Q3 2024 Earnings Summary
Reported on Feb 18, 2025 (After Market Close)
Pre-Earnings Price$198.41Last close (Apr 25, 2024)
Post-Earnings Price$182.73Open (Apr 26, 2024)
Price Change
$-15.68(-7.90%)
- Strong Growth Opportunities from Cloud Migrations: Atlassian continues to see significant growth potential as data center customers transition to cloud over time. The company expects migrations to be a key driver of cloud revenue growth in FY25, given the substantial size of the data center installed base. This confidence is reinforced by the 90% year-over-year increase in data center to cloud migrations during the first three quarters. Atlassian views the upside in data center as a long-term benefit for cloud growth. , ,
- Multiple Growth Levers Remain Strong: Atlassian's key growth drivers—including migrations, cross-selling, upselling to premium and enterprise editions, and new product introductions like Jira Product Discovery and Loom—are performing well and align with their expectations. The company's investment in innovation and new products has expanded their opportunities beyond initial projections. Despite challenges in paid seat expansion within SMBs, other drivers like enterprise stability, new customer adds, and product upsells contribute to their confidence in delivering durable revenue growth over a multiyear period. , , ,
- Unique Positioning to Capitalize on AI Advancements: Atlassian is well-positioned to benefit from AI trends due to their unique data graphs and focus on team collaboration. The company believes that AI will lead to the generation of more software and services, which aligns with their products like Compass and Atlassian Intelligence. By leveraging AI, they can enhance coordination activities—a significant portion of developers' time—and deliver greater value to customers, driving future growth. , ,
- The recent strong revenue growth for Atlassian was primarily driven by one-time events such as server end-of-life migrations to data center and price increases. As these events cannot be repeated, there is concern about the sustainability of future revenue growth.
- Cloud revenue growth is being hampered by weak paid seat expansion in the SMB sector due to macroeconomic challenges, which may continue to affect growth. Atlassian noted that paid seat expansion rates remained well below prior year levels, particularly in the SMB sector.
- Migrations of data center customers to cloud may take longer than anticipated due to the complexity of these customers and remaining barriers such as compliance and data residency requirements. This could delay expected cloud revenue growth from these migrations.