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IT project management software company, Atlassian (NASDAQ:TEAM) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 14.1% year on year to $1.36 billion. The company expects next quarter’s revenue to be around $1.35 billion, close to analysts’ estimates. Its non-GAAP profit of $0.97 per share was 5.2% above analysts’ consensus estimates.

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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 (5.2% beat)

• Adjusted Operating Income: $348.3 million vs analyst estimates of $321.9 million (25.7% margin, 8.2% 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

• Free Cash Flow Margin: 47%, up from 26.6% in the previous quarter

• Billings: $1.53 billion at quarter end, up 2.5% year on year

• Market Capitalization: $57.98 billion

StockStory’s Take

Atlassian’s first quarter results reflected ongoing momentum in its cloud business and rising adoption of AI-powered features. CEO Mike Cannon-Brookes attributed the quarter’s performance to rapid advancements in the company’s AI platform, Rovo, and a continued emphasis on enterprise customers. Management highlighted that embedding Rovo into core products has already led to over 1.5 million monthly active AI users, and that premium enterprise editions are seeing significant uptake, with sales up more than 40% year-over-year.

Looking ahead, management explained that the decision to broadly include Rovo is intended to accelerate user adoption, even if it may defer some near-term monetization. CFO Joe Binz stated, “We remain confident and on track to the plans we laid out at Investor Day,” reaffirming Atlassian’s multi-year revenue growth targets. Executives pointed to expanded enterprise offerings, cloud migrations, and continued product innovation as key drivers for the company’s full-year outlook, while also noting increased deal complexity and a cautious approach to macroeconomic risk.

Key Insights from Management’s Remarks

Atlassian’s leadership focused on the integration of AI, expansion of enterprise offerings, and enhancements to its cloud platform as primary factors shaping the quarter.

• AI Platform Expansion: The integration of Rovo AI into core products is increasing user engagement, with over 1.5 million monthly active AI users. Management sees this as a foundation for long-term growth and wider platform adoption.

• Enterprise Customer Growth: Sales of premium and enterprise cloud editions grew by more than 40% year-over-year, reflecting heightened demand from larger, more complex customers. The company noted that enterprise customers now account for over 40% of sales, up from 15% five years ago.

• Cloud Migration Progress: Atlassian achieved FedRAMP Moderate authorization, enabling it to serve U.S. federal government customers and partners. The launch of Atlassian Government Cloud and Isolated Cloud addresses customers with high security and compliance requirements, supporting continued migrations from data center to cloud.

• Operational Efficiency Gains: Engineering investments have improved cloud gross margins, with management attributing these gains to optimized infrastructure and support costs. These efficiency improvements are expected to be structural and sustainable.

• Go-to-Market Evolution: The appointment of a new Chief Revenue Officer is expected to further align the company’s sales approach with enterprise needs. Leadership indicated that ongoing changes in go-to-market strategy are necessary to address a diversified and expanding customer base.