Atlassian’s second quarter saw revenue growth above Wall Street expectations, but the market’s reaction was subdued, reflecting some investor concerns. Management cited strong enterprise sales execution and increased adoption of its core cloud products—including Jira, Confluence, and Loom—as key drivers. CEO Mike Cannon-Brookes emphasized substantial momentum in large deal activity, with a record number of contracts over $1 million in annual contract value and evidence of growing usage among both technical and business users. The company also highlighted that its AI-powered features are seeing increased engagement, with business users now comprising half of core app usage, demonstrating the platform’s reach beyond traditional developer teams.
Is now the time to buy TEAM? Find out in our full research report (it’s free).
Atlassian (TEAM) Q2 CY2025 Highlights:
- Revenue: $1.38 billion vs analyst estimates of $1.36 billion (22.3% year-on-year growth, 2.1% beat)
- Adjusted EPS: $0.98 vs analyst estimates of $0.85 (14.6% beat)
- Adjusted Operating Income: $335.9 million vs analyst estimates of $302.6 million (24.3% margin, 11% beat)
- Revenue Guidance for Q3 CY2025 is $1.40 billion at the midpoint, below analyst estimates of $1.41 billion
- Operating Margin: -2.1%, up from -5.9% in the same quarter last year
- Billings: $1.50 billion at quarter end, up 16% year on year
- Market Capitalization: $43.05 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 From Atlassian’s Q2 Earnings Call
- Keith Weiss (Morgan Stanley) questioned the impact of AI “co-generation” tools on developer seat expansion; CEO Mike Cannon-Brookes explained that no negative effects have been observed and predicted more software creation and broader adoption across business roles.
- Alex Mulan (Jefferies) asked about the trajectory for free cash flow; CFO Joe Binz clarified that short-term variability is due to billing and collections timing, but long-term free cash flow should align closely with non-GAAP operating income trends.
- Kash Rangan (Goldman Sachs) pressed on how Atlassian will achieve its multi-year growth targets; management pointed to multiple growth levers including AI, cloud migration, and cross-sell opportunities, while reaffirming commitment to 20% annual growth.
- Karl Keirstead (UBS) inquired about the step-down in Data Center growth; Binz explained that the next quarter is seasonally weaker with fewer large renewals and incremental headwinds from prior program changes.
- David E. Hynes (Canaccord) asked about the monetization timeline for the Rovo AI platform; Binz responded that the focus remains on driving user adoption and engagement, with meaningful revenue contributions expected over the longer term.
Catalysts in Upcoming Quarters
In future quarters, the StockStory team will focus on (1) the adoption rate and monetization progress of new AI-powered features across Atlassian’s product suite, (2) the pace and scale of large enterprise migrations from on-premises data centers to the cloud, and (3) execution of the Teamwork Collection’s go-to-market strategy. Additionally, we will monitor the impacts of ongoing leadership transitions and investments in sales capacity on revenue growth and margins.
Atlassian currently trades at $164.02, down from $170.57 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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