Atlassian cuts loss in half as AI roll-out lifts quarterly revenue above US$1 billion

Sydney-headquartered productivity software provider Atlassian (NASDAQ: TEAM) has reported its first-ever US$1 billion revenue quarter after rolling out artificial intelligence (AI) capabilities for key collaboration software offerings, while operating losses were cut in half year-on-year to US$49.1 million.

The revenue result for the December quarter represents a 21 per cent lift year-on-year, while further growth is baked in as cloud annual recurring revenue (ARR) also hit the US$1 billion mark for Atlassian's flagship division Jira, a software development and collaboration tool.

Cloud revenue is projected to rise by an even faster growth rate of 30-32 per cent for the full fiscal year.

The latest quarterly result also shows a significant jump in the share of subscriptions out of total revenue, increasing from 81 per cent to 87 per cent of sales at US$932 million.

"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," says Atlassian’s co-founder and co-CEO Scott Farquhar.

"While we are extremely proud of our accomplishments, we remain laser-focused on executing against our top strategic priorities: cloud migrations, serving enterprise customers, ITSM (IT service management), and AI."

In the quarter Atlassian announced the availability of AI-powered Atlassian Intelligence for the premium enterprise editions of its Jira Software, Confluence, and Jira Service Management products, developed with 20 years worth of insights of how millions of teams work and interact.

These AI-powered features include gathering actionable insights from data through natural language querying in Jira Software, to text generation and summarisation in Confluence, which is a corporate 'wiki' developed by Atlassian for managing knowledge within an organisation.

The tech giant's other co-founder and co-CEO, Mike Cannon-Brookes, describes this first wave of Atlassian Intelligence capabilities as part of a "steady drumbeat" of innovation at the group.

"With over 20 years of experience and knowledge about how technical and non-technical teams plan, track, deliver, and collaborate, we are uniquely positioned to supercharge teams through the power of AI," he says.

"We officially welcomed Loom to the Atlassian family in Q2, and have been thrilled to see the team deliver on their ambitious AI vision with a slew of new features including an enhanced editing experience that makes updating a video as easy as editing a text document.

"The addition of async video to our toolbelt combined with its AI capabilities will help our customers collaborate in deeper and more meaningful ways."

In a letter to shareholders, the two CEOs compared the recent results to the US$100 million in quarterly revenue and 54,000 customers on the books when Atlassian listed on the Nasdaq in late 2015. At the time it had a valuation of US$5.8 billion, compared to US$65.8 billion today.

"As we turn up the pace of innovation across our platform, the rate at which customers are making the switch to the Atlassian cloud continues to pick up," the CEOs said.

"Today, we have more seats on Cloud than on Server and Data Center combined, with migrations to Cloud in Q2 increasing more than 2x year-on-year and beating our expectations across both Enterprise and SMB.

"The momentum we’re seeing into Q3 only strengthens our conviction in our long-term strategy. Our position is an enviable one: huge market opportunities, increasing commitment from customers in response to the drumbeat of innovation, a world-class team, and a unique position to combine over 20 years of insights with the immense power of AI."

The company also reported a net loss of US$84.5 million for the quarter, compared to US$205 million for the same period in 2022. Atlassian closed out the year with US$1.6 billion in cash and cash equivalents.

TEAM shares are down 9.18 per cent in after-hours trading, but in the five days leading up to the announcement they had already risen 5.19 per cent and in the past six months have surged by 50.21 per cent.