Atlassian (NASDAQ:TEAM) Q2: Beats On Revenue, Stock Jumps 10.8%

Jabin Bastian /
2024/02/01 4:09 pm EST

IT project management software company, Atlassian (NASDAQ:TEAM) reported Q2 FY2024 results exceeding Wall Street analysts' expectations, with revenue up 21.5% year on year to $1.06 billion. Guidance for next quarter's revenue was also optimistic at $1.10 billion at the midpoint, 2.8% above analysts' estimates. It made a non-GAAP profit of $0.73 per share, improving from its profit of $0.45 per share in the same quarter last year.

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Atlassian (TEAM) Q2 FY2024 Highlights:

  • Revenue: $1.06 billion vs analyst estimates of $1.02 billion (3.5% beat)
  • EPS (non-GAAP): $0.73 vs analyst estimates of $0.63 (16.4% beat)
  • Revenue Guidance for Q3 2024 is $1.10 billion at the midpoint, above analyst estimates of $1.07 billion
  • Full year 2024 guidance raised for Cloud and Data Center revenue, also raised for non-GAAP operating margin
  • Free Cash Flow of $284.3 million, up 74.1% from the previous quarter
  • Gross Margin (GAAP): 81.6%, in line with the same quarter last year
  • Market Capitalization: $64.46 billion

“Q2 was full of incredible milestones as we recorded our first-ever $1 billion revenue quarter, Jira Software crossed $1 billion in Cloud ARR, and we surpassed 300,000 customers,” said Scott Farquhar, Atlassian’s co-founder and co-CEO.

Founded by Australian co-CEOs Mike Cannon-Brookes and Scott Farquhar in 2002, Atlassian (NASDAQ:TEAM) provides software as a service that makes it easier for large teams of software developers to manage projects, especially in software development.

Project Management Software

The future of work requires teams to collaborate across departments and remote offices. Project management software is both driving this change and benefiting from it. While the trend of collaborative work management has been strong for a while, the Covid pandemic has definitively accelerated the demand for tools that allow work to be done remotely.

Sales Growth

As you can see below, Atlassian's revenue growth has been strong over the last two years, growing from $688.5 million in Q2 FY2022 to $1.06 billion this quarter.

Atlassian Total Revenue

This quarter, Atlassian's quarterly revenue was once again up a very solid 21.5% year on year. On top of that, its revenue increased $82.34 million quarter on quarter, a very strong improvement from the $38.68 million increase in Q1 2024. This is a sign of re-acceleration of growth and great to see.

Next quarter's guidance suggests that Atlassian is expecting revenue to grow 19.6% year on year to $1.10 billion, slowing down from the 23.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 15.5% over the next 12 months before the earnings results announcement.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Atlassian's free cash flow came in at $284.3 million in Q2, up 94.1% year on year.

Atlassian Free Cash Flow

Atlassian has generated $1.07 billion in free cash flow over the last 12 months, an eye-popping 27.6% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.

Key Takeaways from Atlassian's Q2 Results

It was good to see Atlassian's strong revenue guidance for next quarter, which topped analysts' expectations. Full year guidance was also promising, with Cloud and Data Center revenue outlook raised. Higher growth is not hurting profits, as the outlook for full year non-GAAP operating margin was lifted as well. We were also glad its revenue outperformed Wall Street's estimates. Overall, we think this was a really good quarter that should please shareholders. The stock is up 10.8% after reporting and currently trades at $282.5 per share.

So should you invest in Atlassian right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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