Atlassian Corporation (TEAM) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights strong financial performance with record revenue and free cash flow, robust AI user growth, and positive enterprise momentum. The Q&A section reinforces optimism with a focus on AI-driven opportunities and strategic investments. Despite some uncertainties in monetization timelines, the overall sentiment remains positive, supported by strategic priorities and growth prospects. The lack of specific market cap information suggests a moderate stock price reaction, likely in the positive range.

Key Financial Performance

Revenue $5.2 billion in FY '25, showcasing stellar execution from enterprise sales teams and partner teams.

Free Cash Flow $1.4 billion in FY '25, contributing to balanced Rule of 40 plus performance.

Deals Greater than $1 Million in ACV Record number signed in Q4, up over 2x year-on-year, indicating strong enterprise momentum.

AI Users 2.3 million, up 50% from last quarter, reflecting rapid adoption of AI-powered solutions.

Cloud Net Revenue Retention Rate 120%, driven by strategic priorities and cloud transformation.

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Operating Highlights

Teamwork Collection: Launched less than a quarter ago, it has seen strong momentum and exceeded expectations.

Core Apps (Jira, Confluence, Jira Service Management, Loom): These apps are growing in line or faster than total company revenue, showcasing significant growth potential.

Enterprise Sales: Signed a record number of deals greater than $1 million in ACV in Q4, doubling year-on-year.

AI-powered Teamwork Platform: Partnered with Google Cloud to enhance AI solutions and accelerate cloud transformation, targeting millions of users worldwide.

Revenue and Cash Flow: Generated over $5.2 billion in revenue and $1.4 billion in free cash flow in FY '25.

Cloud Net Revenue Retention Rate: Achieved a rate of 120%, indicating strong customer retention and growth.

AI and Multi-cloud Strategy: Focused on integrating AI innovations and multi-cloud strategies to strengthen competitive positioning.

Leadership Transition: Anu, Atlassian President, will transition out of her role by December after 12 years, with leadership updates forthcoming.

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Risk or Challenges

Market Conditions: The company is pursuing massive market opportunities and playing offense, but there is no explicit mention of risks related to market conditions.

Competitive Pressures: The company is consolidating tools onto the Atlassian Cloud platform and strengthening its competitive position, but no explicit risks are mentioned.

Regulatory Hurdles: No explicit mention of regulatory hurdles or challenges in the transcript.

Supply Chain Disruptions: No mention of supply chain disruptions or related risks.

Economic Uncertainties: No explicit mention of economic uncertainties or their impact on the company.

Strategic Execution Risks: The departure of Anu, Atlassian's President, at the end of December could pose a leadership transition risk. However, the company emphasizes its long-term thinking and plans to manage this transition thoughtfully.

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Guidance & Outlook

Revenue Growth: As we forge ahead into FY '26, we're bringing a new level of intensity to our pursuit of the massive market opportunities in front of us. We're playing offense and relentlessly innovating in order to further strengthen our competitive position, delivering differentiated customer experiences and value and making Atlassian System of Work for the Fortune 500,000 and beyond.

AI and Cloud Transformation: To further accelerate our progress, we are partnering with Google Cloud to bring our AI-powered Teamwork platform together with Google Cloud's AI optimized infrastructure. This partnership marks a major milestone in Atlassian's multi-cloud strategy, accelerating our cloud transformation and delivering advanced AI solutions to millions more users worldwide.

Core Apps Growth: The result with continued revenue growth across our core apps of Jira, Confluence, Jira Service Management and Loom, all of which are growing in line or faster than total company revenue with significant runway ahead of all.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What is Atlassian's perspective on the impact of AI co-generation tools on their business?

A:Atlassian does not see any negative impact from AI co-generation tools on their business metrics such as expansion rates, growth rates, and adoption rates. They observe healthy user growth and even faster growth in business users for customers integrating AI tools. Atlassian believes AI will lead to more software creation, more developers, and expanded opportunities for their workflow tools.

Q:How should we think about the trajectory for free cash flow in 2026?

A:Free cash flow in FY '26 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 over time. Temporal headwinds, such as transitioning multiyear agreements to annual billing and backloaded sales, may impact short-term cash flow.

Q:What are the potential inflection points in Atlassian's business for fiscal '27?

A:Atlassian expects to achieve 20% compounded annual growth from FY '24 through FY '27. Key growth levers include paid seat expansion, cross-sell, upsell, pricing, new customer growth, and AI-driven opportunities. The Teamwork Collection and enterprise transformations are also expected to contribute significantly.

Q:How did Atlassian's fiscal '25 close relative to expectations, and what is the outlook for fiscal '26?

A:Atlassian had strong execution in fiscal '25, with record deals over $1 million, 60% year-over-year growth in Data Center to Cloud migrations, and a 38% year-over-year increase in RPO balance. For fiscal '26, Atlassian maintains a conservative guidance approach, expecting stable macro trends and continued growth in enterprise and AI-driven opportunities.

Q:What is the progress and outlook for Atlassian's Teamwork Collection?

A:The Teamwork Collection has shown strong early traction, with significant customer wins citing AI integration as a key factor. Atlassian plans to continue innovating and launching new AI capabilities to drive further momentum. The Teamwork Collection is positioned as a core offering for enterprise and business teams.

Q:What is Atlassian's approach to monetizing AI and Rovo?

A:Atlassian is focused on driving deployment, usage, and engagement for AI and Rovo, with monetization being a secondary, longer-term consideration. While there is some consumption-based revenue from Rovo, the primary focus is on adoption. AI capabilities are integrated into premium and enterprise offerings, contributing to growth in those segments.

Q:What are Atlassian's investment priorities for fiscal '26?

A:Atlassian plans to invest in sales and marketing, R&D, and strategic priorities such as Enterprise Cloud AI and the System of Work. The company aims to maintain disciplined cost management while achieving its profitability commitments, targeting a 24% operating margin for FY '26 and 25% for FY '27.

Q:How is Atlassian addressing the opportunity to expand into non-technical roles within enterprises?

A:Atlassian is making progress in expanding into non-technical roles through offerings like the Teamwork Collection, Loom, Trello, and Rovo. These tools cater to business teams and drive broader adoption. Atlassian continues to invest in usability, design, and AI capabilities to appeal to a wider audience.

Q:What is the outlook for Atlassian's Data Center segment in fiscal '26?

A:Atlassian expects Data Center growth to slow in Q1 FY '26 due to a smaller expiration base, headwinds from one-year deal terms, and the lapping of server and support migrations. However, the company continues to see strong migrations to Cloud and remains focused on delivering enterprise-grade capabilities.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the timeline for monetizing AI and Rovo, instead emphasizing a focus on driving usage and engagement. Additionally, while they highlighted strong enterprise momentum, they did not provide clear metrics or timelines for achieving wall-to-wall deployments in non-technical roles.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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