Atlassian Q2 Earnings Beat: Can Strong Guidance Lift the Stock?

Atlassian TEAM reported second-quarter fiscal 2025 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Its non-GAAP earnings per share of 96 cents beat the Zacks Consensus Estimate by 31.5%. The figure jumped 31.5% from the year-ago quarter’s non-GAAP earnings of 73 cents per share, driven by strong top-line growth and disciplined cost management.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

TEAM’s fiscal second-quarter revenues climbed 21.4% year over year to $1.29 billion and beat the Zacks Consensus Estimate of $1.24 billion by 4.12%. The top line was primarily driven by robust paid seat expansion, cross-selling of additional products, growing ARPU and strong migrations.

Buoyed by strong top-line and bottom-line performances, Atlassian raised its revenue guidance for the full year. The better-than-expected second-quarter results, along with upbeat fiscal 2025 guidance, can give a fresh boost to Atlassian’s share price. Shares of TEAM have gained 4.7% year to date, underperforming the Zacks Internet – Software industry’s growth of 39.1%.

Atlassian Corporation PLC Price, Consensus and EPS Surprise

Atlassian Corporation PLC price-consensus-eps-surprise-chart | Atlassian Corporation PLC Quote

Atlassian’s Quarterly Details

Segment-wise, Subscription revenues soared 30.2% year over year to $1.21 billion, driven by the ongoing shift toward cloud. Our estimate for Subscription revenues was pegged at $1.16 billion.

The Maintenance business registered no revenues due to the closure of its operations.

Atlassian’s Other revenues (including perpetual license revenues) declined 42.8% year over year to $73.2 million. Our estimate for Other revenues was pegged at $68.2 million.

During the fiscal second quarter, Cloud revenues were $846.9 million, up 29.7% year over year. Meanwhile, revenues from the Data Center soared 32% to $362.3 million. Marketplace and Services revenues were $77.2 million, which climbed 22.6% year over year. The Server segment registered no revenues due to the closure of operations.

Our revenue estimates for the Cloud, Data Center and Marketplace and Services, were pegged at $811.6 million, $346.6 million and 67.9 million, respectively.

The company’s non-GAAP gross profit climbed 23% year over year to $1.1 billion. The non-GAAP gross margin increased 100 basis points year over year to 85% during the quarter.

TEAM’s non-GAAP operating income rose 33.7% year over year to $335.1 million, and its non-GAAP operating margin increased 200 basis points year over year to 26%. The operating income is benefiting from strong migrations to the cloud and high growth in Data Center, as well as Marketplace and Services revenues. Disciplined cost management also contributed to the robust operating income.

TEAM’s Balance Sheet

The company ended the second quarter of fiscal 2025 with cash and cash equivalents and short-term investments of $2.5 billion, down from $2.22 billion reported at the end of the previous quarter.

In the fiscal second quarter, TEAM generated operating and free cash flows of $352 million and $342.6 million, respectively.

TEAM’s Q3 and FY25 Guidance

For the third quarter of fiscal 2025, the company anticipates revenues between $1.345 billion and $1.353 billion. The Zacks Consensus Estimate is pegged at $1.32 billion.

The non-GAAP gross margin is estimated to be 84.5%. The non-GAAP operating margin is projected to be 23.5%.

For fiscal 2025, Atlassian expects its revenues to grow in the range of 18.5-19% year over year, up from the previously announced growth rate of 16.5%-17%. Atlassian expects the non-GAAP gross margin to be 84.5% and the operating margin to be 23.5%.

Zacks Rank & Stocks to Consider

Currently, TEAM carries a Zacks Rank #3 (Hold).

Bill Holdings BILL, Marvell Technology MRVL and Twilio TWLO are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector.

Bill Holdings, Marvell Technology and Twilio sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus mark for BILL’s 2025 earnings has been revised upward by 4 cents to $1.81 per share over the past 60 days, indicating a 13% year-over-year increase. BILL shares have gained 24.1% in the past year.

The consensus mark for MRVL’s 2025 earnings has been revised downward by 10 cents to $1.56 per share over the past 60 days, indicating a 3.31% year-over-year increase. MRVL shares have risen 52.3% in the past year.

The consensus mark for TWLO’s 2025 earnings has been revised upward by 5 cents to $3.69 per share over the past 30 days, indicating a 50.6% year-over-year increase. GTLB shares have gained 110.6% in the past year.

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