Atlassian Q3 Earnings Surpass Expectations, Revenues Rise Y/Y

Atlassian TEAM reported third-quarter fiscal 2025 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Its non-GAAP earnings per share of 97 cents beat the Zacks Consensus Estimate by 7.8%. The figure jumped 9% from the year-ago quarter’s non-GAAP earnings of 89 cents per share.

TEAM’s fiscal third-quarter revenues climbed 21.4% year over year to $1.36 billion and beat the Zacks Consensus Estimate by 0.72%. The top line was primarily driven by robust paid growth in Atlassian Government Cloud and Isolated Cloud and momentum in AI-adoption.

Atlassian’s Quarterly Details

Segment-wise, Subscription revenues rose 18.8% year over year to $1.27 billion, reflecting the continued transition to cloud services. Our estimate for Subscription revenues was pegged at $1.27 billion.

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The Maintenance business registered no revenues, as it has been phased out.

Atlassian’s Other revenues (including perpetual license revenues) declined 28.8% year over year to $83.8 million. Our estimate for Other revenues was pegged at $78.9 million.

During the fiscal third quarter, Cloud revenues were $880.4 million, up 25.2% year over year. Data Center revenues rose 6.7% to $388.5 million, while Marketplace and Services revenues reached $87.8 million, down 4.8% year over year. The Server segment recorded no revenues, reflecting its complete sunset.

Our revenue estimates for Cloud, Data Center, and Marketplace and Services were pegged at $868.5 million, $389.5 million, and $92.7 million, respectively.

The company’s non-GAAP gross profit rose 16.1% year over year to $1.17 billion, with a non-GAAP gross margin of 86%, up 100 basis points from the prior year.

TEAM’s non-GAAP operating income increased 10% year over year to $348.3 million. This strong performance was driven by solid growth in Cloud and disciplined cost control across business units.

TEAM’s Balance Sheet

At the end of third-quarter fiscal 2025, the company held $3 billion in cash, cash equivalents, and short-term investments, up from $2.5 billion at the end of the prior quarter.

TEAM generated $652.7 million in operating cash flow and $638.3 million in free cash flow during the quarter.

TEAM’s Q4 and FY25 Guidance

For fourth-quarter fiscal 2025, the company projects revenues in the range of $1.349-$1.359 billion. The Zacks Consensus Estimate is pegged at $1.35 billion.

Non-GAAP gross margin is expected to be 84.5%, while the non-GAAP operating margin is projected at 22.0%.

For fiscal 2025, Atlassian expects its revenues to grow 19% year over year, up from the previously announced growth rate of 18.5-19%. The Zacks Consensus Estimate for the same has been pegged at $5.17 billion, indicating year-over-year growth of 18.6%.

Zacks Rank and Stocks to Consider

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

Affirm AFRM, Super Micro Computer SMCI and Paycom Software PAYC are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. AFRM, SMCI and PAYC sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AFRM shares have gained 4% in the past year. The Zacks Consensus Estimate for AFRM’s 2025 is pegged at a loss of 6 cents per share, narrowed by 7 cents over the past 60 days, suggesting growth of 96.7% from the year-ago quarter’s reported figure.

SMCI shares have plunged 56.4% in the past year. The Zacks Consensus Estimate for SMCI’s fiscal 2025 earnings has been revised downward to $2.52 in the past seven days, suggesting year-over-year growth of 14%.

PAYC shares have gained 6% over the past year. The Zacks Consensus Estimate for PAYC’s 2025 earnings is pegged at $8.72 per share, implying a rise of 6.21% from the year-ago quarter’s levels.

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This article originally published on Zacks Investment Research (zacks.com).

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