Summary
Atlassian closed the second quarter of fiscal 2025 with revenue of $1.29 billion, up 21.4% from the prior-year quarter. Gross profit rose 22.8% to $1.06 billion. The company still reported an operating loss of $57.5 million, wider than the prior-year quarter. Net loss narrowed to $38.2 million from the prior-year quarter, and diluted net loss per share improved to -$0.15.
Margins were mixed. Gross margin came in at 82.7%, up 1.0 percentage point from the prior-year quarter. Operating margin was -4.5%, up 0.2 percentage points. Cash generation was the stronger part of the story. Operating cash flow for the quarter was $351.9 million, up 21.5%, while operating cash flow for the first six months of fiscal 2025 was $432.4 million, down 5.3%. Capital expenditures were $9.34 million in the quarter, up 75.1%, and $15.49 million for the six months, up 72.0%. Deferred revenue reached $2.20 billion, up 32.8% year over year. Remaining performance obligations were $2.70 billion, up 42.1%. Free cash flow for the quarter was $342.6 million at a 27% margin. On a non-GAAP basis, operating income was $335.1 million and operating margin was 26%, while net income was $255.6 million and diluted earnings per share were $0.96.
Enterprise momentum drove the quarter. Atlassian ended with 49,449 customers spending more than $10,000 in Cloud annualized recurring revenue, an increase of 15% year over year, and closed a record number of deals greater than $1 million in annual contract value. Headcount stood at 12,750, an increase of 249 from the prior quarter. Confluence Cloud now supports up to 150,000 users on a single site, a threefold increase in scale, and Jira Cloud is on the roadmap for 100,000 users on a single site. Rovo and Atlassian Intelligence reached over 1 million monthly active users, and AI interactions grew more than 25 times year over year. Sales of Premium and Enterprise editions rose more than 40% year over year. The company also expanded its partnership with Amazon Web Services and moved closer to FedRAMP Moderate authorization.
Guidance points to continued growth at a slower pace. For the third quarter of fiscal 2025, Cloud revenue growth is expected at approximately 23.5%, Data Center growth at approximately 7.0%, and Marketplace and other growth at approximately flat. Non-GAAP gross margin for that quarter is guided to approximately 84.5% and non-GAAP operating margin to approximately 23.5%. For the full fiscal year 2025, Atlassian increased its total revenue growth outlook to 18.5% to 19.0%, with Cloud growth of approximately 26.5%, Data Center growth of approximately 21.5%, and Marketplace and other growth of approximately 8.5%. Full-year non-GAAP gross margin is guided to 84.0% to 84.5% and non-GAAP operating margin to approximately 23.5%. Diluted share count is expected to rise by approximately 2% for the fiscal year.
Several risks sit behind those targets. The outlook takes a prudent and risk-adjusted approach that contemplates macroeconomic uncertainty hurting paid seat expansion, cross-sell, upsell, and customer retention, and it allows for execution risk as the enterprise go-to-market motion evolves. Fiscal 2025 also faces difficult comparisons as the company laps Server-related benefits from fiscal 2024, including event-driven Data Center and Marketplace outperformance in the third quarter of fiscal 2024, the roll-off of Server migration benefits, and the end of Server maintenance revenue. Cloud revenue growth is expected to decelerate in the second half of the year, and Data Center growth faces its toughest comparison in the third quarter. Foreign exchange movement, tax law changes, and the global minimum tax framework effective for fiscal 2025 add further uncertainty, and the company notes its effective tax rate and cash tax payments may increase in future years.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.29B | $1.19B | +8.3% | $1.06B | +21.4% |
| Gross profit | $1.06B | $970.2M | +9.6% | $865.6M | +22.8% |
| Gross margin | 82.7% | 81.7% | +1.0 pp | 81.7% | +1.0 pp |
| Research & development | $680.2M | $603.1M | +12.8% | $536.8M | +26.7% |
| Sales & marketing | $271.9M | $252.4M | +7.7% | $220.5M | +23.3% |
| General & administrative | $168.7M | $146.6M | +15.0% | $157.3M | +7.2% |
| Total operating expenses | $1.12B | $1.00B | +11.8% | $914.6M | +22.5% |
| Operating income (loss) | -$57.5M | -$32.0M | -79.7% | -$49.1M | -17.2% |
| Operating margin | -4.5% | -2.7% | -1.8 pp | -4.6% | +0.2 pp |
| Net income (loss) | -$38.2M | -$123.8M | +69.1% | -$84.5M | +54.8% |
| Net margin | -3.0% | -10.4% | +7.4 pp | -8.0% | +5.0 pp |
| Diluted EPS | -$0.15 | -$0.48 | +$0.33 | -$0.33 | +$0.18 |
| Customers | 300,000 | 300,000 | ±0.0% | 302,000 | -0.7% |
Risks
Competitors may incorporate AI more successfully, and Atlassian's AI investments have negatively impacted operating margins. Third-party AI model suppliers could terminate relationships, become prohibited in some jurisdictions, or increase prices.
A majority of revenue is derived from Jira and Confluence, making the company vulnerable to reduced demand, competitive pressures, or technological changes affecting these products.
The shift to Cloud offerings may pressure near-term revenue growth and margins due to lower initial Cloud revenue and higher hosting costs. Server end of support in February 2024 already reduced other revenues, and remaining Server customers may not transition.
Developing an enterprise sales force involves challenges in recruitment and retention, and may lead to longer sales cycles, increased costs, and less predictability. The company may need to reduce R&D expenses to accommodate higher marketing and sales expenses.
The markets are intensely competitive with low barriers to entry, and competitors like Microsoft, IBM, and Alphabet have greater resources. Pricing pressures and AI-driven competition could reduce sales and margins.
Global economic and geopolitical volatility, inflation, and interest rate changes could reduce demand, elongate sales cycles, and impact SMB customers' ability to pay, as seen with past bank failures.
Competition for AI talent is intense, and the loss of key executives (former Co-CEO and Chief Sales Officer stepped down in August 2024) or other key employees could disrupt the business. The company hired a new Chief Revenue Officer effective January 1, 2025.
The company has experienced security breaches in the past, and its remote-first work environment and third-party apps on the Atlassian Marketplace pose additional data security risks. AI integration may also increase cybersecurity risks.
Evolving regulation of AI, privacy, and cross-border data transfers may limit adoption and require significant compliance expenditures. The global minimum corporate income tax of 15% could increase the effective tax rate and cash tax payments.
The company has $1.0 billion in senior notes due 2029 and 2034, with interest expense of $7.3 million in the quarter. Change in control repurchase provisions may delay or prevent a takeover.
Share repurchase programs may increase stock price volatility and diminish cash reserves. The 2023 program has $199.6 million remaining, and the 2024 program allows up to $1.5 billion.
SaaS KPIs
All quarters →Total customers
Non-GAAP Operating Margin
Free Cash Flow Margin
Free Cash Flow
Customers with >$10,000 in Cloud ARR
Non-GAAP Operating Income
Summary, forecast, risks and KPIs are extracted from Atlassian Corp's SEC filings for Q2 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.