Atlassian Q3 2024 Earnings Analysis
Dive into $TEAM Atlassian’s Q3 2024 earnings with review of financial performance, key metrics, operating expenses, dilution, customer growth, future outlook
Financial Results:
↗️$1,188M rev (+21.5% YoY, +20.5% LQ) beat est by 3.3%
↘️GM* (84.1%, -0.0 PPs YoY)🟡
↘️Operating Margin* (22.6%, -0.4 PPs YoY)🟡
↘️FCF Margin (6.3%, -10.4 PPs YoY)🟡
↗️EPS* $0.77 beat est by 20.3%
*non-GAAP
Revenue By Type
↗️Subscription $1,132M rev (+32.9% YoY)
➡️Other $56M rev (+18.3% YoY)🟡
Revenue By Deployment
↗️Cloud $792M rev (+31.0% YoY)🟢
↗️Data Center $336M rev (+38.1% YoY)
➡️Marketplace and services $60M rev (+16.4% YoY)🟡
Customers
➡️46,844 $10k+ customers (+16.8% YoY, +1002)
Operating expenses
↗️S&M*/Revenue 17.9% (+1.7 PPs YoY)
↗️R&D*/Revenue 34.5% (+0.6 PPs YoY)
↘️G&A*/Revenue 9.1% (-1.9 PPs YoY)
Quarterly Performance Highlights
↗️Net New ARR $252M (+20.7% YoY)
↗️CAC* Payback Period 11.5 Months (+0.1 YoY)🟡
↗️R&D* Index (RDI) 0.63 (+0.02 YoY)🟢
Dilution
↗️SBC/rev 24%, +2.4 PPs QoQ
↘️Basic shares up 1.0% YoY, -0.1 PPs QoQ🟢
↘️Diluted shares up 0.7% YoY, -0.4 PPs QoQ🟢
Headcount
➡️12,501 Total Headcount (+12.1% YoY, +344 added)
Guidance
↗️Q4'24 $1,233.0 - $1,241.0M guide (+16.7% YoY) beat est by 0.6%
Key points from Atlassian’s Third Quarter 2024 Earnings Call:
Financial Performance
In Q1 of Fiscal Year 2025, Atlassian demonstrated strong financial growth, with cloud revenue rising 31% year-over-year, exceeding the company's guidance. This growth was driven by seat expansion in the SMB segment, significant enterprise contracts, and a robust increase in customer upgrades to premium and enterprise editions. Atlassian attributes this performance to stable macroeconomic conditions and effective sales execution, with cloud migrations and paid seat expansions serving as key revenue drivers within a favorable market landscape.
AI Innovation and Product Development
Atlassian's dual AI strategy centers on Atlassian Intelligence, embedded across its platform, and Robo, a standalone AI-first product. Atlassian Intelligence has achieved a tenfold increase in usage since the beginning of the year, enhancing customer productivity through automated insights and task recommendations. Robo, launched only five months after its announcement, leverages Atlassian’s Teamwork Graph to improve team productivity by tapping into organizational knowledge on a large scale. These AI-driven innovations are accelerating migration demand and increasing premium adoption, reflecting strong customer interest and positive early feedback.
Expanded Enterprise Offerings
In response to growing demand from enterprise clients, Atlassian introduced premium versions of several products, including Compass Premium, Guard Premium, and Steara Product Discovery Premium. These offerings address complex enterprise requirements with advanced data management, security, and user control capabilities. Compass Premium enhances visibility and control over team workflows within complex environments, strengthening Atlassian’s position in the enterprise market where secure, high-value solutions are essential.
Enhancements in Jira Service Management (JSM)
Atlassian continues to advance its Jira Service Management (JSM) platform, a cornerstone in its system of work. Recent upgrades include AI-powered automation, virtual service agents, and incident management tools tailored for DevOps teams. JSM's functionality now extends beyond IT departments to serve HR, marketing, and finance teams, underscoring its versatility as an enterprise solution that enables faster time-to-value across various business functions.
Focus on Emerging Tools: Loom, Compass, and Guard
Atlassian has expanded its portfolio with the integration of Loom, Compass, and Guard into the Atlassian Cloud Platform to meet evolving customer needs. Loom, acquired in FY 2024, facilitates asynchronous video communication, enhancing team collaboration. Compass provides centralized insights for distributed teams, while Guard emphasizes security at an enterprise level with data residency and compliance features. These products reflect Atlassian’s commitment to providing a flexible platform that addresses the diverse needs of large organizations.
System of Work and Cross-Product Integration
Atlassian’s "system of work" philosophy guides its approach to cross-product integration, fostering collaboration across software, IT, and business teams. Leveraging the Atlassian Cloud Platform and Teamwork Graph, the company integrates tools like Jira, Confluence, and JSM into a cohesive workflow ecosystem. This interconnected approach enables clients to capitalize on the full capabilities of Atlassian's cloud offerings, breaking down silos and driving organizational productivity.
Security and Compliance
Atlassian continues to expand its security and compliance capabilities across its product suite, with Guard Premium offering advanced security measures essential for enterprise adoption. This enhanced focus on security supports Atlassian's cloud migration strategy, helping legacy system clients transition to a more secure cloud environment, often encouraged by these compliance features.
Cloud Migrations and Enterprise Transitions
Cloud migration is a primary growth focus, with major clients committing to multi-year migration agreements. Migrations were a significant contributor to Q1 revenue, with numerous enterprises moving from data centers to cloud solutions, drawn by Atlassian’s AI and analytics capabilities. The company expects data center migrations to contribute mid- to high-single-digit revenue growth over the next three years, aligning with the trend of increased cloud-native AI adoption among enterprises.
R&D Investment and Platform Maturity
With R&D investment at 35% of revenue, Atlassian remains committed to continuous product innovation. The company’s platform maturity has accelerated product rollouts, exemplified by recent launches of Robo, Atlassian Intelligence, and premium offerings such as Compass and Guard. This platform development enables Atlassian to meet the comprehensive demands of its expanding enterprise client base more efficiently.
Market Expansion and Enterprise Adoption
Atlassian’s market expansion strategy emphasizes cross-selling, product adoption, and premium upgrades within large organizations. The appointment of Brian Duffy as Chief Revenue Officer supports this shift toward enterprise sales. The continued growth of Jira Service Management (JSM) reinforces Atlassian’s position in the DevOps and service management sectors, with increased usage across business teams beyond traditional IT functions. The company’s alignment between product development and go-to-market strategies has established Atlassian as a strategic partner within enterprise accounts.
Customer Engagement and Success
Atlassian reported strong engagement from enterprise clients in Q1, with growing adoption of its cloud and AI-driven products. For example, one of the world’s largest investment management firms recently signed a multi-year migration agreement, motivated by Atlassian Intelligence and analytics capabilities. This trend highlights the importance of cloud-native AI tools in today’s enterprise landscape, with customer upgrades to premium editions further supporting Atlassian’s revenue growth.
High-Value Customer Wins
Atlassian secured several high-value contracts this quarter, with significant upgrades to premium and enterprise editions across its product lines. A notable win involved a leading financial services provider committing to a phased migration to Atlassian Cloud, underscoring customer confidence in Atlassian’s security, data residency, and AI capabilities. These enterprise partnerships affirm Atlassian’s role as a strategic partner, supporting long-term digital transformation within large organizations.
Future Outlook
Atlassian’s FY2025 guidance remains cautious amidst ongoing macroeconomic and geopolitical uncertainty. While the company anticipates growth driven by cloud migrations, AI innovation, and strategic pricing, it maintains a conservative revenue forecast for upcoming quarters. With accelerating enterprise adoption and a solid R&D roadmap, Atlassian is well-positioned for sustainable long-term growth despite potential short-term challenges.
Management comments on the earnings call.
Product Innovations
Mike Cannon-Brookes, Co-Founder and CEO
"We’re shipping innovation across our product suite—from AI capabilities in Atlassian Intelligence to dedicated new tools like Robo—all to empower teams with a seamless, integrated system of work. These innovations aren’t just concepts; they’re delivering real, measurable value to our customers."
Cloud Migrations
Joe Dins, Chief Financial Officer
"Our enterprise clients increasingly recognize that their best experience is in the cloud, and our job is to support them through their unique migration journeys. With our advanced AI and analytics capabilities, we’re seeing clients migrate to the cloud, confident that this transition brings real strategic advantage."
Artificial Intelligence (AI)
Mike Cannon-Brookes, Co-Founder and CEO
"Our dual AI approach—with Atlassian Intelligence embedded across products and Robo as a standalone tool—gives customers the power to unlock knowledge within their organizations. AI is driving productivity at a scale we’ve never seen before, fundamentally transforming how teams can work."
Customers and Success Stories
Mike Cannon-Brookes, Co-Founder and CEO
"Our largest clients, from finance to telecommunications, are adopting our solutions to unify and drive productivity across their organizations. The strength of Atlassian Intelligence and our cloud platform is evident as more companies view us as their strategic partner in navigating transformation."
Challenges and Current Market Dynamics
Joe Dins, Chief Financial Officer
"We’re operating in a complex macroeconomic environment, and our guidance reflects a cautious, risk-adjusted approach. With multiple global factors at play, we are prepared to stay agile and continue executing our long-term strategy."
Future Outlook
Mike Cannon-Brookes, Co-Founder and CEO
"Our strategy is clear: keep innovating, serve our enterprise customers at every stage of their growth, and build a resilient business for the future. We’re playing the long game with a continued focus on R&D, our system of work philosophy, and expanding our reach in the enterprise space."