Here's our initial take on Atlassian's (TEAM 3.07%) financial report.
Key Metrics
| Metric | Q3 2024 | Q3 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $1.19 billion | $1.36 billion | 14% | Beat |
| Earnings per share | $0.89 | $0.97 | 9% | Beat |
| Cloud customers w/ AAR > $10k | 44,336 | 50,715 | 14% | n/a |
| Services revenue | $703.0 million | $880.4 million | 25% | n/a |
AAR = average annual return.
Atlassian Sees Headwinds Up Ahead
Atlassian topped expectations in its fiscal second quarter ending March 31, reporting revenue up 14% and earnings per share up 9% year over year, thanks to strong 25% growth in cloud revenue. The company's shift from stand-alone products to a cloud-based suite appears to be going according to script.
But the outlook for the final three months of its fiscal year left investors wanting more. Atlassian said it expects total revenue of between $1.349 billion and $1.359 billion in the current quarter, which would mean little sequential growth. Even the high end of the guidance is below Wall Street's $1.36 billion consensus estimate.
Atlassian also said it expects 23% cloud revenue growth in the current quarter, which would signal a slowdown from this quarter's 25% mark.
The underlying numbers for the just-completed quarter are a mixed bag. Atlassian's number of cloud customers doing at least $10,000 worth of business annually jumped by 14% to 50,715. But operating margin for the quarter fell by 100 basis points to 26%.
NASDAQ: TEAM
Key Data Points
Immediate Market Reaction
Investors are more focused on the outlook than they are on the earnings beat. Atlassian shares were down 15% in after-market trading following the release of results but ahead of the company conference call with investors.
What to Watch
For investors, the big question coming out of this quarter is whether the sluggish outlook is just management being cautious in an uncertain environment or the start of a troubling trend. Investors should look for a lot more color on the call regarding what management is hearing from customers and what the long-term growth outlook is from here.
Atlassian was an all-star of the pandemic period, when work trends shifted and new collaboration tools were needed. In the years since the shutdown, the tools have proven to have value far beyond work-at-home environments. The cloud opportunity will take years to fully play out, creating some choppiness in the near term.
Over the long haul, there is a lot of reason for optimism, but for now, traders appear to be viewing the quarter as a glass half empty, not full.
