What happened

Shares of Atlassian (TEAM -1.37%) is having a "bonzer" (Australian for "good") day on the market today. Share prices rose as much as 15.8% before backing down to a milder gain of 7.6% as of 11:45 a.m., EDT. A fantastic first-quarter earnings report triggered the Australia-based software company's big jump.

So what

In the first quarter of fiscal year 2022, Atlassian's sales rose 34% year over year to land at $614 million. As a result, adjusted earnings jumped 53% higher to $0.46 per diluted share. Your average analyst would have settled for earnings of roughly $0.40 per share on revenue near $582 million. This was not a small surprise to the upside.

For this report, management updated its definition of customers, narrowing the term to those with an active subscription or maintenance agreement. The change primarily excludes single-user Trello accounts. Under this new definition, Atlassian's customer count rose by 5.7% sequentially and 30% year over year, landing at 216,500 accounts.

A team of office workers celebrate what they see on their laptop computers.

Image source: Getty Images.

Now what

Atlassian's migration to a pure cloud-computing operating model is proceeding as planned, though management noted that the transition still has several years left to go.

Many existing customers are hanging on to their current software license deals for popular tools such as collaboration platform Trello and project management system Jira. Atlassian allows these clients to move over to the cloud-based versions of these tools on their own schedule. The company sold its last software license two quarters ago but will provide maintenance and support for the stragglers until February 2024.

This light touch makes sense because Atlassian's customer growth relies on strongly positive word-of-mouth marketing. Forcing customers to make the leap into the cloud before they're ready could be bad for Atlassian's customer relationships.

The stock has now doubled in 52 weeks, trading at a lofty 293 times trailing earnings and 51 times sales. This aggressive growth stock is not for the faint of heart, but it's hard to argue with Atlassian's robust revenue growth, even in the midst of the game-changing strategy shift mentioned above. Growth investors don't mind paying a premium for top-quality businesses, and Atlassian falls squarely in that category.