Teamwork quality (TWQ), team members’ success, and team performance are critical components of effective collaboration in modern software development. As capstone courses in software engineering aim to prepare students for industry practices, understanding the factors that influence team dynamics is essential. This study investigates the relationship between team ambition levels and TWQ, team members’ success, and team performance in an agile capstone course. Our study involves 133 student teams comprising 790 students across three consecutive years (2022–2024). Data collection included 1,122 responses from pre- and post-surveys. In all three years, students were grouped into teams based on ambition levels. In 2024, the course structure was changed to place less emphasis on written project reports due to the widespread adoption of AI tools like ChatGPT. The results show that ambition levels were positively correlated with TWQ, team members’ success, and team performance in 2022 and 2023, with higher ambition levels generally associated with improved collaboration and outcomes. However, in 2024, there were reduced disparities between lower and higher-ambition teams, enabling more equitable success across all teams. This study highlights that while ambition levels play a role in influencing teamwork and success, structured interventions that prioritize collaboration and inclusivity have a more substantial impact. These findings suggest that moving away from ambition-based team formation and focusing on fostering high-quality teamwork processes can better prepare students for real-world agile environments.