Enterprise collaboration solutions provider Atlassian (Nasdaq: TEAM) recently announced its second quarter results that surpassed market expectations. This was a milestone quarter for the company as it surpassed $1 billion in revenues for the first time.

Atlassian’s Financials

For the second quarter, revenues grew 21% to $1.06 billion, ahead of the market’s forecast of $1.02 billion. Adjusted EPS for the quarter of $0.73 was ahead of the market’s forecast of $0.62.

By segment, Subscription revenues came in at $932.2 million compared with $711.2 million a year ago. Maintenance revenues fell from $106 million to $69.1 million. Other revenues grew 6% to $58.8 million.

For the third quarter, Atlassian expects revenues of $1.085-$1.105 billion, compared with the Street’s estimate of $1.065 billion.

Atlassian’s AI Growth

Atlassian continued to move forward with its product enhancements. It recently announced the general availability of Atlassian Intelligence, which will bring AI capabilities to the Premium and Enterprise editions of Jira Software, Confluence, and Jira Service Management. The AI capabilities built into the product include features such as gathering actionable insights from data through natural language querying in Jira Software and text generation and summarization in Confluence to improve the efficiency of teams.

Virtual agents available to Jira Service Management customers allow IT and HR teams to provide an always-on conversational support at scale. An in-built AI engine analyzes intent, context, sentiment and profile information to personalize each interaction. The agent looks at internal sources, onboarding material, and published FAQ to generate answers to employee queries. It is also able to escalate the query to a human expert through built in assignment and routing capabilities. The agent ensures that the summary of the earlier interaction is provided in a way that there is a seamless transfer of the case to the expert.

Within the enterprise platform, Atlassian expanded its capabilities with several product upgrades that include the launch of Data Residency in Canada, Bring-Your-Own-Key encryption in Jira Software, HIPAA compliance availability in all paid plans of Jira Software, Confluence, and Jira Service Management, and enhanced API token controls for admins.

While Atlassian continues with its product upgrades, the market is concerned about its cloud growth. Atlassian is phasing out sales of on-premises software used in the data centers of corporate customers. For remaining data center customers, it has also included price hikes in contract renewals. But despite these efforts, last quarter, cloud revenues grew 27.5% and data center revenues grew 41%.

Excluding the Loom acquisition, cloud revenues would have grown a point slower. Five quarters ago, Atlassian was seeing cloud revenue growth of almost 50%. Atlassian is not concerned about the slow down. It expects its data center customers to migrate onto the cloud segment in the longer run.

Atlassian’s stock is trading at $205.43 with a market capitalization of $53.3 billion. It touched a 52-week high of $258.69 last month and a 52-week low of $128.02 in May last year.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

Photo Credit: mohamed Hassan from Pixabay