In This Article:
Key Points
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Atlassian beat top- and bottom-line estimates, posting 14% revenue growth and 9% earnings-per-share growth.
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Guidance for the fiscal fourth quarter was a little light relative to expectations, leaving the stock under pressure in after-market trading.
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Atlassian's shift toward cloud revenue appears to be working, though the company is forecasting a slowdown in cloud revenue growth in the current quarter.
Here's our initial take on Atlassian's (NASDAQ: TEAM) 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.
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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%.
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.