Atlassian Q3 2025 Earnings Analysis
Dive into $TEAM Atlassian’s Q3 2025 earnings with review of financial performance, key metrics, operating expenses, dilution, customer growth, future outlook
Financial Results:
↗️$1,433M rev +20.6% YoY, +3.5% QoQ) beat est by 2.3%
↗️Gross Margin* (86.2%, +2.1 PPs YoY)
↘️Operating Margin* (22.5%, -0.0 PPs YoY)🟡
↗️FCF Margin (8.0%, +1.7 PPs YoY)
↗️Net Margin (-3.6%, +6.8 PPs YoY)
↗️EPS* $1.04 beat est by 25.3%🟢
*non-GAAP
Revenue By Type
↗️Subscription $1,375M rev (+21.4% YoY)
➡️Other $58M rev (+4.0% YoY)🟡
Revenue By Deployment
↗️Cloud $998M rev (+25.9% YoY)🟢
➡️Data Center $373M rev (+11.0% YoY)🟡
➡️Marketplace and services $62M rev (+3.9% YoY)🟡
Customers
➡️53,017 $10k+ customers (+13.2% YoY, +1039)
Operating expenses
↗️S&M*/Revenue 19.6% (+1.7 PPs YoY)
↗️R&D*/Revenue 34.7% (+0.2 PPs YoY)
↗️G&A*/Revenue 9.4% (+0.2 PPs YoY)
Quarterly Performance Highlights
↘️Net New ARR $248M (-1.8% YoY)
↗️CAC* Payback Period 15.0 Months (+3.5 YoY)🟡
↗️R&D* Index (RDI) 0.61 (-0.02 YoY)🟡
Dilution
↘️SBC/rev 24%, -0.9 PPs QoQ
↘️Basic shares up 1.0% YoY, -0.0 PPs QoQ🟢
↘️Diluted shares up 1.4% YoY, -0.5 PPs QoQ
Headcount
➡️14,089 Total Headcount (+12.7% YoY, +276 added)
Guidance
↗️Q4’25 $1,535.0 - $1,543.0M guide (+19.7% YoY) beat est by 1.7%
Key points from Atlassian’s Third Quarter 2025 Earnings Call:
Financial Performance
Atlassian began FY2026 with $1.40B in total revenue, up 21% year over year. Cloud revenue reached $998M, growing 26%, while Remaining Performance Obligations rose 42% to $3.3B. Management increased cloud revenue guidance by 1.5 points to 22.5% YoY, mainly from migration-driven upside expected in the second half. The company reaffirmed a 20% three-year CAGR and reported stronger bookings and CRPO compared to the prior quarter. Organic growth excluding data center end-of-life is modeled about 50 bps lower due to mix and timing differences as revenue shifts from partial upfront recognition to ratable cloud billing. Net expansion remained steady at roughly 120% NER.
Joe Binz, Chief Financial Officer
“We’re entering FY2026 with stronger fundamentals than anticipated. Our migration pipeline and CRPO performance give us confidence in sustained acceleration through the rest of the fiscal year.”
Cloud Services
Cloud operations scaled rapidly, generating $998M in Q1 revenue, up 26% YoY. The Teamwork Collection, launched under two quarters ago, drove double-digit user growth and higher-tier upgrades. Enterprise migrations accelerated under the Ascend and FastShift programs, with migrated seats doubling year on year. Partnerships with global system integrators strengthened customer conversions from on-premise to cloud. Migration revenue will be recognized ratably, creating short-term headwinds but strengthening long-term recurring value. Remaining performance obligations climbed 42% YoY to $3.3B, underscoring sustained cloud demand from over 300,000 customers.
Joe Binz, Chief Financial Officer
“We had significantly stronger-than-expected cloud migrations from data center, which is a great thing for our business. It allows us to provide more value through automation, analytics, and AI. It’s simply the most valuable and secure experience we can offer to our customers.”
Jira Platform
Jira remains the company’s core system of work for developers and business teams. Customers using AI-assisted coding tools such as GitHub Copilot and Cursor expanded Jira seat counts 5% faster and managed 20% more projects than non-AI users. New integrations allow Jira workflows to assign work to AI or human agents within partner ecosystems like GitHub, Canva, and Box. The platform continues to unify technical and non-technical workstreams, improving efficiency and visibility at enterprise scale.
Mike Cannon-Brookes, Chief Executive Officer and Co-Founder
“We have tens of millions of developers, engineers, and designers using Jira every day. It remains the hub for where real work gets done and where AI is now accelerating productivity across entire organizations.”
AI and Rovo
Artificial intelligence is Atlassian’s main innovation driver. The company surpassed 3.5M monthly active AI users, a 50% increase quarter over quarter, while AI token volume tripled. The Rovo AI platform delivers intelligent assistance across Jira, Confluence, Service Management, and Loom. Rovo Dev identified over half of internal security incidents, signaling operational maturity. The Teamwork Graph exceeded 100B connected objects, improving context and recommendation accuracy. Consumption-based monetization—AI credits, agents, and pipelines—now contributes incremental revenue. AI remains a key reason customers migrate to cloud or upgrade to premium collections.
Mike Cannon-Brookes, Chief Executive Officer and Co-Founder
“AI is one of the best things that’s ever happened to us. The need to track, plan, and manage work grows stronger in this new era. Our 3.5 million monthly active AI users are proof that customers are already creating real business value.”
“Rovo Dev is doing a fantastic job. Over half of our internal security findings now come from it. We’re giving enterprises the governance, controls, and traceability they need to use AI responsibly at scale.”
Joe Binz, Chief Financial Officer
“Our business in FY26 is stronger than we projected 90 days ago, and AI-driven cloud adoption is a major contributor to that strength.”
Data Center
The company confirmed the end-of-life for Data Center products by March 2029, completing its shift to a cloud-first model. Customers and partners responded positively due to years of preparation and enterprise-ready cloud options, including government and isolated cloud offerings. Migrations accelerated, though the revenue mix changed as cloud income is recognized ratably and marketplace take rates are lower for cloud apps. Migration pace will vary quarterly but is expected to rise sharply through FY2028–FY2029. Migration volumes have already doubled year on year, showing strong execution as Atlassian transitions from upfront licensing to recurring revenue.
Mike Cannon-Brookes, Chief Executive Officer and Co-Founder
“The partner and customer reaction to the data center end-of-life has been fantastic. We’ve managed this transition with long-term discipline, and customers now see that cloud is the best experience we can deliver.”
“Every quarter we improve our migration process. Seats upgraded doubled year over year across industries. Customers no longer ask if they’ll move to cloud—only when.”
Product Innovations
AI integration expanded across Jira, Confluence, Service Management, and Loom. Loom surpassed $100M ARR two years post-acquisition, with its AI SKU growing over 100% YoY. The pending DX acquisition strengthens developer productivity analytics for AI-driven engineering. The Browser Company acquisition supports an AI-first workspace designed for modern SaaS workflows, connecting seamlessly with the teamwork graph, agents, and enterprise governance.
Mike Cannon-Brookes, Chief Executive Officer and Co-Founder
“Our acquisition philosophy hasn’t changed. We look for great teams, strategic fit, and the right timing. Loom now exceeds $100 million ARR, growing over 100% year on year through AI innovation.”
“AI will reshape how and where knowledge workers get their work done. The Browser Company lets us reimagine the enterprise workspace for the AI era—built with AI agents, the teamwork graph, and enterprise-grade governance.”
Go-to-Market
Nine months into CRO Brian Duffy’s leadership, enterprise execution accelerated. The company signed some of its largest deals to date across technology, financial services, and telecom. Customers consolidated multiple tools and standardized on Atlassian’s cloud platform. The focus remains on expanding within the existing customer base by pairing migrations with multi-product collections.
Mike Cannon-Brookes, Chief Executive Officer and Co-Founder
“Brian Duffy has hit the ground running. He’s helped us close some of our largest enterprise deals ever—customers consolidating tools on our cloud platform and expanding with AI. The team executed exceptionally well, and our customers are the winners.”
Customers
Atlassian closed the quarter with over 300,000 active customers across global markets. Adoption among large enterprises continues to rise, with 80% of the Fortune 500 and 60% of the Forbes AI 50 using its platform. Customers view Atlassian as a strategic partner for managing AI-enabled, cross-team workflows.
Mike Cannon-Brookes, Chief Executive Officer and Co-Founder
“I’ve talked to hundreds of customers this past quarter—from startups to the world’s largest enterprises. What I’m most proud of is how they’re turning to us as a strategic partner to transform how work gets done as AI reshapes their businesses.”
“Our customers include Databricks, Expedia, Ford, and Wells Fargo—organizations running mission-critical operations on our platform. The confidence they show proves we’re building for the long term.”
Customer Success
Global companies such as Databricks, Expedia, Ford, and Wells Fargo run core operations on Atlassian’s AI-enabled cloud platform. At the Team ’25 event in Barcelona, Mercedes-Benz, Sonos, FanDuel, and 24 Hour Fitness highlighted AI-driven collaboration success. Many cited the Teamwork Collection as a driver of faster project cycles, tool consolidation, and stronger engagement from non-technical teams.
Mike Cannon-Brookes, Chief Executive Officer and Co-Founder
“When we see customers like Mercedes-Benz and Sonos showcase real gains from AI collaboration, it validates our vision of building products that connect every team across an organization.”
Leadership
Mike Cannon-Brookes, CEO and Co-Founder, reaffirmed confidence in Atlassian’s multi-year strategy, calling AI “one of the best things” to happen to the company. Joe Binz, CFO, announced plans to transition later in the year for personal reasons, focusing on a smooth handoff while maintaining a conservative financial outlook.
Joe Binz, Chief Financial Officer
“I’ve got a lot of big life events coming up and want to be fully present for those. The finance team is in great shape, and I believe fresh energy and new ideas are always positive. My focus now is ensuring a smooth transition.”
Challenges
The shift from Data Center to Cloud brings short-term accounting headwinds and a lower marketplace take rate. Enterprises adopting AI demand stricter governance, traceability, and control. Migration velocity may fluctuate, and marketplace economics could pressure gross take rates as the model transitions to cloud.
Joe Binz, Chief Financial Officer
“The move to cloud impacts revenue timing and marketplace mix. While our take rate on cloud apps is lower than data center, this shift builds a more predictable, higher-quality business model over time.”
Future Outlook
Management expects FY2026 to outperform initial forecasts, citing higher migration volumes, stronger bookings, and elevated CRPO. Cloud growth of about 22.5% YoY serves as the new baseline, with migration contributing mid- to high-single digits later in the year. The company targets a 20% CAGR through FY2029, driven by enterprise adoption, AI-native workflows, and unified systems of work. Migrations are expected to peak in FY2028–FY2029, establishing cloud as the standard platform for customers seeking scalability, compliance, and AI-enabled productivity.
Mike Cannon-Brookes, Chief Executive Officer and Co-Founder
“We continue to hold incredible confidence in our long-term 20% CAGR. Our cloud, AI, and enterprise strategies are combining to build durable, high-quality growth.”
Joe Binz, Chief Financial Officer
“Our bookings, CRPO, and migration pipeline point to a stronger FY2026 than we expected 90 days ago. The fundamentals are improving as we transition fully into a cloud-first model.”
Thoughts on Atlassian Earnings Report $TEAM:
🟢 Positive
Revenue $1,433M (+20.6% YoY, +3.5% QoQ), beat by +2.3%
Cloud $998M (+25.9% YoY); subscription $1,375M (+21.4% YoY)
RPO $3.3B (+42% YoY) supporting forward growth
EPS $1.04* beat by +25.3%
Gross margin 86.2%* (+2.1pp YoY)
FCF margin 8.0% (+1.7pp YoY)
53,017 customers $10k+ (+13.2% YoY, +1,039 net adds)
Q4’25 guide $1,535–$1,543M (+19.7% YoY) beat by +1.7%
SBC/rev 24% (−0.9pp QoQ); diluted shares +1.4% YoY (−0.5pp QoQ)
🟡 Neutral
Operating margin 22.5%* (flat −0.0pp YoY)
Data Center $373M (+11.0% YoY)
Marketplace & services $62M (+3.9% YoY)
Other revenue $58M (+4.0% YoY)
R&D/Revenue 34.7%* (+0.2pp YoY); G&A/Revenue 9.4%* (+0.2pp YoY)
Headcount 14,089 (+12.7% YoY, +276 QoQ)
🔴 Negative
Net margin −3.6% (improved +6.8pp YoY but still negative)
Net new ARR $248M (−1.8% YoY)
CAC payback 15.0 months* (+3.5 months YoY; slower payback)
S&M/Revenue 19.6%* (+1.7pp YoY; higher acquisition spend)
RDI 0.61 (−0.02 YoY) indicating slight efficiency dip
*-non-GAAP
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Disclaimer: This earnings review is for informational purposes only and does not constitute financial, investment, or trading advice.