Why Atlassian Stock Jumped to a 2-Year High Today

Shares of work management software company Atlassian (NASDAQ: TEAM) jumped to a two-year high on Friday after the company reported financial results for its fiscal second quarter of 2025. Investors seem to be particularly encouraged by some big contract wins in Q2. And this is why Atlassian stock was up a whopping 18% as of 10:30 a.m. ET.

Atlassian under-promised and over-delivered

Back in the first quarter, Atlassian's growth rate for deferred revenue accelerated, suggesting that it could have some revenue surprises in 2025. And that proved to be true in Q2. Management had guided for revenue of $1.241 billion, at most, for the quarter. But it surpassed this by actually generating revenue of $1.286 billion.

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Investors are encouraged by the manner in which Atlassian is outperforming expectations. Subscription customers spending at least $10,000 annually jumped 15% year over year. And the company had a record number of deals worth $1 million or more annually.

The strong underlying trends here led Atlassian's management to increase its full-year guidance for the second time. It raised its guidance in Q1. But with its Q2 report, it says it now expects full-year revenue growth of 18.5% to 19%, compared with its Q1 guidance of 16.5% to 17% growth.

Marching on to $10 billion

Atlassian attributes its outsized growth to its philosophy of heavy spending on research and development (R&D). Essentially, management believes it costs money to build great products but great products will attract new business. The chart below shows it usually spends over 40% of its revenue on R&D and can even spend over 50%.

TEAM Research and Development Expense (TTM) data by YCharts

For this reason, Atlassian isn't profitable. But many investors overlook this as long as the strategy pays off with growth.

Atlassian passed $5 billion in annualized subscription revenue in Q2 and is still eyeing $10 billion in the near future. At its current growth rate for cloud revenue, it will hit this target in under three years, which is something that will likely keep investors excited about this growth stock.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Atlassian. The Motley Fool has a disclosure policy.