Why Atlassian Surged Today

Shares of enterprise productivity software company Atlassian (NASDAQ: TEAM) rallied 6.6% on Wednesday as of 3:05 p.m. ET.

Atlassian rose along with many others in the space on the back of good earnings elsewhere in the sector. However, a large strategic collaboration agreement with Amazon Web Services appears to be driving especially big gains today.

A close collaboration to help businesses use AI

At Amazon's Re:Invent conference, Atlassian and AWS announced a strategic collaboration agreement (SCA) with the goal of driving faster migrations of large enterprise workloads to Atlassian Cloud, which runs on AWS. Today, Atlassian still runs lots of its software for large enterprises in on-premises data centers. In the press release announcing the collaboration, Atlassian noted over $1 billion of its $4.6 billion in trailing-12-month revenue comes from Atlassian Data Center.

There are often barriers to migrating large and complicated enterprise workloads within on-premises data centers to the cloud, including security, timing, and cost concerns. However, Atlassian Cloud currently has some capabilities that Atlassian Data Center doesn't, including AI, automation, analytics, and unified search capabilities like Atlassian Intelligence to help enhance productivity.

But the new tie-up will go a long way toward streamlining and quickening the migration process. The two companies will establish a joint Cloud Center for Excellence to enable large enterprises to migrate complex workloads, enabling the largest Atlassian customers to take advantage of the most cutting-edge cloud tools.

A feather in Atlassian's cap

Though the two companies have partnered since 2011, the expansive collaboration is a positive vote of confidence in Atlassian from the largest cloud provider in the world with increasingly competitive AI capabilities.

Of course, like many software-as-a-service companies, Atlassian's valuation at 16.3 times sales is quite high. So while it appears all systems are a go for Atlassian, the recent run over the past month since its positive earnings report appears to have factored in a lot of this good news already.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Billy Duberstein and/or his clients have positions in Amazon. The Motley Fool has positions in and recommends Amazon and Atlassian. The Motley Fool has a disclosure policy.