Wall Street Is Bullish on This Artificial Intelligence (AI) Growth Stock, but Is It Too Late to Buy?

Artificial intelligence (AI) could be the most transformative technology in a generation. A recent survey by McKinsey and Company suggests that 72% of companies already use it in at least one business function. It’s a percentage that is likely to grow.

Even though AI could dramatically increase productivity in the corporate world, potentially adding $15.7 trillion to the global economy by 2030 (according to PwC), not every AI stock is a screaming buy right now. Shares of Atlassian (TEAM 0.87%) have soared by 94% from their 52-week low, thanks in part to the company’s growing portfolio of AI software. The Wall Street Journal tracks 29 analysts who cover the stock, and the majority are bullish. However, it’s currently trading above their consensus price target.

So is it too late for investors interested in Atlassian?

Atlassian is becoming a force in AI software

Jira and Confluence are Atlassian’s flagship software platforms. Jira was originally designed to help developers manage, debug, and deliver software projects, but it’s increasingly popular with non-technical teams to collaborate on work of all kinds. Confluence, on the other hand, is a virtual workspace where employees from every department can come together to post information and share ideas.

In late 2023, Atlassian started rolling out Atlassian Intelligence, which is a suite of AI-powered tools designed to enhance Jira and Confluence. It offers an AI assistant that can be prompted to instantly uncover issues and software dependencies in Jira, which can save developers significant amounts of time. It can also instantly summarize and generate text, which is highly useful in Confluence.

Since the start of 2024, Atlassian Intelligence usage has soared by 10x. The company is now using the Atlassian Intelligence brand to introduce entirely new AI products, which will create opportunities to generate more revenue from its existing 300,000-plus customers. Rovo is one of those products, and it allows employees to deploy AI virtual agents across their entire organization, which can help with practically any task.

Organizations typically use dozens of software applications. Rovo can plug into many of the major ones including Figma, Salesforce‘s Slack, and Microsoft Teams, so employees can instantly request information without digging through each individual app. Plus, since Rovo knows everything about the organization, it can answer questions about teams, departments, or projects through its chat function. Workers can even build custom Rovo agents to assist with the tasks at hand, without having to write any programming code.

Atlassian’s revenue growth is steadily slowing

Atlassian generated $1.2 billion in total revenue during its fiscal 2025 first quarter (ended Sept. 30), which was a 21% increase from the year-ago period. That rate of increase has steadily trended lower over the last few years, as the company abandoned its growth-at-all-costs strategy to focus on generating profits instead.

However, during Q1, Atlassian actually ramped up its spending. Its operating costs grew by 22% year over year and surpassed $1 billion, with research and development spending accounting for a whopping 60% of that total. That makes sense because it isn’t cheap to develop new AI products, but in this case, the company couldn’t deliver faster revenue growth to offset that additional spending.

That led to a whopping 288% increase in Atlassian’s generally accepted accounting principles (GAAP) net loss, which came in at $123.7 million.

Of course, the company is hoping its massive research and development spending will pay off over the long term as AI adoption grows. However, investors might have to endure some pain in the form of slower revenue growth and larger losses until products like Atlassian Intelligence achieve scale.

Wall Street is bullish on Atlassian stock, but the upside could be limited in the short term

The Wall Street Journal tracks 29 analysts who cover Atlassian stock, and 14 have assigned it the highest possible buy rating. Six more are in the overweight (bullish) camp, while the remaining nine recommend holding. No analysts recommend selling the stock.

The analysts’ average price target is $254.41, but the stock closed at $263.58 on Friday, Nov. 29, so it’s already above that level. That’s a sign Atlassian might be slightly overvalued at the moment.

Therefore, investors who have a time horizon of 12 months or less should probably avoid buying in. For longer-term investors, the picture looks a little different.

Atlassian values its addressable market at $67 billion, so based on its current revenue, it has barely scratched the surface of that opportunity. Plus, the company believes it can eventually generate more than $10 billion in annual revenue, which would be more than double the $4.4 billion it delivered in fiscal 2024 (which ended on June 30).

As a result, investors who are willing to hold Atlassian stock for at least the next five years probably shouldn’t be deterred by the fact it’s trading above Wall Street’s current price target. It might actually look like a bargain when you look back on this moment in the future.