Atlassian's Cloud Strength, AI Momentum, and Impressive Enterprise Deals Please Analysts

After a strong quarterly performance, Wall Street analysts have raised their price targets and rerated Atlassian Corp (NASDAQ: TEAM). The company exceeded expectations, boosting optimism regarding its future potential.

• Patrick Walravens from JMP Securities maintained a Market Perform rating on Atlassian.
• Adam Tindle at Raymond James kept an Outperform rating and raised the price target from $250 to $330.
• Joel Fishbein of Truist Securities reiterated a Buy rating and lifted the price target from $300 to $350.
• Keybanc's Jason Celino confirmed his Overweight rating and upped the price target from $315 to $365.
• Thomas Blakey at Cantor Fitzgerald maintained a Neutral rating and increased the price target from $264 to $304.
• Scotiabank's Nick Altmann held steady with a Sector Perform rating while raising the price target from $250 to $330.

These adjustments come after Atlassian reported better-than-expected fiscal second-quarter 2025 results. The company achieved an adjusted earnings per share (EPS) of $0.96, exceeding the consensus estimate of $0.76, with total revenue reaching $1.286 billion, surpassing the expected $1.240 billion. This reflects a year-over-year growth of 21%, consistent with the previous quarter.

The strong cloud revenue of $847 million marked a remarkable 30% increase from the previous year, well above the initial guidance of 25.5%. Though it was slightly lower than the 31% growth from the last quarter, it still outperformed the consensus estimate of 26%.

In terms of Data Center revenue, the company recorded $362 million, which is a 32% year-over-year rise but is down from 38% last quarter. This performance also surpassed expectations, which called for a 28% increase.

Atlassian's billings were reported at $1.470 billion, also exceeding expectations and showcasing 21% year-over-year growth.

Looking ahead, Walravens projected a third-quarter revenue of $1.35 billion with an anticipated EPS of 88 cents.

Strong Growth in the Cloud and AI Adoption

Adam Tindle from Raymond James commented that Atlassian's strong quarterly results indicate resilient cloud growth. He suggested that revenue growth might ultimately trend towards the mid to high-20% range rather than the initial low-20% projections, highlighting the company's rising success in the Enterprise customer space.

Tindle, who expressed earlier concerns about Atlassian's AI strategy potentially raising customer acquisition costs, noted that the overall gross margins have been strong and operating leverage has improved during this transition. The introduction of paid AI features is seen as a significant step toward monetizing this technology, which could enhance Atlassian's valuation over time.

Looking ahead, he projected a third-quarter revenue of $1.35 billion and an EPS of 92 cents.

Positive Trends and Future Outlook

Truist's Joel Fishbein reflected on Atlassian's notable success in the small to medium-sized business (SMB) sector, indicating that the company has stabilized in areas that had previously posed challenges. He noted good traction in enterprise sales and new product offerings, suggesting the company is on solid footing for future growth.

Keybanc's Jason Celino also emphasized the robustness of the cloud and Data Center performance, driven by enterprise execution and paid seat expansions. He added that the positive trajectory of cloud guidance is impressive as well.

Cantor Fitzgerald's Thomas Blakey reiterated his positive stance after a strong earnings release, with solid enterprise growth driving cloud revenue significantly. His third-quarter projections align with the optimistic views expressed by various analysts.

Meanwhile, Scotiabank's Nick Altmann found that Atlassian's strong performance, particularly the 40% year-over-year growth in Premium and Enterprise subscriptions, reflects the increasing impact of new AI capabilities, a critical yet potentially undervalued aspect of their performance.

Market Response

Following the earnings report and the resulting analyst upgrades, Atlassian's stock rose 13.1%, currently standing at $310.95.

In summary, Atlassian is seeing strong momentum in both cloud and AI segments, alongside impressive enterprise deals, which are collectively fostering increased analyst confidence in the company's future performance.

Atlassian, Cloud, AI, Earnings, Analysts