0001650372-26-000011
SEC filingRevenue grew 23% YoY driven by Cloud seat expansion; GAAP net loss widened to $42.6M, but non-GAAP operating margin improved to 27%.
For the second quarter of fiscal 2026, total revenue increased 23% year-over-year to $1.586 billion, driven primarily by subscription revenue growth of 24% (to $1.508 billion) from seat expansion and price increases. Gross margin improved 200 bps to 85%, benefiting from Cloud infrastructure optimization and support cost leverage. However, GAAP net loss widened to $42.6 million from $38.2 million as operating expenses rose 25% – notably marketing and sales expenses grew 38% due to higher compensation and advertising. Non-GAAP operating income reached $430.2 million (27% margin, up 100 bps) as stock-based compensation and amortization were excluded. Free cash flow fell 51% to $168.5 million, reflecting increased cash outflows for employees and taxes.
Cloud revenue accelerated 26% YoY to $1.067 billion, now 67% of total revenue, as the company successfully expands within its base through seat growth and product attach. Data Center revenue grew 20% to $435.6 million, though management announced plans to end-of-life the offering (no new term licenses after March 2026, maintenance ending March 2029). This strategic shift will pressure Data Center revenue in future periods but reinforces the Cloud-first strategy. Marketplace and other revenue increased 8% to $83.7 million. Geographically, EMEA led with 26% growth, followed by Asia Pacific at 25% and the Americas at 21%.
No quantitative guidance was provided. Management highlighted the acquisitions of BCNY (enterprise browser) and DX (engineering intelligence) as enhancing Collections and AI capabilities. The restructuring (elimination of roles, lease exits) signals a focus on operational efficiency. The Data Center end-of-life will begin to impact revenue in fiscal 2027 as customers migrate to Cloud. Free cash flow is expected to remain under pressure from compensation and tax payments, but non-GAAP margins should benefit from Cloud scale and cost actions.
Atlassian’s balance sheet as of December 31, 2025 shows cash and cash equivalents of $1.16B, down sharply from $2.51B at June 30, 2025, driven by $1.2B in acquisition-related cash outflows (primarily The Browser Company and DX). Marketable securities were $407.9M, slightly lower than $424.3M at year-end. Total debt stood at $988.6M (net of unamortized discount and issuance costs), consisting of $500M 5.250% senior notes due 2029 and $500M 5.500% senior notes due 2034. The company had no borrowings under its $750M revolving credit facility. Stockholders’ equity increased to $1.59B from $1.35B, aided by $803.8M in stock-based compensation partially offset by $450.4M in share repurchases and a $94.5M net loss.
The Notes disclose non-cancellable purchase obligations for cloud services, marketing, and other services that expire within two to seven years, but do not provide an aggregate dollar amount. Operating lease right-of-use assets were $126.5M (down from $169.1M) after a $25.2M impairment charge related to facilities consolidation. The company also recorded $27.9M in severance and other termination benefits as part of restructuring. No material litigation contingencies were accrued.
Atlassian repurchased 2.7 million shares for $450.3M during the six months ended December 31, 2025, at an average price of $169.21. As of period end, $720.9M remained under the 2024 repurchase program and $2.5B under a newly authorized 2025 program (announced October 2025). No dividends were paid. Capital expenditures were $23.4M (0.78% of revenue). Debt remained essentially unchanged; the company issued no new debt and made no repayments beyond scheduled interest.
Atlassian operates as a single operating and reportable segment. The CODM uses consolidated net loss to allocate resources. Revenue by deployment: Cloud $2.06B (68.4% of total), Data Center $808.3M (26.8%), Marketplace and other $145.9M (4.8%). Geographically, the Americas contributed $1.45B (48.1%), EMEA $1.23B (40.7%), and Asia Pacific $337.4M (11.2%). No customer exceeded 10% of revenue or receivables.