Atlassian surpassed its projected personal income growth for the first quarter of the new fiscal year (Q1, FY25), yet its losses continued to rise despite expectations of a slowdown in growth.
The Australian cloud-based software company, led by sole CEO and cofounder Mike Cannon-Brookes, reported a robust September quarter, with total revenue increasing 21% year-on-year to USD 1.19 billion, surpassing expectations of USD 1.16 billion.
Subscription income surged 33% to a record $1.13 billion, exceeding Atlassian’s forecast of 27%, and the market responded enthusiastically, with the company’s shares skyrocketing over 17% in after-hours trading, from $188.54 on Thursday to over $220.
The potential boost from a $1.5 billion share buyback program may have contributed to the enthusiasm, alongside Atlassian’s recent appointment of SAP veteran Brian Duffy as chief income officer, who is set to start on January 1, 2025, after 18 years at the German multinational, where he rose through the ranks to become president of cloud and most recently CEO of SoftwareOne.
Despite the narrative of growth, Atlassian’s tradition of annual losses has persisted, with a notable increase over recent years. The company reported a web loss of US$123.8 million in the September quarter, a staggering 300% increase from the US$31.9 million loss recorded in Q1, fiscal year 2024. The company reported a net loss of $0.48 per diluted share for the first quarter of fiscal year 2025, a significant increase from the -$0.12 loss recorded in the same period last year?
The company suffered a significant increase in working loss, rising to $32.0 million in the first quarter, up from a working loss of $18.9 million in the same period last fiscal year. The working capital margin loss increased to 3% this quarter, a stark contrast to the 2% recorded 12 months prior.
Atlassian ended the September quarter with a cash flow from operations of USD 80.5 million, accompanied by a free cash flow of USD 74.3 million, while holding USD 2.2 billion in cash, cash equivalents, and marketable securities.
Atlassian’s Chief Financial Officer (CFO), Joe Binz, noted that the company is “off to a strong start” for its 2025 fiscal year.
As we realign our resources and efforts, we’re prioritizing initiatives that drive business impact, fuel AI-driven innovation, and foster closer collaboration between technology and enterprise teams within the Atlassian System of Work framework.
In his quarterly letter to shareholders, following Scott Farquhar’s departure as co-CEO, Mike Cannon-Brooks expressed satisfaction with the quarter’s progress and optimism about future opportunities, despite anticipating slower revenue growth for FY2025, with total revenue expected within the range of 16.5-17%, and cloud revenue growth projected at 24%.
“Our considerable investment in building a premier cloud infrastructure is yielding significant dividends, particularly during this pivotal era of artificial intelligence.” As organizations increasingly adopt our System of Work philosophy, fueled by technological advancements, we’re proud that our products continue to serve as the bedrock for countless teams to achieve their goals.
What drives my conviction is the unique synergy between Atlassian’s platform, our System of Work ethos, cutting-edge AI capabilities, and diverse product portfolio, which collectively empower us to achieve our mission of unlocking the full potential of every team.
Cannon-Brookes highlighted Atlassian’s focus on deploying synthetic intelligence within its offerings, unveiling Rovo, a pioneering AI-powered product featuring enhanced enterprise search functionalities and intelligent agents capable of resolving complex problems and automating mundane tasks across the Atlassian platform and other SaaS applications.
“Via the facility of our R&D engine, we’re not simply advertising AI, we’re transport it. “Cannon-Brookes expressed enthusiasm about our team’s ability to bring Rovo, designed specifically for the AI era, to market just five months after its initial announcement,”
“We empower customers to unlock value through seamless access to their organizational data, leveraging Atlassian’s cloud infrastructure and our proprietary Teamwork Graph, which integrates both first-party and third-party sources at scale.”
Atlassian forecasts its Q2 earnings to fall within a range of approximately $1.233 billion to $1.241 billion, driven by a 25.5% increase in cloud revenue and a 27.5% surge in data center income. The December quarter’s working margin is anticipated to be approximately 10.0% under GAAP and around 21.0% on a non-GAAP basis.
The forecasted working margin for the 2025 fiscal year is anticipated to fall within a range of 5.5% to 5.0% on a GAAP basis, and between 22.0% to 22.5% on a non-GAAP basis.
Atlassian’s September quarter, FY2025 outcomes. Supply: Atlassian
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