Why Atlassian Stock Fell 36% in February

By Jeremy Bowman – Mar 4, 2026 at 12:42AM ESTKey PointsAtlassian was swept up in the broader sell-off in software stocks last month.The company beat estimates in its Q2 report, but slowing growth and a GAAP loss weighed on the stock.Atlassian spent close to 40% of its revenue on share-based compensation in the quarter. Shares of Atlassian (TEAM +6.18%) continued to bear the brunt of the software sell-off last month as the collaboration-based software company disappointed the market with its fourth-quarter earnings report and fell alongside its software-as-a-service (SaaS) peers. Investors are worried that new AI tools will disrupt companies like Atlassian by offering easier, customizable solutions for things like kanban boards, a Jira tool that is one of its most popular products. Atlassian sells to mostly small and medium-sized businesses, which also makes it more vulnerable to new competition. Atlassian finished the month down 36%, according to data from S&P Global Market Intelligence, continuing a long downward trend. As the chart below shows, the stock fell steadily throughout the month, only to recover modestly late in February. TEAM data by YCharts Atlassian's troubles continue Like most other SaaS stocks, Atlassian fell sharply last month as valuations compressed and fears about AI disruption led to a panic. Atlassian may be more vulnerable, however, given its focus on small and medium-sized businesses and its lack of generally accepted accounting principles (GAAP) profits. The biggest news out on Atlassian last month was its second-quarter earnings report. Even though the company beat estimates, the stock still fell. Revenue in the quarter rose 23% to $1.59 billion, which beat estimates at $1.54 billion. Adjusted earnings per share increased from $0.96 to $1.22, which beat the consensus at $1.14. However, Atlassian is still deeply unprofitable on a GAAP basis, with a $47.7 million operating loss in the quarter. Its adjusted profits have been inflated by $452.6 million in share-based compensation, or well over a third of its revenue. That is a real cost to the company as it dilutes shareholders. Atlassian does repurchase its stock to offset that dilution, but because of the way financial statements work, those buybacks don't count against free cash flow or profits, even though they need to be done to keep dilution under control. Investors may be losing patience with that cash management strategy, given the pressure on the software sector. Image source: Getty Images. Can Atlassian bounce back? Atlassian called for full-year revenue growth of 22%, and said it would accelerate share buybacks to take advantage of its low stock price, which is still down more than 80% from its pandemic-era peak. Still, it won't be easy for Atlassian to shake off the fears about the AI threat, especially as the company is on track to report a GAAP operating loss of roughly $300 million this year. Atlassian may need to rein in its expenses, and that could mean layoffs at the company. Such a cost-cutting move could give the stock a boost and show management is taking the AI threat seriously. Read NextFeb 24, 2026 •By Rich SmithWhy Atlassian Stock Just PoppedFeb 12, 2026 •By Anthony Di PizioThis Super Software Stock Is the Cheapest It Has Ever Been. Time to Swoop in and Buy?Jan 26, 2026 •By Adam Levy1 Stock Down 21% So Far in 2026 to Buy Before It Rebounds 76%, According to Wall Street AnalystsOct 11, 2025 •By Adam Levy1 Growth Stock to Buy Before It Soars As Much As 118%, According to Wall StreetSep 27, 2025 •By Anthony Di Pizio1 Artificial Intelligence (AI) Stock to Buy Before It Soars By 50%, According to Wall StreetSep 9, 2025 •By Keith SpeightsMeet the Large-Cap AI Stock That Wall Street Is Most Bullish About Right Now (Hint: It's Not Nvidia or Palantir)About the AuthorJeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011.

Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.TMFHoboX@TMFBowmanStocks MentionedAtlassianNASDAQ: TEAM$78.36(+6.18%)+$4.56*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.