3 Analyst Reactions To Atlassian's Q2 Outperformance

3 Analyst Reactions To Atlassian's Q2 Outperformance

Atlassian Corporation PLC TEAM  exceeded expectations with second-quarter revenue growth of 37%, billings growth of 39%, operating margins of 30.7%, and earnings per share of 37 cents.

The company failed to meet its growth targets for expenses and headcount, but these outcomes were largely overshadowed by positive financials. The stock surged 9% on the report, building off a steady 8% run in the new year.

Metrics Breakdown

Billings growth was driven largely by renewal outperformance and lower R&D costs.

“In particular, data center customers (who rev-rec similar to traditional upfront licensing) were a key factor in upside in the quarter (first DC price increase in October),” KeyBanc analyst Alex Kurtz wrote. “TEAM also introduced a new free cloud tier that should over time expand the top of funnel for new customers. This is important given TEAM's new customer adds (as expected) dropped vs. last quarter by ~2K as a portion of customers are now using Free Tiers.”

Analysts attributed revenue growth to 50% subscription growth and pull-forward effects.

“Although we anticipated pull-forward activity related to price increases to be largely confined to 1Q, this activity well-exceeded expectations as revenue benefited by $10 million (with the largest benefits accruing to the perpetual licenses) and deferred revenue by $50 million (compared to historic seasonal trends),” Needham analyst Jack Andrews wrote.

Looking forward, Needham expects licenses to slow rapidly and maintenance revenue to decelerate gradually, buffered by years of price increases. Meanwhile, JMP Securities affirmed its admiration for Atlassian’s fundamentals.

“Atlassian’s 37% revenue growth at a $1.6B run-rate illustrates the power of its product-led growth model, and the company doubled down on that model by rolling out free cloud editions of Jira Software, Confluence, and Jira Service Desk in October,” JMP's Patrick Walravens wrote.

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