AI Adoption Drives Atlassian and Higher Twilio as Enterprise Software Sentiment Shifts

Twilio and Atlassian Turn AI Disruption Fears Into Growth

Twilio (TWLO) and Atlassian (TEAM) moved sharply higher Friday after both companies delivered stronger-than-expected results and highlighted growing demand for AI-enabled products across communications, collaboration, and enterprise software.

Twilio reported record second-quarter revenue of $1.50 billion, up 22% year over year, while Atlassian's fiscal fourth-quarter revenue increased 28% to $1.77 billion. The results were particularly notable because both companies presented AI as a driver of customer adoption, product expansion, and efficiency rather than simply a competitive threat to established software platforms.

Key Points

• Twilio reported record Q2 revenue of $1.50 billion, up 22% year over year and 17% organically, while raising its full-year revenue, operating income, and free cash flow outlook.
• Atlassian reported fiscal Q4 revenue of $1.77 billion, up 28%, with cloud revenue rising 31% and AI-powered Rovo now used by more than 80% of Fortune 500 companies.
• Both companies pointed to AI as a source of expanding customer activity, helping challenge concerns that artificial intelligence will primarily disrupt established enterprise software businesses.

Twilio's AI Communications Push Accelerates Growth

Twilio delivered one of its strongest quarters in years as growth broadened across messaging, voice, software add-ons, and its self-service business.

Second-quarter revenue reached a record $1.50 billion, increasing 22% year over year and exceeding expectations of $1.43 billion. Organic revenue growth accelerated to 17%, while adjusted earnings of $1.47 per share surpassed expectations of $1.32.

Messaging remained Twilio's largest growth engine, with revenue increasing 28%. WhatsApp and RCS contributed to the increase, while voice revenue accelerated to more than 20% growth.

Voice is becoming particularly important as AI creates new communications workloads. Self-service voice revenue increased more than 50% year over year, while larger independent software vendors are increasingly embedding Twilio's voice AI capabilities into autonomous customer engagement systems.

Software add-on revenue increased more than 25%, led by Verify, which grew more than 30%.

Twilio's dollar-based net expansion rate improved to 116%, indicating that existing customers increased their spending on the platform. Incremental carrier fees contributed approximately five percentage points to that figure, but the expansion rate also improved sequentially excluding those fees.

The company is also seeing customers expand across multiple communications channels. AI-native businesses may begin with voice before adding messaging, RCS, branded calling, and other services.

Twilio highlighted Atlassian as one example of that trend, with Twilio's voice AI capabilities integrated into Atlassian's newly launched customer service management platform.

Chief Executive Khozema Shipchandler described AI-driven communications demand as being in the early stages. Less than 5% to 6% of voice interactions are currently AI-driven, according to management.

The company is positioning its infrastructure to support interactions involving both humans and autonomous agents as those use cases expand.

Why Did Atlassian Stock Surge?

Atlassian's fiscal fourth-quarter results provided another example of AI supporting an established software platform rather than displacing it.

Revenue increased 28% year over year to $1.77 billion, comfortably exceeding analyst expectations of $1.66 billion. Adjusted earnings reached $1.87 per share compared with expectations of $1.50.

Cloud revenue climbed 31% to approximately $1.21 billion and represented nearly 69% of total revenue. Subscription annual recurring revenue increased 23% to $6.6 billion, while remaining performance obligations increased 44% to $4.8 billion.

Large enterprise adoption also strengthened.

Atlassian reported a record quarter for deals carrying annual contract values of $1 million, $3 million, and $5 million. Customers generating at least $3 million in annual recurring revenue increased more than 50% year over year, while customers above $5 million grew more than 70%.

The company also signed the largest enterprise deal in its history with one of the world's largest consumer technology companies.

AI adoption was central to the quarter.

More than 80% of Fortune 500 companies now use Atlassian's Rovo AI-powered teamwork product. Rovo-assisted actions increased more than 50%, translating into millions of hours saved each month for customers, according to the company.

Separate usage data showed Rovo users completing 20% more Jira tasks and creating 25% more Confluence pages than customers not using the AI tools.

Atlassian's Teamwork Collection also exceeded the company's expectations during its first year, helping drive broader platform adoption and higher average revenue per user.

The results prompted Bank of America to upgrade Atlassian to Buy from Neutral and raise its price target to $175 from $105, describing the company as an "AI beneficiary rather than AI victim." BMO Capital Markets also raised its target to $175 from $95.

Chief Executive Mike Cannon-Brookes additionally committed to purchasing up to $250 million of Atlassian shares.

What Matters Next for Twilio and Atlassian?

Both companies entered their next reporting periods with stronger operating momentum, but their forward outlooks also highlight important differences between current growth and expected future performance.

Twilio raised its full-year 2026 organic revenue growth outlook to 13% to 13.5%, up from its previous forecast of 9.5% to 10.5%. Reported revenue growth guidance increased to 18% to 18.5% from 14% to 15%.

The company also raised adjusted operating income guidance to between $1.135 billion and $1.155 billion and lifted its free cash flow outlook to the same range.

Twilio generated a record $353 million in free cash flow during Q2, compared with approximately $264 million a year earlier. Non-GAAP operating income increased 29% to approximately $285 million.

For Q3, Twilio expects revenue between $1.505 billion and $1.515 billion, above the $1.464 billion consensus cited in the provided material. Organic growth is expected to moderate to between 11% and 12% as the company faces tougher comparisons in voice and software add-ons.

Atlassian also provided a strong near-term outlook. For fiscal Q1 2027, it expects revenue between $1.705 billion and $1.715 billion and cloud revenue growth of approximately 28.5%.

The full-year picture is more measured. Atlassian expects fiscal 2027 total revenue growth of approximately 13%, compared with the 28% growth reported in the latest quarter, while cloud revenue is expected to grow 25.5%.

The company's Data Center business remains part of its ongoing transition as customers migrate toward cloud products.

For both companies, the next stage centers on whether current AI adoption continues translating into measurable customer expansion and financial performance. Twilio is seeing AI-related demand emerge most clearly in voice and communications infrastructure, while Atlassian is using Rovo and its Teamwork Graph to deepen engagement across Jira, Confluence, and its broader enterprise platform.

What It Means for Investors

The simultaneous rallies in Twilio and Atlassian provide a notable market signal for the enterprise software sector.

AI has created uncertainty around traditional software companies as investors assess whether new autonomous tools will replace established applications or strengthen them. The latest results from Twilio and Atlassian show another possible outcome: existing platforms can become infrastructure for AI-driven activity.

For Twilio, the connection is increasingly visible in communications. Voice revenue is accelerating, AI-native customers are expanding rapidly, and larger software companies are embedding Twilio's communications technology into agentic workflows.

The company's broader financial results also show that growth is extending beyond a single product. Messaging increased 28%, voice grew more than 20%, software add-ons increased more than 25%, and the self-service channel grew more than 30%.

Atlassian is demonstrating a different form of AI leverage. Its advantage centers on the context and information already contained within workplace products such as Jira and Confluence. Management argues that this structured knowledge makes its AI tools more useful because they can operate within the existing workflows and information of enterprise customers.

The market reaction extended beyond Atlassian itself. Datadog (DDOG) and Snowflake (SNOW) also traded higher as Atlassian's results contributed to a broader reassessment of AI-related risks across enterprise software.

The important distinction going forward will be between AI adoption and AI monetization. Both companies have provided evidence of increasing usage, but future results will show how consistently that activity translates into sustained revenue growth, customer expansion, and profitability.

Conclusion

Twilio and Atlassian delivered strong results at a time when investors have been closely examining whether artificial intelligence represents an opportunity or a threat for established software companies.

Twilio's record $1.50 billion quarter combined accelerating organic growth with record profitability and free cash flow. The company is seeing expanding AI-related demand in voice communications while messaging, software add-ons, and self-service channels also continue growing.

Atlassian's $1.77 billion quarter showed similar momentum through a different business model. Cloud revenue increased 31%, large enterprise contracts expanded rapidly, and Rovo adoption reached more than 80% of Fortune 500 companies.

Both companies now face the task of sustaining that momentum against tougher comparisons and more measured forward growth expectations.

For the broader enterprise software market, however, the results provide an important data point. AI adoption is not only creating new competitors. In Twilio's communications infrastructure and Atlassian's workplace platform, it is also creating new activity within existing software ecosystems.

FAQs

Why did Twilio stock rise after Q2 earnings?

Twilio reported record Q2 revenue of $1.50 billion, up 22% year over year and 17% organically, while adjusted earnings exceeded expectations. The company also raised its full-year revenue, operating income, and free cash flow outlook as messaging, voice, software add-ons, and AI-related demand strengthened.

How is AI contributing to Twilio's growth?

Twilio is seeing increasing demand for AI-powered communications, particularly voice. Self-service voice revenue grew more than 50% year over year, while larger software companies are embedding Twilio's voice AI capabilities into autonomous customer engagement workflows.

Why did Atlassian stock surge after earnings?

Atlassian reported fiscal Q4 revenue of $1.77 billion, up 28% and above expectations, while cloud revenue increased 31%. Large enterprise deals strengthened and adoption of its Rovo AI platform continued expanding, with more than 80% of Fortune 500 companies now using the product.

How is Atlassian using AI?

Atlassian uses Rovo and its Teamwork Graph to bring AI capabilities into products including Jira and Confluence. Rovo-assisted actions increased more than 50%, while Rovo users completed 20% more Jira tasks and created 25% more Confluence pages than non-users.

What do the Twilio and Atlassian results signal for enterprise software?

The results show that AI can increase activity within established software platforms rather than only disrupting them. Twilio is benefiting from AI-driven communications workloads, while Atlassian is using AI to deepen engagement across its collaboration and workflow products.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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