Atlassian's (TEAM) strong execution in fiscal Q1 was offset by cautious guidance that increases investor scrutiny about the durability of growth rate in its Cloud offerings, Truist said in a Friday note.

The company reported fiscal Q1 adjusted net income late Thursday of $1.65 per diluted share on revenue of $1.77 billion. Analysts polled by FactSet expected EPS of $1.44 on revenue of $1.71 billion.

Fiscal Q2 Cloud revenue guidance of about 27% implies a sequential decline of 4 percentage points and suggests H2 growth in the low-to-mid 20 range, Truist analysts said. They noted that the company indicated that fiscal Q1 had more large hybrid deals than expected, creating a headwind to Cloud revenue as it was split between Data Center and Cloud.

Collections, pricing, and continued seat expansion continue to be Atlassian's growth drivers in the near term, although the outlook implies growth will moderate later in fiscal 2027, according to the note.

The analysts said they remain "cautiously optimistic" that AI tailwinds can become an upside driver.

Truist reiterated the company's stock rating at buy and cut the price target to $200 from $250.

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