• Annual Run Rate Revenue: Exceeded $5 billion.
• Subscription Revenue Growth: Increased by 30% year over year.
• AI Interactions: Increased more than 25x year over year.
• Sales to Higher Value SKUs: Up over 40% year over year.
• Deals Greater Than $1 Million: Record number signed during the quarter.

• Warning! GuruFocus has detected 8 Warning Signs with INTC.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Atlassian Corp (NASDAQ:TEAM) achieved over $5 billion in annual run rate revenue, with subscription revenue growing 30% year over year.
• The company reported a record number of deals greater than $1 million in annual contract value, indicating strong enterprise adoption.
• AI features have seen a significant increase in interactions, growing more than 25x year over year, enhancing customer workflows and collaboration.
• Sales of premium and enterprise editions increased by over 40% year over year, driven by AI, automation, and analytics capabilities.
• Atlassian's cloud platform is well-positioned to connect technology and business teams across the Fortune 500, with significant customer wins in Q2.

Negative Points

• Despite strong enterprise performance, only 10% of Atlassian's revenue is driven by large customers, indicating potential under-penetration in this segment.
• The company faces execution risks related to the evolution and transformation of its enterprise go-to-market strategy.
• There is ongoing uncertainty in the macroeconomic environment, which could impact future financial performance.
• Data center revenue growth is expected to be challenging due to prior year comparables related to server end of support and pricing changes.
• Operating margins in the second half of the fiscal year are expected to be slightly lower due to increased investments in sales, marketing, and R&D.

Q & A Highlights

Q: How does Atlassian plan to increase penetration in larger enterprise accounts, and what are the key product areas for growth? A: Joe Binz, CFO, highlighted that Atlassian had a strong Q2 in the enterprise segment, driven by broad-scale growth across products like Jira. The company is focusing on connecting business and technology teams, which offers significant growth potential. Atlassian's go-to-market strategy involves evolving its sales motions to enhance customer success, with a record number of $1 million deals indicating strong momentum.

Q: Can you provide an update on Rovo's adoption and its impact on developer workflows? A: Joe Binz, CFO, noted that Rovo is in the early stages of adoption, with positive feedback from customers. Atlassian Intelligence features, including Rovo, have surpassed 1 million monthly active users, driving significant growth in premium and enterprise editions. The company continues to invest in AI and R&D to enhance features like auto dev, which are expected to improve developer productivity.

Q: How is Atlassian managing the transition risks and macroeconomic uncertainties in its guidance for the second half of FY25? A: Joe Binz, CFO, explained that Atlassian's guidance remains conservative and risk-adjusted due to macroeconomic uncertainties and execution risks related to its enterprise go-to-market transformation. The company observed stable trends in Q2, with consistent performance in SMB and enterprise segments, and continues to monitor these factors closely.

Q: What differentiates Atlassian's approach to AI agents in a crowded market? A: Michael Cannon-Brookes, Co-CEO, emphasized Atlassian's unique approach to AI agents, which are integrated deeply into its software to act like virtual teammates. The company's strategic advantages include a significant R&D investment, a comprehensive multi-modal AI strategy, and a robust data infrastructure that supports enterprise search and team graph capabilities.

Q: How is Atlassian's Loom product performing, and what impact does it have on cloud revenue? A: Joe Binz, CFO, stated that Loom is performing well, with strong customer adoption and engagement. While specific revenue figures for Loom are not disclosed, it contributes to cloud revenue growth, with AI innovations enhancing its value proposition. Loom remains a standalone product, not included in premium editions, but its integration with Atlassian's platform is driving customer value.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.