Revenue: Over $5.2 billion in FY25.
Free Cash Flow: Over $1.4 billion in FY25.
Cloud Net Revenue Retention Rate: 120%.
Deals Greater Than $1 Million in ACV: Record number signed in Q4, up over 2x year on year.
AI Users: 2.3 million, up 50% from last quarter.
Release Date: August 07, 2025
Warning! GuruFocus has detected 6 Warning Signs with PCT.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Atlassian Corp (NASDAQ:TEAM) reported over $5.2 billion in revenue and $1.4 billion in free cash flow for FY25, demonstrating strong financial performance.
The company signed a record number of deals greater than $1 million in ACV in Q4, more than doubling year-over-year.
Atlassian's cloud net revenue retention rate stands at 120%, indicating strong customer retention and expansion.
The partnership with Google Cloud is expected to accelerate Atlassian's cloud transformation and enhance AI capabilities.
The Teamwork Collection has shown strong momentum, exceeding expectations shortly after its launch.
Negative Points
Free cash flow in Q4 was down 13% year-over-year, attributed to strong collections in the prior year.
There are temporal headwinds due to the transition from multiyear agreements to annual billing terms.
The departure of Atlassian's President, Anu, at the end of December may lead to leadership transitions and potential disruptions.
The company faces macroeconomic uncertainties and potential business disruptions from evolving enterprise go-to-market strategies.
Data center revenue growth is expected to slow down in Q1 due to a smaller expiration base and headwinds from previous programmatic changes.
Q & A Highlights
Q: Mike, there's concern around cogeneration tools and the changing role of a developer. How do you see these innovations affecting Atlassian's core business? A: Michael Cannon Brookes, CEO, explained that Atlassian is not seeing any negative impact from cogeneration tools on their numbers. Instead, they observe healthy user growth and believe that more people will be creating software across various functions, expanding their opportunity. AI tools are seen as augmenting developer roles, making software creation more efficient, which is beneficial for Atlassian's workflow tools.
Q: How should we think about the trajectory for free cash flow in 2025? A: Joe Binz, CFO, noted that free cash flow was $360 million, down 13% year over year, due to strong collections in the prior year. He explained that temporal headwinds exist as they transition multiyear agreements to annual billing terms. Long-term, cash flow is expected to correlate with non-GAAP operating income trends, with a 500 basis point difference between non-GAAP operating margin and free cash flow margin.
Q: What are the potential inflection points in the business for achieving longer-term growth guidance? A: Joe Binz, CFO, stated that Atlassian's confidence in achieving 20% compounded annual growth through FY27 is rooted in significant market opportunities and strategic investments in enterprise AI and system of work. They have multiple growth levers, including paid seat expansion, cross-sell, upsell, pricing, and new customer growth, with AI opening more opportunities.
Q: Can we expect more AI capabilities or new feature launches within the Teamwork Collection this year? A: Michael Cannon Brookes, CEO, confirmed that Atlassian will continue to innovate and ship new capabilities, with AI being a significant tailwind. He highlighted that AI is integrated into their core platform, driving collaboration and growth, with strong quarter-on-quarter growth in AI usage.
Q: How are you thinking about go-to-market and enterprise acceleration in 2026? A: Michael Cannon Brookes, CEO, emphasized that Atlassian already has a robust enterprise business, with significant growth opportunities within their existing customer base. They are focusing on improving customer-centric processes, building partnerships, and enhancing customer success operations to drive enterprise transformation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
