Summary
Atlassian closed FY2025 Q3 with total revenue of $1.36 billion, up 14.1% from $1.19 billion in the prior-year quarter. Cloud revenue grew 25% and subscription revenue rose 19%, while Data Center revenue grew 7% and Marketplace and other revenue fell 5%. Server revenue has disappeared after the prior-year end of support. Gross profit was $1.14 billion, up 16.5%, and GAAP gross margin was 83.8%, up 1.8 percentage points from 82.1%. Higher Cloud gross margin more than offset the continued mix shift toward Cloud.
Profitability moved the other way. GAAP operating loss was $12.5 million compared with prior-year operating income of $17.8 million, and GAAP operating margin was -0.9% versus prior-year operating margin of 1.5%. Net loss was $70.8 million compared with prior-year net income of $12.8 million, and diluted loss per share was $0.27 versus prior-year diluted earnings per share of $0.05. Spending drove the swing. Research and development expenses rose 19%, marketing and sales rose 32%, and general and administrative expenses rose 7%, with stock-based compensation a large part of the increase. The income tax provision also grew, driven by a change in the mix of earnings and losses in foreign jurisdictions. Non-GAAP operating income was $348.3 million at a 26% margin, and non-GAAP net income was $261.5 million, or $0.97 per diluted share.
Cash generation held up. Operating cash flow was $652.7 million, up 15.4% from $565.4 million, and capital expenditures were $14.4 million, up 36.6%. Free cash flow, a non-GAAP measure, was $638.3 million and free cash flow margin was 47%. Deferred revenue rose 21.1% to $2.37 billion and remaining performance obligations rose 26.1% to $2.90 billion. The company ended the quarter with 50,715 customers spending more than $10,000 in Cloud annualized recurring revenue, an increase of 14% year over year.
The quarter's story is the AI bet. Atlassian said it passed 1.5 million monthly active users of AI and moved Rovo into all Premium and Enterprise editions of Jira, Confluence, and Jira Service Management, with Standard editions to follow. Management framed that as a deliberate trade-off: it will forgo some near-term revenue to push AI adoption across its base. At Team 25 the company introduced Teamwork Collection and Strategy Collection, a Customer Service Management app, a Government Cloud with FedRAMP Moderate authorization, and an Isolated Cloud planned for 2026. Headcount ended at 13,370, up 620 from the prior quarter, with hiring concentrated in research and development and sales.
For the next quarter, Q4 FY2025, Atlassian expects Cloud revenue growth of approximately 23.0%, Data Center revenue growth of approximately 16.5%, and Marketplace and other revenue growth to be approximately flat. Q4 gross margin is guided to roughly 82.5% on a GAAP basis and 84.5% on a non-GAAP basis. Q4 operating margin is guided to roughly -5.0% on a GAAP basis and 22.0% on a non-GAAP basis. For the full fiscal year 2025, the company expects total revenue growth of approximately 19.0%, Cloud growth of approximately 27.0%, Data Center growth of approximately 21.5%, and Marketplace and other growth of approximately 6.5%. Full-year non-GAAP operating margin is expected to be about one percentage point higher than fiscal year 2024.
Risks are real. Management pointed to a dynamic and uncertain macro environment and said the business is not immune to a potential global economic slowdown, with guidance assuming pressure on paid seat expansion, migrations, cross-sell, upsell, and retention. Data Center growth faces a drag from a policy change limiting contract duration to one year and from customers shifting to Cloud. Marketplace and other revenue is squeezed by lower Data Center app purchasing ahead of migrations. The Rovo decision adds near-term revenue pressure, and the enterprise go-to-market motion carries execution risk. Atlassian is betting that AI adoption and its System of Work will produce durable growth, and the quarter shows the transition carries margin and tax volatility.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $1.36B | $1.29B | +5.5% | $1.19B | +14.1% |
| Gross profit | $1.14B | $1.06B | +6.9% | $975.7M | +16.5% |
| Gross margin | 83.8% | 82.7% | +1.2 pp | 82.0% | +1.8 pp |
| Research & development | $685.3M | $680.2M | +0.8% | $576.5M | +18.9% |
| Sales & marketing | $295.8M | $271.9M | +8.8% | $223.8M | +32.2% |
| General & administrative | $168.3M | $168.7M | -0.2% | $157.6M | +6.8% |
| Total operating expenses | $1.15B | $1.12B | +2.6% | $957.9M | +20.0% |
| Operating income (loss) | -$12.5M | -$57.5M | +78.3% | $17.8M | -170.0% |
| Operating margin | -0.9% | -4.5% | +3.5 pp | 1.5% | -2.4 pp |
| Net income (loss) | -$70.8M | -$38.2M | -85.3% | $12.8M | -655.3% |
| Net margin | -5.2% | -3.0% | -2.2 pp | 1.1% | -6.3 pp |
| Diluted EPS | -$0.27 | -$0.15 | -$0.12 | $0.05 | -$0.32 |
| Customers | 300,000 | 300,000 | ±0.0% | 300,000 | ±0.0% |
Risks
Atlassian is building generative AI into its products, but competitors may incorporate AI more successfully and new AI regulations such as the EU AI Act may impose compliance costs. The filing states AI investments have negatively impacted and may continue to negatively impact operating margins until revenue offsets them; GAAP operating margin decreased 2.4 pp to -0.9% in FY2025 Q3 from 1.5% in FY2024 Q3.
Atlassian swung to GAAP operating and net losses in FY2025 Q3. Operating income was down $30.3 million, turning to a $12.5 million loss, and net loss was $70.8 million compared with prior-year net income of $12.8 million. The filing cites significant investments in research and development and stock-based compensation and expects expenses to increase substantially.
The markets for Atlassian products are intensely competitive with low barriers to entry, and competitors include Microsoft, IBM, Alphabet, ServiceNow, Gitlab, and others. The filing warns that competitors may offer more compelling products or pricing, and MD&A notes marketing and sales expenses rose 32% in FY2025 Q3 partly due to increased advertising and marketing events.
Atlassian depends on customers renewing subscriptions and expanding usage, but customers generally have monthly or annual terms and no long-term contract obligation. The filing states a decline in retention or expansion could harm future results; over 90% of FY2025 Q3 revenue came from customer accounts existing on or before December 31, 2024.
The shift from Data Center and Server offerings to Cloud may lower near-term revenue growth and margins. MD&A states gross margin is expected to modestly decrease due to sales mix shift from Data Center to Cloud, and Server revenue fell 100% in FY2025 Q3 while Cloud revenue rose 25%.
Growth of the enterprise sales force may increase costs and create longer, less predictable sales cycles. MD&A reports marketing and sales expenses increased 32% in FY2025 Q3 and 29% year to date, and the filing notes enterprise deals often require extended proof-of-concept evaluations and more support without assurance of purchase.
A majority of revenue comes from Jira and Confluence, and over 50% of FY2024 revenue came from channel partners. At times in FY2025, one solution partner represented more than 10% of total accounts receivable, so product or partner concentration could harm results.
Global economic and geopolitical volatility, trade policy changes, tariffs, inflation, and interest rate uncertainty could reduce demand, elongate sales cycles, and pressure small and medium-sized business customers. MD&A notes Atlassian is subject to risks from the evolving macroeconomic environment.
Provision for income taxes increased $56.4 million in FY2025 Q3 and $75.8 million year to date, primarily due to the change in mix of foreign earnings and losses. Global minimum tax rules effective for FY2025 and future jurisdictional enactments may increase the effective tax rate and cash tax payments.
Competition for highly qualified personnel, especially AI and cloud engineering talent, is intense. The filing notes stock price fluctuations could reduce perceived equity value, and loss of key executives or employees could disrupt product development and growth.
Atlassian has experienced past security breaches and inappropriate access to systems. Remote-first work, AI features, and third-party apps on the Atlassian Marketplace may increase data security risks, and any breach could lead to customer loss, regulatory liability, and reputational harm.
SaaS KPIs
All quarters →Total customers
Non-GAAP Operating Margin
Free Cash Flow Margin
Free Cash Flow
Non-GAAP Gross Margin
Customers with greater than $10,000 in Cloud ARR
Jira Service Management customers
Non-GAAP Operating Income
Summary, forecast, risks and KPIs are extracted from Atlassian Corp's SEC filings for Q3 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.