Please refer to the tables in our earnings release on the investor relations portion of our website for a reconciliation of these measures to the most directly comparable GAAP financial measures. Atlas performance was strong, accelerating to 30% year-over-year growth, up from 29% in Q2 and 26% in Q1. We generated total revenue of $628 million, up 19% year-over-year and about the high end of our guidance driven by strength in Atlas. We delivered non-GAAP operating income of $123 million, or a 20% non-GAAP operating margin.
Q3 was an exceptional quarter that was driven by our continued go-to-market execution and the broad-based demand we are seeing across business. At the same time, we significantly outperformed on operating margin, demonstrating that we can drive durable revenue growth while simultaneously expanding profitability. Standardizing on Atlas has given the organization the scalability and reliability to improve customer experience, support more advanced data and AI capabilities, and increase development velocity, all central to its transformation and growth ambitions. This is fundamentally an information retrieval problem, and it requires a very different architecture than the last generation of software.
Atlas has scale to support Mercor's 50% month-over-month growth, allowing the company to keep its software engineering team lean and agile as it expands to over $10 billion in value. For example, a highly influential global media company aimed to increase engagement via enhanced content recommendation for its vast repository of multimodal assets across its 70-plus websites. I believe we accomplished a lot in a short period of time and appreciate all of your guidance and leadership. I will begin with a detailed review of our third quarter results and then finish with our outlook for the fourth quarter and fiscal 2026.
| Metric | Period | Current guidance |
|---|---|---|
| Atlas revenue growth | Q4 FY2026 | approximately 27% (raised) |
| Non-Atlas revenue growth | Q4 FY2026 | upper single-digit % year-over-year |
| Full-year FY2026 revenue and operating income | FY2026 | raised across the board (raised) |
| Non-Atlas revenue growth (directional) | FY2027 | mid-to-low single digits (full-year non-Atlas ~4% this year) |
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +19% | Strength in Atlas and above the high end of guidance. |
| Atlas revenue | +30% | Consumption consistent with last year, driven by continued strength with largest U.S. customers and broad-based strength in EMEA, from both new and existing workloads. |
| Non-Atlas ARR | +8% | Continued success expanding within the existing non-Atlas customer base. |
| Operating margin | 20% vs 19% | Revenue outperformance and lower-than-expected operating expenses. |
| Net ARR expansion rate | 120% vs 119% last quarter | Growing strategic importance and ability to win more critical workloads. |
| $100K+ ARR customers | +16% | 2,694 customers with at least $100,000 in ARR. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Atlas consumption | 29% growth in Q2 | 30% growth in Q3, third straight quarter of acceleration | Improving |
| CEO transition | Dev Ittycheria as CEO | CJ Desai as new CEO (day 28), Ittycheria now board member | Leadership change |
| Enterprise AI adoption | early, mostly productivity tools | still early, many pilots, no true AI agents in production at scale yet | Stable/early |
| Reclaim the Bay / West Coast developer mindshare | concerted reinvestment in Bay Area startup community | relaunching .local in San Francisco January 15; CEO leveraging Silicon Valley network | Improving |
| Multi-year non-Atlas deals | more widespread, not large in Q2 | about two-thirds of non-Atlas outperformance; good line of sight to several large Q4 multi-year deals | Improving |
| Margin philosophy for FY2027 | revenue growth drives margin | continued investment in engineering, marketing, and sales capacity; margin expansion mostly from revenue growth | Stable |