Atlassian Corp Q3 FY2025 earnings call

• Total revenue for Q3 was $1.4 billion, with cloud revenue growth of 25% year-over-year. • Held Team '25 user conference, launching next evolution of Atlassian System of Work, integrating Rovo AI into core products, and announcing new cloud offerings. • Over 1.5 million monthly active users of AI across the platform. • Achieved FedRAMP Moderate authorization for U.S. federal government customers and announced Atlassian Government Cloud and Isolated Cloud. • Gross margin was 86% in Q3, driven by price increases, upsell to premium editions, and engineering-driven efficiency in cloud infrastructure.

Total revenue for the third quarter was $1.4 billion. Cloud revenue grew 25% year-over-year. No specific product segment revenue contribution percentages were detailed in the transcript beyond the overall cloud and total revenue figures.

• Expect revenue growth in excess of a 20% CAGR through FY '27. • Migration to cloud is expected to contribute more to cloud revenue growth in FY '26 and '27, consistent with Investor Day guidance. • Teamwork Collection (TWC) is seen as a long-term growth driver with opportunities for attach of Confluence and Loom to Jira, incremental new seats, and AI usage driving structural competitive advantage.

• Macro-economic uncertainty could impact deal timings. • Elongated deal cycles for large, complex enterprise deals due to increased time spent with customers to walk through innovation and value. • Potential impact on revenue growth from execution risks related to growth strategies.

Q: Sanjit Singh asked about embedding Rovo and its potential impact on near-term revenue growth and mid-term 20% CAGR outlook.

A: Mike Cannon-Brookes stated Rovo adoption is growing strongly with over 1.5M monthly active users, and they believe maximizing usage and adoption fits with long-term growth. Joe Binz added no macro factors are changing their commitment to 20% CAGR.

Q: Gregg Moskowitz asked about cloud revenue linearity and data center duration change.

A: Joe Binz said cloud revenue growth was impacted by later landing of enterprise deals, and data center growth was driven by pricing but offset by cloud migrations.

Q: Arjun Bhatia asked about deal timing idiosyncrasies and cloud migration hangups.

A: Joe Binz attributed deal timing to larger, complex deals taking longer to close, and Mike Cannon-Brookes noted cloud platform parity with data center and progress in migrating customers with initiatives like FedRAMP and Atlassian Government Cloud.

Q: Michael Turrin asked about gross margin and efficiency gains.

A: Joe Binz discussed 86% gross margin driven by price increases, upsell, and engineering-driven efficiency in cloud, with more to come from R&D efforts.

Q: Alex Zukin asked about cloud revenue outlook and cross-sell.

A: Joe Binz said cloud revenue growth was impacted by deal timing, but core business trends were in line, and Mike Cannon-Brookes emphasized cloud platform parity and customer upgrades.

Q: Kash Rangan asked about tariffs and CRO transition.

A: Mike Cannon-Brookes said business is healthy with strong pipeline, and Brian's CRO transition is going well with experienced team support.

Q: Keith Bachman asked about Q4 guidance and Teamwork Collection.

A: Joe Binz said Q4 guidance accounts for macro risks, and TWC is a long-term growth driver with attach opportunities and AI usage benefits.

Q: Rob Oliver asked about Isolated Cloud and cost-to-serve.

A: Mike Cannon-Brookes explained Isolated Cloud serves complex customer needs, and Joe Binz discussed structural gross margin trends and AI COGS management.

Q: Raimo Lenschow asked about go-to-market changes with new CRO.

A: Mike Cannon-Brookes said go-to-market evolves with customer mix, and Brian brings enterprise experience to support evolution.

Q: Billy asked about Rovo adoption barriers.

A: Mike Cannon-Brookes said Rovo adoption is early, with customers experimenting and cautious, but high excitement due to familiar agent interaction and ROI potential.