Atlassian Raises Revenue Forecast Amid Strong Q2 Earnings
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 30 2025
0mins
Should l Buy TEAM?
Source: Benzinga
Atlassian Corp's stock fell 4.32% and hit a 52-week low amid broader market gains, with the Nasdaq-100 up 1.01% and the S&P 500 up 1.16%.
The company raised its fiscal 2026 revenue growth forecast to approximately 22%, up from 20.8%, reflecting strong demand for its enterprise software services. Despite reporting Q2 revenue of $1.59 billion, exceeding expectations, free cash flow fell by about 51%, which may impact investor confidence. The company achieved its first-ever quarter with over $1 billion in cloud revenue, growing 26% year-over-year, indicating strong market appeal.
While Atlassian's revenue growth and cloud performance are promising, the decline in free cash flow could raise concerns among investors. The company’s optimistic outlook for Q3 and fiscal 2026 suggests confidence in future growth, but the market's reaction to cash flow performance will be crucial.
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Analyst Views on TEAM
Wall Street analysts forecast TEAM stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for TEAM is 235.57 USD with a low forecast of 185.00 USD and a high forecast of 320.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
23 Analyst Rating
19 Buy
4 Hold
0 Sell
Strong Buy
Current: 98.410
Low
185.00
Averages
235.57
High
320.00
Current: 98.410
Low
185.00
Averages
235.57
High
320.00
About TEAM
Atlassian Corporation is a provider of team collaboration and productivity software. The Company specializes in software development, work management, and enterprise service management software, which enables enterprises to connect their business and technology teams with an artificial intelligence (AI)-powered system of work. Its interconnected portfolio of apps, AI agents, and Collections, each with discrete value propositions, delivers solutions for software teams, IT operations and support teams, leadership, and business teams. Its apps, agents, and Collections are all built on the Atlassian Cloud Platform and data model: a common technology foundation that connects teams, information, and workflows throughout an organization. Its apps include Jira, Confluence, Loom, Jira Service Management, Rovo, Bitbucket, Compass, Jira Product Discovery, Jira Align, Focus and Talent. It offers team collaboration products on its Data Center deployment option. It operates the Dia and Arc browsers.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Analyst Rating Maintained: Canaccord Genuity analyst David Hynes maintains a Buy rating on Atlassian (NASDAQ:TEAM) with a price target of $230, indicating confidence in the company's future growth despite current stock price declines due to sector-wide valuation compression.
- Revenue Growth Expectations: Hynes anticipates that Atlassian's fiscal Q2 revenue growth will exceed guidance, potentially enabling the company to raise its full-year cloud targets, thereby enhancing investor confidence in its long-term growth potential.
- Market Reaction Analysis: Despite recent price target cuts from several research firms, including UBS lowering its target from $185 to $145 and BofA from $200 to $170, Hynes believes the company's pricing strategies and product upgrades will improve revenue run rates.
- Competitive Landscape Consideration: While analysts remain optimistic about Atlassian's prospects, the article notes that certain AI stocks may offer greater upside potential and lower downside risk, reflecting changing market preferences for investments across different technology sectors.
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- Significant Revenue Growth: Atlassian reported Q2 revenue of $1.59 billion, surpassing analyst expectations of $1.54 billion, with a year-over-year increase of 23%, showcasing the company's robust performance in cloud services.
- Improved Profitability: Adjusted earnings per share reached $1.22, exceeding the analyst estimate of $1.14, while operating income hit $430.2 million, with an operating margin rising from 26% last year to 27%, reflecting effective cost control and efficiency improvements.
- Strong Cash Flow: The company generated $177.8 million in operating cash flow and $168.5 million in free cash flow during the quarter, ending with $1.6 billion in cash and cash equivalents, providing ample funding for future investments.
- Optimistic Outlook: Atlassian expects Q3 revenue to range between $1.689 billion and $1.697 billion, with cloud revenue projected to grow around 23%, and has raised its fiscal 2026 sales outlook to $6.362 billion, indicating strong confidence in future growth.
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