Do sprite atlases double-compress sprites?

If I imported a texture with default settings (automatic compression) and then put that in a sprite atlas, it seems that Unity compresses the image twice, resulting it very poor quality.

Me and other Unity developers I know have always assumed that sprite atlases are based off the original (uncompressed) versions of sprite atlases - so for example if I set a sprite atlas to uncompressed, the results will always be a high quality atlas.

So if Unity does in fact double-compress sprites in atlases by default, is there a way to disable that? Sure I could manually set every source sprite to uncompressed as a workaround, but that's hard to maintain on large projects with hundreds of sprites.