Atlassian’s first quarter saw revenue growth align with Wall Street expectations, but the market responded negatively, reflecting concerns raised by management regarding deal timing and profitability. CEO Mike Cannon-Brookes noted that several large enterprise deals closed later than anticipated, impacting revenue recognition for the quarter. Additionally, the shift in product bundling and investments in AI, notably the Rovo platform, contributed to a more complex margin profile. CFO Joe Binz highlighted that while gross margins benefited from efficiency improvements, operating margins declined compared to the prior year, due in part to upfront investments and evolving sales cycles.
Is now the time to buy TEAM? Find out in our full research report (it’s free).
Atlassian (TEAM) Q1 CY2025 Highlights:
- Revenue: $1.36 billion vs analyst estimates of $1.35 billion (14.1% year-on-year growth, in line)
- Adjusted EPS: $0.97 vs analyst estimates of $0.93 (4.9% beat)
- Adjusted Operating Income: $348.3 million vs analyst estimates of $321.6 million (25.7% margin, 8.3% beat)
- Revenue Guidance for Q2 CY2025 is $1.35 billion at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: -0.9%, down from 1.5% in the same quarter last year
- Billings: $1.53 billion at quarter end, up 2.5% year on year
- Market Capitalization: $52.07 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Atlassian’s Q1 Earnings Call
- Sanjit Singh (Morgan Stanley) questioned the impact of embedding Rovo AI on near-term growth targets. CEO Mike Cannon-Brookes responded that the move prioritizes user adoption over immediate monetization, citing long-term expansion potential.
- Gregg Moskowitz (Mizuho) asked how late-closing enterprise deals affected cloud revenue. CFO Joe Binz confirmed that deal timing delayed revenue recognition, but underlying customer demand and billings remained healthy.
- Mark Cash (Raymond James) inquired about the effect of cloud migrations and annualized data center contracts on future revenue. Binz explained that migration contributions are expected to rise in coming years, offsetting data center growth.
- Keith Bachman (BMO) pressed on whether risk adjustments in guidance reflected greater macroeconomic caution. Binz clarified that conservatism is consistent across quarters, with added variability from product bundling and deal timing.
- Arsenije Matovic (Wolfe Research) sought clarification on cloud growth expectations given deal linearity. Binz noted that paid seat expansion and migrations drove outperformance, but that Q1 is seasonally slower and impacted by mechanical factors in data center and marketplace revenue.
Catalysts in Upcoming Quarters
In the coming quarters, StockStory analysts will track (1) the pace of Rovo AI adoption and its influence on customer upgrade rates, (2) the effectiveness of the new go-to-market strategy and product bundling in reducing deal complexity and driving sales, and (3) the ongoing migration of large enterprise customers to Atlassian’s cloud platform. Additional attention will be paid to how margin trends develop as AI features scale.
Atlassian currently trades at $198.75, down from $229.02 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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