0001650372-25-000068
SEC filingCloud subscription growth of 26% and margin expansion drove 21% revenue growth despite restructuring drag on GAAP profitability.
Total revenue for Q1 FY26 rose $244.8M (21%) to $1.433B, with subscription revenue contributing $242.6M of the growth (21% YoY to $1.375B). Over 90% of revenue came from existing customer accounts as of June 30, 2025, highlighting strong retention and expansion. Cloud subscription revenue surged 26% to $997.7M, driven by paid seat expansion and price increases, while Data Center grew 11% to $372.6M. Other revenue (marketplace and services) grew 4% to $58.1M.
Gross margin held flat at 82% as cost of revenue rose 19% to $257.9M, reflecting $31.6M in restructuring charges and a $14.4M increase in cloud hosting fees. GAAP operating loss widened to $96.3M (operating margin of -7%) from $32.0M (-3%), largely due to $55.7M in total restructuring charges (severance, stock-based compensation, and lease impairments). Non-GAAP operating income increased to $322.7M (23% margin, flat YoY), excluding $349.7M in stock-based comp, $13.7M in amortization, and restructuring. Net GAAP loss narrowed to $51.9M (-$0.20 per diluted share) from $123.8M (-$0.48) as a $98.1M swing in income tax benefit (from $93.6M expense to $4.5M benefit) offset operational deterioration.
Free cash flow improved to $114.6M from $74.3M, driven by stronger customer collections.
Cloud remains the primary growth engine, generating 70% of total revenue and accelerating 26% YoY. The company added 1,039 customers with >$10K in Cloud ARR during the quarter (total 53,017), confirming expansion within the base. Management cited the September 2025 announcement to end-of-life the Data Center offering, which will stop new sales in March 2026 and maintenance by March 2029, signaling an intentional shift to Cloud. Data Center still grew 11%, likely driven by existing customers adding term licenses before the sunset, but this segment will eventually decline. Marketplace and other revenue grew modestly at 4%.
Geographically, the Americas and EMEA each grew 21%, while Asia Pacific grew 20%, indicating balanced global demand.
Management did not provide quantitative guidance for upcoming periods. However, they reiterated expectations for subscription revenue (especially Cloud) to remain the primary growth driver and for gross margin to be approximately flat as Cloud infrastructure optimization offsets the mix shift from Data Center to Cloud. The Data Center end-of-life plan suggests a strategic pivot toward higher-margin, recurring Cloud subscriptions, though near-term gross margin may benefit from temporary Data Center license pull-forwards.
Restructuring actions (headcount reduction and lease exits) are expected to be substantially completed by December 31, 2025, reducing future fixed costs. The company’s liquidity position remains strong with $2.3B cash, $456M marketable securities, and a $750M undrawn credit facility, supporting upcoming acquisitions—$610M for The Browser Company (post-quarter close) and a planned ~$1.0B acquisition of DX (expected Q2 FY26 close).
No explicit revenue or margin guidance was provided for Q2 FY27 or FY26.
As of September 30, 2025, Atlassian reported cash and cash equivalents of $2.32B and marketable securities of $456M, totaling $2.78B in liquid assets. Total debt stood at $988M (net of unamortized discount) from $1.0B aggregate principal of senior notes due 2029 and 2034. Stockholders' equity was $1.38B, with an accumulated deficit of $4.54B.
Noncancellable purchase obligations for cloud services, marketing, and other services exist but are not quantified in the interim filing. Remaining performance obligations (RPO) were $3.3B, of which 74% is expected to be recognized within 12 months, with the balance thereafter.
During Q1 FY2026, Atlassian repurchased 1.4M shares for $249.9M (average price $180.74), leaving $921.3M remaining under the $1.5B 2024 Repurchase Program. Subsequently, in October 2025, the Board authorized an additional $2.5B buyback program. No dividends were paid. Debt activity was limited to routine amortization of discount; the $750M revolving credit facility remained undrawn. Capital expenditures totaled $14.1M (1.0% of revenue).
Atlassian operates as a single reportable segment. Revenue disaggregation in Note 12 shows Cloud revenue of $997.7M (70% of total), Data Center $372.6M (26%), and Marketplace/other $62.2M. Geographically, Americas contributed $705.8M (49%), EMEA $566.1M (40%), and Asia Pacific $160.7M (11%).