It has been about a month since the last earnings report for Atlassian (TEAM Quick QuoteTEAM - Free Report) . Shares have added about 4.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Atlassian due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Atlassian Tops Q2 Earnings & Revenue Estimates

Atlassian reported better-than-expected second-quarter fiscal 2021 results. The company’s non-IFRS earnings per share of 37 cents beat the Zacks Consensus Estimate of 31 cents. However, on a year-over-year basis, the bottom line remained flat as benefits of higher revenues were offset by elevated expenses.

Quarter in Detail

The company reported fiscal second-quarter revenues of $501.4 million, which surpassed the Zacks Consensus Estimate of $469.9 million. Moreover, quarterly revenues climbed 23% year on year, mainly on new client additions and increased pricing on certain products. During the reported quarter, Atlassian added a record 11,617 net new clients, bringing the total customer count to 194,334.

Segment wise, Subscription revenues jumped 35.8% year over year to $310.7 million. Sales from the Maintenance business increased 12.3% to $131.3 million, while Perpetual License business revenues declined 23.8% to $22.1 million. Other revenues climbed 9.3% year on year to $37.3 million.

The company’s non-IFRS gross profit increased 21.7% year over year to $434.1 million. Nonetheless, non-IFRS gross margin contracted 60 basis points (bps) to 86.6% during the fiscal second quarter.

Atlassian’s non-IFRS operating income was up 14.2% year over year to $143.2 million, while margin shrunk 210 bps to 28.6%.

The company ended the fiscal second quarter with cash and cash equivalents, and short-term investments of $1.79 billion, down from the $2.18 billion recorded at the end of fiscal first quarter. During the reported quarter, the company generated operating and free cash flow of $200.5 million and $179.8 million, respectively. In the first half of fiscal 2021, it generated operating and free cash flow of $279.9 million and $240.3 million, respectively.

Outlook

For third-quarter fiscal 2021, the company anticipates revenues between $475 million $490 million (mid-point $482.5 million), suggesting year-over-year growth of 15-19%.

Non-IFRS gross margin is anticipated to be approximately 84%. Non-IFRS operating margin is projected to be around 16%. The company expects to report non-IFRS earnings per share in the 20-21 cents band.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -324.43% due to these changes.

VGM Scores

At this time, Atlassian has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Atlassian has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.