Atlassian (TEAM) Q2 Earnings and Revenues Beat Estimates

Atlassian TEAM reported stronger-than-expected second-quarter fiscal 2024 results. Its second-quarter fiscal 2024 non-GAAP earnings per share of 73 cents beat the Zacks Consensus Estimate of 62 cents. The figure increased 62.2% from the year-ago quarter’s non-GAAP earnings of 45 cents per share, mainly driven by double-digit year-over-year growth across segments like Cloud and Data Center.

TEAM’s second-quarter revenues jumped 21.5% to $1.06 billion and surpassed the consensus mark of $1.02 billion. The top line was primarily driven by growth in Subscription revenues, migrations, paid seat expansion, cross-selling of additional products and contribution from Loom to the Cloud revenues.

Quarterly Details

Segment-wise, Subscription revenues jumped 31.1% year over year to $932 million. The ongoing shift toward cloud, the increasing number of customers and higher prices on some products boosted the company's quarterly revenues. Our estimate for Subscription revenues was pegged at $919.6 million.

Atlassian Corporation PLC Price, Consensus and EPS Surprise

Atlassian Corporation PLC Price, Consensus and EPS Surprise

Atlassian Corporation PLC price-consensus-eps-surprise-chart | Atlassian Corporation PLC Quote

Sales from the Maintenance business decreased 34.8% year over year to $69.1 million. The decline was primarily due to the company’s planned end of providing maintenance and support for its Server offerings, which is expected to begin in February 2024. Our estimate for Maintenance revenues was pegged at $39.8 million.

Atlassian’s Other revenues (including perpetual license revenues) rose 6% year over year to $58.8 million. Our estimate for Other revenues was pegged at $58.8 million.

During the second quarter, Cloud revenues were $653.2 million, representing 27.5% year-over-year growth. Meanwhile, revenues from the Data Center soared 41.4% to $274.8 million. Marketplace and services revenues were $62.9 million, which rose 5.1% year over year. However, revenues from Server declined 34.8% to $69.1 million.

Our revenue estimates for the Cloud, Data Center, Marketplace and Services, as well as Server businesses, were pegged at $643.6 million, $258.3 million, $59.9 million and $56.3 million, respectively.

Atlassian added more than 37,000 net new customers, bringing the total count to over 302,000 on an active subscription or maintenance agreement basis in the reported quarter. A large number of customers are opting for cloud offerings amid the ongoing cloud migration. The acquisition of Loom increased TEAM’s new customer base by approximately 33,000. Such new additions and increased pricing on certain products contributed to the company’s quarterly revenues.

The company’s non-GAAP gross profit climbed 20.4% year over year to $891.8 million. The non-GAAP gross margin contracted 100 basis points to 84% during the quarter. The decrease primarily resulted from investments aimed at meeting the increasing demand for Atlassian’s Cloud services and the ongoing shift in revenue composition toward cloud-based offerings.

TEAM’s non-GAAP operating income increased 43.4% year over year to $250.6 million, while its non-GAAP operating margin rose to 24% from 20% in the year-ago quarter. The operating income is benefiting from the company’s focus on cost management and revenue outperformance.

Balance Sheet

The company ended the second quarter of fiscal 2024 with cash and cash equivalents and short-term investments of $1.61 billion, down from $2.24 billion at the end of the previous quarter.

In the fiscal second quarter, TEAM generated operating and free cash flows of $289.6 million and $284.3 million, respectively.

Guidance

Atlassian reiterated its guidance for non-GAAP gross margin while raising it for non-GAAP operating margin for fiscal 2024. The company still projects non-GAAP gross margin to be approximately 83.5%. It now forecasts non-GAAP operating margin in the range of 20.5-21% compared with the previous guidance of 20%.

The company provided guidance for the third quarter. For the third quarter of fiscal 2024, the company anticipates revenues between $1.08 billion and $1.1 billion. The Zacks Consensus Estimate is pegged at $1.06 billion.

The non-GAAP gross margin for the third quarter is estimated to be approximately 83.5%. The non-GAAP operating margin is anticipated to be approximately 19.5% in the third quarter.

Zacks Rank and Other Stocks to Consider

Currently, Atlassian carries a Zacks Rank #2 (Buy). Shares of TEAM have gained 39.7% in the past year.

Some other top-ranked stocks from the broader technology sector are BlackLine BL, Arista Networks ANET and Blackbaud BLKB. While BL and ANET sport a Zacks Rank #1 (Strong Buy) each, BLKB carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BlackLine’s fourth-quarter 2023 earnings has been revised by a penny northward to 55 cents per share in the past 30 days. Shares of BL have lost 22% in the past year.

The Zacks Consensus Estimate for Arista’s fourth-quarter 2023 earnings has been revised by a penny northward to $1.70 per share in the past 90 days. Shares of ANET have rallied 97.1% in the past year.

The Zacks Consensus Estimate for Blackbaud's fourth-quarter 2023 earnings per share has been revised by a penny northward to $1.04 in the past 90 days. Shares of BLKB have returned 29.9% in the past year.

Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.

This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Blackbaud, Inc. (BLKB) : Free Stock Analysis Report

Arista Networks, Inc. (ANET) : Free Stock Analysis Report

Atlassian Corporation PLC (TEAM) : Free Stock Analysis Report

BlackLine (BL) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.