Atlassian's Cloud Growth and AI Adoption Impress Analysts

Atlassian Corp (NYSE:TEAM) saw a significant uptick in its stock price as Wall Street analysts reacted positively to the company's latest quarterly report. Many analysts raised their price targets for Atlassian's stock following its strong performance.

• JMP Securities analyst Patrick Walravens maintained a Market Perform rating for Atlassian.
• Raymond James analyst Adam Tindle upgraded Atlassian to Outperform, raising the price target from $250 to $330.
• Truist Securities analyst Joel Fishbein reiterated a Buy rating, increasing the price target from $300 to $350.
• Keybanc analyst Jason Celino upheld an Overweight rating, with the price target rising from $315 to $365.
• Cantor Fitzgerald analyst Thomas Blakey kept a Neutral stance but raised the price target from $264 to $304.
• Scotiabank analyst Nick Altmann maintained a Sector Perform rating and increased the price target from $250 to $330.

Strong Quarterly Results

The positive reviews followed Atlassian's solid fiscal second-quarter 2025 results, which surpassed analyst expectations. The company reported an adjusted earnings per share (EPS) of $0.96, exceeding the consensus estimate of $0.76. Total revenue came in at $1.286 billion, which was also above the expected $1.240 billion, marking a year-over-year growth of 21%.

Cloud revenue reached $847 million, a 30% increase from the previous year, and significantly exceeded guidance of 25.5%. Although this was a slight decrease from 31% in the last quarter, it surpassed the consensus of 26%.

Data Center revenue was reported at $362 million, up 32% from the previous year, beating the expected 28% growth, despite a decline from 38% last quarter.

Billings grew to $1.470 billion, also exceeding expectations, representing a 21% year-over-year increase.

Walravens projected third-quarter revenue figures of $1.35 billion and an EPS of 88 cents.

Enterprise and AI Growth

Analyst Adam Tindle from Raymond James emphasized the continued strong performance of Atlassian in the Cloud sector, suggesting that growth could end up being higher than initially guided. The company has successfully engaged with 85% of Fortune 500 companies, expanding its footprint in a $14 billion market opportunity.

Moreover, the growing user base for Atlassian’s AI functionalities, including over 1 million active users on the Rovo platform, indicates momentum in AI adoption. Analysts noted that while the costs for customer acquisition could rise, Atlassian appears to be managing its gross margins effectively during this growth phase.

Tindle added that the introduction of paid options for AI features is likely to enhance monetization, contributing positively to Atlassian's valuation.

Fishbein from Truist Securities noted signs of stabilization in the small-to-medium business (SMB) sectors, which had previously posed challenges, and highlighted positive developments in enterprise sales.

Keybanc's analyst, Celino, recognized the impressive increase in guidance for Cloud services and pointed out that the company is poised for substantial growth, especially with upcoming product releases.

Cantor Fitzgerald's Blakey noted that strong enterprise performance and pricing strategies contributed significantly to the Cloud revenue growth as well.

Scotiabank's Altmann was encouraged by Atlassian's performance in the software market, particularly in Cloud interactions and emerging AI capabilities, which could lead to even more significant growth and investor confidence.

Market Reaction

Following all these developments, Atlassian's stock experienced a boost, rising 13.1% to reach $310.95, reflecting the optimism surrounding the company's potential for growth in the cloud and AI sectors.

Atlassian, Cloud, AI