Executive Summary

Strong top-line beat vs guidance and acceleration in profitability: Revenue was $1.286B (+21% y/y) versus Q1-issued guidance of $1.233–$1.241B, with non‑GAAP operating margin at 26% (+200 bps y/y) and non‑GAAP EPS $0.96 (vs $0.73 y/y) .
FY25 outlook raised across the board: Total revenue growth to 18.5–19.0% (prior 16.5–17.0%), Cloud to ~26.5% (prior ~24.0%), Data Center to ~21.5% (prior ~20.5%), Marketplace to ~8.5% (prior ~5.0%); Q3 revenue guided to $1.345–$1.353B .
Enterprise momentum and AI adoption are key drivers: Record number of $1M+ ACV deals; >1M MAU using Atlassian Intelligence; 25x y/y increase in AI interactions; Premium/Enterprise SKUs up 40% y/y, underpinning mix/ARPU tailwinds .
Free cash flow robust at $343M (27% margin), with deferred revenue up 33% y/y to $2.20B, reflecting strong multi‑year commitments; Cloud y/y +30%, Data Center y/y +32% in Q2 .
Stock catalysts: Raised FY25 guide, enterprise GTM investments, FedRAMP progress, and continued AI productization (Rovo/agents) support estimate revisions and multiple resilience near-term .

What Went Well and What Went Wrong

What Went Well

Enterprise sales execution: “Record number of deals greater than $1 million in ACV” as large customers committed to Cloud and the System of Work; management highlighted momentum across products and markets .
AI adoption driving monetization: >1M MAU on Atlassian Intelligence; AI interactions +25x y/y; Premium and Enterprise editions sales up 40% y/y tied to AI, automation, analytics .
Gross margin and operating leverage outperformed: Q2 non‑GAAP GM 85% (up ~100 bps y/y) and non‑GAAP OM 26% (up 200 bps y/y), supported by lower Cloud COGS and operating discipline .

What Went Wrong

H2 margin cadence: Management plans increased S&M/R&D investments in Enterprise and timing shifts from Q2 push H2 operating margins slightly below H1 despite Q2 beat .
Data Center growth to decelerate: Q3 DC revenue growth guidance ~7% y/y due to tough compares (Server EoS pull‑forward) and ongoing migrations to Cloud .
Seat expansion not yet re-accelerating: SMB paid-seat expansion stabilized but has not turned to growth; macro uncertainty remains embedded in H2 outlook .

Financial Results

Headline metrics vs prior periods and guidance

Metric	Q4 FY24	Q1 FY25	Q2 FY25	Commentary
Revenue ($USD Millions)	$1,131.6	$1,187.8	$1,286.5	Beat vs Q2 guidance ($1,233–$1,241) set in Q1
GAAP Diluted EPS	$(0.76)	$(0.48)	$(0.15)	Loss narrows y/y and q/q
Non‑GAAP EPS	$0.66	$0.77	$0.96	+32% y/y from $0.73 in Q2’24
GAAP Gross Margin	81%	82%	83%	+100 bps y/y
Non‑GAAP Gross Margin	83%	84%	85%	+100 bps y/y
Non‑GAAP Operating Margin	20%	23%	26%	+200 bps y/y
Free Cash Flow ($USD Millions)	$413.2	$74.3	$342.6	Q2 FCF margin 27%

Deployment/Segment revenue

($USD Millions)	Q4 FY24	Q1 FY25	Q2 FY25
Cloud	$738.0	$792.3	$847.0
Data Center	$326.7	$335.6	$362.3
Marketplace & Other	$66.9	$59.9	$77.2
Total	$1,131.6	$1,187.8	$1,286.5

KPIs and balance sheet

KPI	Q4 FY24	Q1 FY25	Q2 FY25
Customers with >$10k Cloud ARR	45,842	46,844	49,449
Deferred Revenue – Current ($M)	$1,806.3	$1,744.2	$1,914.1
Deferred Revenue – Non‑Current ($M)	$308.5	$268.6	$282.2
Cash & Equivalents ($M)	$2,176.9	$2,055.6	$2,217.6

Notes: Q2 y/y revenue +21%; subscription revenue +30% y/y; Cloud +30% y/y; Data Center +32% y/y; FCF margin 27% .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue	FY25	+16.5% to +17.0% y/y	+18.5% to +19.0% y/y	Raised
Cloud Revenue Growth	FY25	~24.0% y/y	~26.5% y/y	Raised
Data Center Revenue Growth	FY25	~20.5% y/y	~21.5% y/y	Raised
Marketplace & Other Growth	FY25	~5.0% y/y	~8.5% y/y	Raised
Non‑GAAP Gross Margin	FY25	~83.5%	84.0% to 84.5%	Raised
Non‑GAAP Operating Margin	FY25	22.0% to 22.5%	~23.5%	Raised
Total Revenue	Q3 FY25	—	$1,345–$1,353M	New Q3 guide
Cloud Revenue Growth	Q3 FY25	—	~23.5% y/y	New Q3 guide
Data Center Revenue Growth	Q3 FY25	—	~7.0% y/y ; CFO reiterated ~7%	New Q3 guide
Marketplace & Other Growth	Q3 FY25	—	~Flat y/y	New Q3 guide
Non‑GAAP Gross Margin	Q3 FY25	—	~84.5%	New Q3 guide
Non‑GAAP Operating Margin	Q3 FY25	—	~23.5%	New Q3 guide

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY24, Q1 FY25)	Current Period (Q2 FY25)	Trend
AI/Technology initiatives	Announced Rovo; 30+ AI features; Atlassian Intelligence usage up ~3x q/q; Rovo to GA in Q1 FY25 .	>1M MAU on Atlassian Intelligence; AI interactions +25x y/y; Rovo/agents progressing; multi‑model strategy; 30+ models across 7+ vendors .	Accelerating productization and usage.
Enterprise GTM & large deals	FY24: 524 customers >$1M (+48% y/y); enterprise focus, CRO search . Q1: CRO Brian Duffy appointed .	Record number of $1M+ ACV deals; continued enterprise pull; further GTM investment planned in H2 .	Strong momentum; stepped-up investment.
Product performance	Cloud +31% y/y; DC +41% y/y in Q4; Q1 Cloud +31% y/y; DC +38% y/y .	Q2 Cloud +30% y/y; DC +32% y/y; Premium/Enterprise SKUs +40% y/y .	High growth maintains, normalizing comps.
Regulatory/Compliance (FedRAMP)	FedRAMP “In Process”; Atlassian Government Cloud .	Final stage toward FedRAMP Moderate; awaiting PMO authorization .	Continued progress toward authorization.
SMB/macro	Q1: prudent, risk‑adjusted guide; macro uncertainty in H2 .	SMB paid-seat expansion stabilized; macro stable, but conservatism retained .	Stabilizing but cautious.

Management Commentary

“We executed well in Q2 as we scaled past $5 billion in annual run rate revenue, driven by subscription revenue, which grew 30% year-over-year.” — Mike Cannon‑Brookes .
“More than 1 million monthly active users are utilizing our Atlassian intelligence features… AI interactions increased more than 25x year-over-year… Premium and Enterprise editions up 40% year-over-year.” — Mike Cannon‑Brookes .
“Our Q3 data center guidance… approximately 7% year-over-year growth… tough prior year comparison… continued momentum in migrations to cloud.” — Joe Binz .
“We are expecting operating margins in H2 to be slightly lower than H1… timing of spending pushed from Q2 to H2… and we are going to slightly increase sales and marketing and R&D investments in the enterprise space in H2.” — Joe Binz .
“Gross margins were 85% this quarter… driven by revenue outperformance and lower-than-expected cloud COGS.” — Joe Binz .

Q&A Highlights

Enterprise penetration and GTM evolution: Management emphasized broad-based enterprise growth, record $1M+ deals, and deeper C‑suite engagement; plans to increase H2 investments in enterprise S&M/R&D to accelerate progress .
AI/Agents and Rovo trajectory: Customer feedback strong; ongoing connector expansion; multi‑model approach; agents designed as “virtual teammates” with permissions/actions, differentiating from generic chatbots .
Loom monetization: Not disclosed quarterly; management reiterated prior frame that Loom contributes ~1.5 points to FY25 Cloud revenue growth; Q2 Loom revenue in line/slightly better than expectations .
Data Center outlook: Q3 DC growth ~7% y/y, impacted by prior-year Server EoS and migrations; price change effects modeled and tracking historical patterns .
Margin cadence: H2 operating margins guided lower than H1 on timing and step-up enterprise investments; long-term target remains >25% non‑GAAP OM by FY27 .

Estimates Context

Wall Street consensus (S&P Global) was unavailable at time of analysis due to request limits. As an alternative, we compared actuals to company-issued guidance and prior periods, and included management’s qualitative “better‑than‑expected” commentary on revenue, gross margin, and operating leverage for Q2 .
We expect upward estimate revisions on FY25 revenue and operating margin given the across-the-board guide raises and Q2 over-delivery versus Q1 guidance .

Key Takeaways for Investors

Quality beat and raise: Q2 revenue and margins outpaced guidance, and FY25 outlook was raised on every major line, implying estimate upgrades and near-term support for the stock .
Enterprise flywheel strengthening: Record large deals, hybrid ELAs aiding migrations, and deeper C‑suite engagement indicate durable pipeline and multi‑year expansion opportunity .
AI is monetizing now: >1M AI MAU, 25x y/y interactions, and 40% y/y Premium/Enterprise SKU growth suggest AI/features are lifting ARPU and mix; Rovo/agents can extend this over time .
Watch H2 margin cadence: Management flagged increased enterprise investments and timing shifts that temper H2 OM, even as FY25 non‑GAAP OM was raised to ~23.5% .
DC growth normalizing: Expect deceleration (Q3 ~7% y/y) given tough comps and Cloud migrations; however, hybrid ELAs support billings/commitments while customers transition .
FedRAMP and scale unlocks: Nearing FedRAMP Moderate authorization and expanding Confluence/Jira scale (up to 150k/100k users) should reduce friction for large public sector and regulated enterprise migrations .
Setup into Q3: Raised revenue guide ($1.345–$1.353B) and stable SMB trends provide a constructive near-term backdrop; continued AI/enterprise updates and FedRAMP progress are potential catalysts .

Appendix: Additional Data Points

Subscription revenue Q2: $1,213M (+30% y/y) .
Cloud revenue Q2: $847.0M (+30% y/y); Data Center: $362.3M (+32% y/y); Marketplace & Other: $77.2M (+23% y/y) .
Deferred revenue Q2: $2.20B total (current $1.914B; non‑current $0.282B), +33% y/y .
Cash from operations/FCF Q2: $351.9M/$342.6M; FCF margin 27% .
Customer metric: 49,449 customers with >$10k Cloud ARR, +15% y/y .

All citations refer to Atlassian’s Q2 FY25 8-K press release, shareholder letter, and earnings call transcript, and prior quarter filings as indicated.

Atlassian Corp (TEAM)·Q2 2025 Earnings Summary