting operating income after tax. It is chosen because it expenses stock-based compensation, which at Atlassian equals 24.4% of revenue and 121.8% of free cash flow: any metric that adds it back —reported free cash flow or adjusted operating income— doubles the return of the business. The tax rate is the 24% the company itself publishes as its projected long-term rate in the reconciliation of its earnings release; the accounting effective rate for the fiscal year is an artifact of nearly nil pre-tax income and is not used. The revenue path starts from the company's guidance for fiscal 2027: consolidated revenue of approximately 13.0%, cloud approximately 25.5% and Data Center approximately minus 17.0%. The shape is trough and recovery, not a continuous deceleration, and the rebound exception is invoked because the reason is mechanical: the end of life of Data Center —no sales to new customers since March 2026, no renewals or expansions from March 2028 and no maintenance from March 2029— subtracts a larger share of consolidated revenue each year until it is exhausted, so consolidated growth hits its floor around the third year and then converges to that of cloud. The accounting operating margin starts at 0.2% and reaches 14.4% in the terminal year. The expansion does not come from price but from the fall in stock-based compensation as a percentage of revenue: 24.4% today, 18.9% in fiscal 2027 —implied by the guided accounting margin of 4.5% against an adjusted margin of 25.0%, net of ~1.6 points of acquired intangible amortization— and 15.0% in the terminal year, with the absolute amount falling in the first year and recovering afterward to end just above today's level while revenue nearly doubles. That is the central assumption of the valuation and the one the bear case tests. Investment capital is minimal: investment in fixed assets represents 0.5% of revenue and a quarter of depreciation and amortization, so it is treated entirely as maintenance; growth is bought with research and development, which is a current expense. Cash does not accumulate: the company returns more than its free cash flow via buybacks (US$1,800 million against US$1,319 million) and funds the difference with existing cash and investments. The share count comes from the annual report's balance sheet, which in a dual-class company reports each class separately: 159,268,260 of class A plus 94,133,617 of class B at 30 June 2026, against 165,949,196 and 97,030,987 a year earlier. The statement of changes in equity in the same report starts from a slightly lower count (262,891 thousand against 252,047 at the close) because it leaves out around 1.35 million restricted shares still subject to forfeiture, which the balance sheet does count as issued and outstanding; the balance sheet is adopted because it is the count that feeds market capitalization. Nor is the weighted average diluted count XBRL tags for the full fiscal year used (260,163 thousand), which being an annual average overstates the count in force at the close. The net reduction was therefore 3.64% a year, not the 0.6% the weighted average diluted count suggests: that average breaks precisely where the count changes level over the course of the fiscal year. The projected path does not extrapolate the revealed reduction. The company allocated US$1,800 million to buybacks against free cash flow of US$1,319 million, so it funded the difference with existing cash; scaling the net reduction to the portion the flow sustains leaves 2.77% a year, and 2.5% is adopted for the price adjustment: against this analysis's estimate of value the stock trades above its worth, so repurchasing at this price does not create value for the shareholder who stays. The path is a single one for all three scenarios: it comes from a revealed history, and what varies between scenarios is the speed of the business, not the capital return policy.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $133 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $208, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $133 in 5 years and a required return of 4.5% annually, the maximum to pay today is $107. Against the current market price ($208), the margin of safety is -94.7% (trades above the maximum → a premium is paid) and the total return at that price would be -8.5% annually.

• Multiple within the archetype's band. 24 times terminal-year after-tax operating income (NOPAT) is applied, within the 20-to-30-times band for enterprise software, with an upper-mid position for growth and moat despite the return on capital.
• The metric expenses stock-based compensation. Valuing on after-tax operating income avoids the reported free-cash-flow trap, which adds back $1,607M of real cost.
• The price prices in the margin expansion. Even taking the GAAP operating margin from 0.2% to 14.4% over five years, the estimated value sits below the quote: the improvement is already paid for.
• The upside scenario barely breaks even. With revenue of $12,550M, an 18.5% operating margin and a 28-times exit multiple, the five-year value sits just above the current price: an annual return of -9%, below the 4% floor. The upside is limited.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✕ CFROIC backs up the ROIC (-3118%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on capital. Return on invested capital is 1.0%, well below the 10% bar, because GAAP operating income is compressed by stock-based compensation and restructuring charges.
• Cash generation. Free cash flow was $1,319M and is predictable, but it incorporates the add-back of stock-based compensation: net of that cost, owner earnings are negative $287M.
• Negative working capital. Deferred revenue contributed $153M of cash in the fiscal year, and current liabilities exceed current assets: the customer funds the operation up front.
• Reinvestment runway. Half of revenue is reinvested in research and development with more than half of headcount assigned to it, and the cloud migration plus the agent layer offer a destination for that spending.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The revenue engine is subscription annualized recurring revenue multiplied by retention and expansion within each account, not a customer count times price: the count of the cohort with more than $10,000 of cloud ARR grew 10% and subscription recurring revenue grew 23%, so roughly half of the advance comes from higher spend per account —more teams, more editions, more collections— and the other half from adding accounts to that cohort. The comparison is indicative: the count is cloud-only and recurring revenue includes Data Center. Remaining performance obligations serve as the leading indicator: it is revenue already signed and not yet recognized, and its 44% growth anticipates the billings of coming fiscal years better than any extrapolation of the historical series. The split between cloud and Data Center is not an operating division but the deployment type, and its correct reading today is one of transition: one line growing above 25% and another in scheduled wind-down through March 2029.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• The company's own guidance. The first-year path is not extrapolated: it starts at the published guidance of approximately 13.0% consolidated growth, 25.5% in cloud and minus 17.0% in Data Center.
• Contracted revenue as a leading indicator. Remaining performance obligations grew 44% year over year to $4,817M, above the growth of recognized billings: future revenue is signed, not extrapolated.
• Base deepening. Customers with more than $10,000 of cloud annualized recurring revenue rose from 51,978 to 57,334 and account for more than 85% of that revenue.
• Data Center wind-down. 28% of revenue enters a scheduled wind-down through March 2029; the consolidated figure touches its growth floor around the third projected year and only afterward converges to cloud.

• Revenue recurrence. 95% of revenue is subscription, recognized ratably over the contract term, with annualized recurring revenue of $6,606M and contracted obligations of $4,817M.
• Ten-year relevance. Coordinating the work of software and service teams is a structural need, though the interface through which it is solved can change if general-purpose agents absorb the workflow.
• Pricing power. The curated-collections model allows for price increases by bundling applications and agents, but today the company delivers the agent layer at no additional cost to force adoption.
• Operating leverage. With a low cost of revenue —an 85% GAAP gross margin— nearly every additional dollar of revenue flows through to the bottom line, as long as personnel spending does not grow in parallel.
• Customer concentration. More than 350,000 customers and no material customer disclosed: there is no dependence on a single account or sector.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0.2 bn
• ✕Interest coverage (EBIT / interest)0.2x
• ✕Liquidity (current ratio)0.78×
• ✕Cash quality (CFROIC vs ROIC)CFROIC backs -3118% of ROIC
• ✕Value creation (ROIC − 10% bar)-9pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.2x — no over-investment
• !Float / working capitalConsumes cash $0.4 bn (positive WC)
• !Dilution (SBC % of revenue + shares)SBC 24.4% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Positive net cash. $1,240M of cash against $990M of notes maturing in 2029 and 2034; the $750M committed revolving line is undrawn.
• Customer-funded. Current liabilities of $3,571M exceed current assets of $2,797M because of deferred revenue: the business is funded by up-front collections.
• Interest burden. Interest expense for the fiscal year was $49M on operating cash flow of $1,353M: debt does not constrain any decision.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

The breakdown takes the cash uses for fiscal 2026: $34M of capital expenditure, $1,229M in business combinations and $1,800M of Class A share buybacks, with no dividend. The important reading is that true reinvestment does not show up here: growth is bought with research and development, which equals 50% of revenue and travels as an operating expense. The buyback does return capital: $1,800M reduced shares outstanding by a net 3.6% for the fiscal year, from 262,980 thousand at the close of fiscal 2025 to 253,402 thousand at the close of fiscal 2026 per the balance sheet in the 10-K, with 19,117 thousand shares retired against 8,273 thousand issued for stock-based compensation. Because uses exceeded free cash flow, the difference was funded with existing cash and marketable securities.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Founder alignment. The two co-founders hold 36.5% of the equity and 85.2% of voting power. The ownership is real and long-term, but the dual-class structure leaves common shareholders with no effective decision-making power.
• Use of buybacks. $1,800M in the fiscal year reduced shares outstanding by a net 3.6%, from 262,980 to 253,402 thousand shares per the balance sheet in the 10-K, with 19,117 thousand shares retired against 8,273 thousand issued for stock-based compensation: the buyback comfortably outpaced dilution and did return capital to shareholders.
• Acquisitions. $1,229M in business combinations for the fiscal year, with no published segment result that would allow the return on those purchases to be measured separately.
• Report candor. The annual report states plainly that it has not achieved GAAP profitability consistently, that its markets have low barriers to entry, and that agent investment will keep weighing on margin in the near term.

• The market pays for the adjusted-margin trajectory —30% operating margin before stock-based compensation, amortization of acquired intangibles and restructuring charges— rather than the 0.2% GAAP margin that results from expensing them.
• Recurring revenue and contracted visibility justify a premium: remaining obligations grow 44% year over year and subscription annualized recurring revenue 23%, both ahead of recognized billings.
• The Data Center-to-cloud transition depresses consolidated growth for three fiscal years, and the market looks through that trough toward cloud growth.
• No positive source of over-discounting is identified: fiscal 2027 guidance decelerates revenue from 26% to 13% by the company's own choice —the scheduled Data Center end of life— not because of a market event, and there is no identifiable motivated selling or missing analyst coverage that would explain a discrepancy in the buyer's favor.

The right question here is not why it would be cheap but why the market pays this price, and the answer is that it values the business before the cost of stock-based compensation. At $40.9bn of market value on $6,572M of revenue, the price equals about 20.5 times the fiscal year's adjusted operating income, a reasonable multiple for a platform with this moat. The problem is that the 30% adjusted operating margin adds back $1,607M of stock-based compensation plus $285M of restructuring and $102M of amortization of acquired intangibles; the bulk of it, and the only recurring piece, is stock-based compensation: salary paid in equity, whose bill the company settles by repurchasing $1,800M of shares a year, a 3.6% net reduction in shares outstanding for the fiscal year. Measured after that cost, the business is only just starting to make money, and the price already prices in that it will end up making it at scale.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -20%/year (-67% total): the margin of safety protects the downside. The bull (+1%/year, +7% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Stock-based compensation. $1,607M, 24.4% of revenue and 121.8% of free cash flow. It is the cost that decides the thesis: if it does not fall as a percentage of billings, the business does not make money at scale.
• AI-native competition. The annual report states that its markets have relatively low barriers to entry and that there are competitors capable of bypassing traditional workflows or displacing established interfaces.
• Cost of agents. The agent layer is delivered at no additional cost to customers on the standard, premium and enterprise editions of Jira, Confluence, Jira Service Management and the Teamwork collection, and the company expects it to keep weighing negatively on operating margin in the near term.
• Forced transition to cloud. Cloud revenue recognized in the first year is typically lower than Data Center revenue and hosting costs are higher; if the self-hosted customer does not migrate before March 2029, that revenue is lost.
• Dual-class structure. Class B shares carry ten votes and are held entirely by the two co-founders, who together hold 85.2% of voting power: the common shareholder has no influence over corporate decisions.
• Non-mandatory renewal. Most of the base contracts on annual or monthly terms with no obligation to renew, and ratable recognition delays the appearance of commercial deterioration in published results.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC 1% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower growing 13% at a multiple/growth of 504.3 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 0% (EBIT/EV) + ROIC 1% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 150% vs our 13%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -20%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: switching costs, network effects, efficient scale, intangibles → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price demands 150% growth, far above our 13% — heroic assumptions.