Atlassian Corp Q1 FY2025 earnings call

• FY25 started well with Team24 Europe event showcasing customer use of Atlassian products. • AI plays a pivotal role with two-pronged strategy: Atlassian Intelligence threaded in existing products and Rovo as a separate AI-powered product. • Product innovations include Jira Product Discovery Premium, Compass Premium, Guard Premium, and Atlassian Focus. • Customers are increasingly adopting cloud offerings, and the system of work philosophy is resonating. • SMB customer segment shows stability, and enterprise trends are healthy with solid results on annual and multi-year deals, migrations, and upsell to premium editions.

• Rovo revenue will be included in cloud, with guidance assuming a modest level of Rovo revenue in FY25. • Data center migrations are expected to make a mid-to-high single-digit contribution to cloud revenue growth rates over the next three years. • Guidance is conservative due to macroeconomic uncertainty and execution risks related to the evolution of the enterprise go-to-market motion.

• Macro-economic uncertainties that can impact business, such as internal macro environments affecting migration projects. • Execution risks related to the transformation of the enterprise go-to-market motion, including longer sales cycles for complex deals.

Q: Kash Rangan asked about proof-points of AI product releases and if AI could have the opposite effect of taking away jobs.

A: Mike Cannon-Brookes said Atlassian Intelligence usage has increased over 10 times, customers see time savings and faster business movement, and AI enables human creativity, with no seat cannibalization seen.

Q: Keith Weiss inquired about how much cloud outperformance is due to market stabilization vs. cloud platform enabling upsell/cross-sell.

A: Joe Binz said it benefited from stable macro environment, SMB stability, and solid enterprise results; Mike Cannon-Brookes added focus on system of work, AI, and long-term growth.

Q: Adam Tindle asked about the pivot to Rovo and Rovo pricing, and if Rovo is in cloud.

A: Mike Cannon-Brookes discussed two-pronged AI strategy, Rovo built for AI era with strong customer feedback; Joe Binz said Rovo revenue will be in cloud and guidance assumes modest Rovo revenue in FY25.

Q: Alex Zukin asked about cloud revenue beat drivers.

A: Joe Binz said it was due to better-than-expected paid seat expansion and migrations; Mike Cannon-Brookes added good sales execution and business health.

Q: Michael Turrin asked about Atlassian's AI differentiation and Rovo.

A: Mike Cannon-Brookes talked about Atlassian's strong R&D, Teamwork Graph, and differentiated Rovo with customer delight.

Q: Fatima Boolani asked about consumption pricing strategy.

A: Mike Cannon-Brookes discussed defensive and customer-driven consumption pricing; Joe Binz said consumption pricing has a modest presence in guidance with conservative modeling.

Q: Gregg Moskowitz asked about R&D innovation.

A: Mike Cannon-Brookes talked about R&D focus, cloud platform enabling faster product building, and continued investment.

Q: Keith Bachman asked about JSM competitive dynamics.

A: Mike Cannon-Brookes discussed JSM strengths, AI impact, and strong competitive position.

Q: Ryan MacWilliams asked about data center migration timing.

A: Mike Cannon-Brookes and Joe Binz talked about migration timing as a multiyear journey, with mid-to-high single-digit contribution to cloud growth expected.

Q: Brent Thill asked about macro factors and guidance.

A: Joe Binz said guidance is conservative due to macro uncertainty and enterprise go-to-market evolution.

Q: Jason Celino asked about deal timing and enterprise sales.

A: Joe Binz and Mike Cannon-Brookes talked about complex sales cycles and long-term approach to deals.