What changed in this filing

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Item 1A. Risk Factors

2025-01-31 compared with 2024-11-01 · 113 added, 95 removed, 736 unchanged (22% of the section changed)

32 unchanged sentences

This rapid growth also makes it more challenging to evaluate our future prospects.

Our revenue growth rate has fluctuated in prior periods and, in future periods, our revenue could grow more slowly than it has in the past or decline for a number of reasons, including any reduction in demand for our products, increase in competition, limitations on our ability to, or any decision not to, increase pricing, slower than anticipated adoption of or migration to our Cloud offerings, failure to capitalize on growth opportunities, contraction in our overall market, or impact from broader macroeconomic factors.

increase in competition;

challenges relating to collecting accounts receivable or collection periods;

limitations on our ability to, or any decision not to, increase pricing, slower than anticipated adoption of or migration to our Cloud offerings;

failure to capitalize on growth opportunities;

contraction in our overall market;

or impact from broader macroeconomic factors.

Additionally, we ceased sales of new perpetual license Server offerings for our products in February 2021, and, subject to limited exceptions, ended maintenance and support for Server products in February 2024.

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Our business depends on demand for business software applications generally and for collaboration software solutions in particular.

The market adoption of our products and our revenue is dependent on the number of users of our products.

The market adoption of our products and our revenue is dependent on the number of users of

our products.

The continuing global economic and geopolitical volatility and uncertainty has and may continue to cause us and our customers to experience decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity, and limits on our ability to access credit or otherwise raise capital.

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In particular, we have revenue exposure to customers who are small- and medium-sized businesses.

If these customers’ business operations and finances are negatively affected, they may not purchase or renew our products, may reduce or delay spending, or request extended payment terms or price concessions, which would negatively

impact our business, results of operations, and financial condition.

For example, rising interest rates and uncertain economic conditions contributed to the failures of banking institutions, such as Silicon Valley Bank and First Republic Bank, in 2023.

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The extent to which global economic and geopolitical factors ultimately impact our business, results of operations, and financial position will depend on future developments, which are uncertain and cannot be fully predicted at this time.

As a result of recent events, we have seen the revenue growth from existing customers moderate and experienced volatility in the trading prices for our Class A Common Stock, and such volatility may continue in the long term.

As a result of recent events, we saw the revenue growth from existing customers moderate and experienced volatility in the trading prices for our Class A Common Stock, and such volatility may continue in the long term.

Any sustained adverse impacts from these and other recent macroeconomic events could materially and adversely affect our business, financial condition, operating results, and earnings guidance that we may issue from time to time, which could have a material effect on the value of our Class A Common Stock.

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Pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of our products to achieve or maintain more widespread market acceptance, any of which could harm our business, results of operations and financial condition.

Additionally, some current and potential customers, particularly large organizations, have elected, and may in the future elect, to develop or acquire their own internal collaboration and productivity software tools that would reduce or eliminate the demand for our solutions.

Additionally, some current and potential customers, particularly large

organizations, have elected, and may in the future elect, to develop or acquire their own internal collaboration and productivity software tools that would reduce or eliminate the demand for our solutions.

Our products seek to serve multiple markets, and we are subject to competition from a wide and varied field of competitors.

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Our quarterly financial results have fluctuated in the past and may fluctuate in the future as a result of a variety of factors, many of which are outside of our control.

If our quarterly financial results fall below the

expectations of investors or any securities analysts who follow us, the price of our Class A Common Stock could decline substantially.

If our quarterly financial results fall below the expectations of investors or any securities analysts who follow us, the price of our Class A Common Stock could decline substantially.

Factors that may cause our revenue, results of operations and cash flows to fluctuate from quarter to quarter include, but are not limited to:

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• the timing of customer renewals;

• challenges in collecting outstanding accounts receivable balances;

• changes in our or our competitors’ pricing policies and offerings;

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• extraordinary expenses such as litigation, tax settlements, adverse audit rulings or other dispute-related settlement payments;

• general economic conditions, including any inflationary pressures and interest rate changes, that may adversely affect either our customers’ ability or willingness to purchase additional licenses, subscriptions, delay a prospective customer’s purchasing decisions, reduce the value of new license or subscription, or affect customer retention;

• general economic conditions, including inflationary pressures and interest rate policy, that may adversely affect either our customers’ ability or willingness to purchase additional licenses, subscriptions, delay a prospective customer’s purchasing decisions, reduce the value of new license or subscription, or affect customer retention;

• the impact of U.S.

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There can be no assurance that the use of AI and machine learning solutions, products and features will enhance our products or services, produce intended results, or be beneficial to our business, including our efficiency or profitability, and we may fail to properly implement or market our AI and machine learning solutions, products and features.

investments in AI solutions, products and features have and may continue to negatively impact our operating margins until we are able to increase revenue enough to offset these investments.

Our investments in AI solutions, products, and features have and may continue to negatively impact our operating margins until we are able to increase revenue enough to offset these investments.

Our competitors or other third parties may incorporate AI into their products, offerings, and solutions more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.

In addition, suppliers of the third-party AI models we use in our products and platform could terminate their relationship with us, cease to make certain models available to us, or make certain models more expensive for us to use.

In addition, suppliers of the third-party AI models we use in our products and platform could terminate their relationship with us, be prohibited from offering certain models in jurisdictions where we operate or otherwise cease to make certain models available to us, or make certain models more expensive for us to use.

Our ability to effectively implement and market our AI products, solutions and features will also depend, in part, on our ability to attract and retain employees with AI expertise, and we expect significant competition for professionals with such skills and technical knowledge.

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Further, inappropriate or controversial data practices by developers and end-users, or other factors adversely affecting public opinion regarding the use of AI and machine learning, could impair the acceptance of AI and machine learning solutions, including those incorporated into our products and services.

If the AI and machine learning tools incorporated into our products and platform, or the content generated by such tools, is harmful, biased, inaccurate, discriminatory or controversial, our results of operations could suffer, including due to legal, competitive and reputational harm.

If the AI and machine learning tools incorporated into our products and platform, or the content generated by such tools, is harmful, biased, inaccurate, defamatory, discriminatory or controversial, our results of operations could suffer, including due to legal, competitive and reputational harm.

Our customers may be less likely to utilize our AI and machine learning tools or may cease using our products or platform altogether.

If we do not have sufficient rights to use the output of such AI and machine learning tools, or the data or other material or content on which the AI and machine learning tools we use rely, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, privacy or other rights, or contracts to which we are a party.

If we do not have sufficient rights to use the output of such AI and machine learning tools, or the data or other material or content on which the AI and machine learning tools we use rely, we also may incur liability through the violation of applicable laws and regulations, third-party intellectual property, privacy, rights of publicity, or other rights, or contracts to which we are a party.

In addition, we are subject to the risks of new or enhanced governmental or regulatory scrutiny, litigation, or other legal liability, ethical concerns, negative consumer perceptions as to automation and AI and machine learning technologies, any of which could adversely affect our business, reputation, or financial results.

The technologies underlying AI and machine learning and their uses are subject to a variety of laws and regulations related to online services, intermediary liability, intellectual property rights, privacy, data security and data protection, consumer protection, competition and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations.

AI and machine learning technologies are the subject of ongoing review by various federal, state and foreign governments and regulators, which are applying, or are considering applying, their platform moderation, privacy, data security and data protection laws and regulations to such technologies or are implementing, or are considering implementing, general legal frameworks for the appropriate use of AI and machine learning.

The technologies underlying AI and machine learning and their uses are subject to a variety of laws and regulations related to online services, intermediary liability, intellectual property rights, privacy, rights of publicity, data security and data protection, consumer protection, competition and equal opportunity laws, and are expected to be subject to increased regulation and new laws or new applications of existing laws and regulations.

AI and machine learning technologies are the subject of ongoing review by various federal, state and foreign governments and regulators, which are applying, or are considering applying, their platform moderation, privacy, rights of publicity, data security and data protection laws and regulations to such technologies or are implementing, or are considering implementing, general legal frameworks for the appropriate use of AI and machine learning.

As the legal, regulatory, and policy environments around AI and machine learning evolve, we may become subject to new legal and regulatory obligations in connection with our use of AI and machine learning technology, which could require us to make significant changes to our policies and practices, necessitating expenditure of significant time, expense, and other resources.

We may not be able to anticipate how to respond to rapidly evolving legal frameworks, and we may have to expend resources to adjust our offerings in certain jurisdictions if the legal frameworks on AI and machine learning products are not consistent across jurisdictions.

We may not be able to anticipate how to respond to rapidly evolving legal frameworks, and we may

have to expend resources to adjust our offerings in certain jurisdictions if the legal frameworks on AI and machine learning products are not consistent across jurisdictions.

Accordingly, it is not possible to predict all of the risks related to the use of AI and machine learning technologies that we may face, and changes in laws, rules, directives, and regulations governing the use of AI and machine learning technologies may adversely affect our ability to use or sell these technologies or subject us to legal liability.

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Although a substantial majority of our revenue was historically generated from customers using our Server and Data Center products, over time our customers have moved and we expect them to continue to move to our Cloud offerings, resulting in our Cloud offerings becoming more central to our distribution model.

As a part of this transition, we ceased sales of new

perpetual licenses for our Server products in February 2021 and, subject to limited exceptions, ended maintenance and support for Server products in February 2024.

As a part of this transition, we ceased sales of new perpetual licenses for our Server products in February 2021 and, subject to limited exceptions, ended maintenance and support for Server products in February 2024.

We may be subject to additional competitive and pricing pressures for our Cloud offerings compared to our Data Center offerings, which could harm our business.

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These are all uncertain and we cannot predict the consequences, effects, or introduction of new, disruptive, emerging technologies or the manner and pace at which our markets develop over time, and our ability to compete in these markets depends on predicting and adapting to these changing circumstances.

The success of our business will depend, in part, on our

ability to adapt and respond effectively to these changes on a timely basis, and anticipating these factors requires that we allocate significant resources without any guarantee that any such investments and efforts will result in initial or enhanced adoption of our products in the marketplace.

The success of our business will depend, in part, on our ability to adapt and respond effectively to these changes on a timely basis, and anticipating these factors requires that we allocate significant resources without any guarantee that any such investments and efforts will result in initial or enhanced adoption of our products in the marketplace.

For example, with the development of next-generation solutions that utilize new and advanced features, including AI and machine learning, we have and expect to continue to commit significant resources to developing new products and enhancements incorporating AI and machine learning, and there is no guarantee that our investments and efforts will result in wider adoption of our products in the marketplace.

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If we fail to successfully manage our anticipated growth and change, the quality of our products may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers.

Finally, our organizational structure is becoming more complex and if we fail to scale and adapt our operational, financial, and management controls and systems, as well as our reporting systems and procedures, to manage this complexity, our business, results of operations, and financial condition

could be harmed.

We will require significant capital expenditures and the allocation of management resources to grow and change in these areas.

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For example, we offer entry-level or free pricing for certain products for small teams at a price that typically does not require capital budget approval and is orders-of-magnitude less than the price of traditional enterprise software.

As a result, our software is frequently purchased by first-time customers to solve specific problems and not as part of a strategic technology purchasing decision.

As a result, our software is frequently purchased by first-time customers to solve

specific problems and not as part of a strategic technology purchasing decision.

We have historically increased, and will continue to increase, prices from time to time.

As competitors enter the market with low cost or free alternatives to our products, it may become increasingly difficult for us to compete effectively and our ability to garner new customers could be harmed.

Additionally, some customers may consider our products to be discretionary purchases, which may contribute to reduced demand for our offerings in times of economic uncertainty, inflation and interest rate increases.

Additionally, some customers may consider our products to be discretionary purchases, which can contribute to reduced demand for our offerings in times of economic uncertainty, inflation and interest rate increases.

If we are unable to sell our software in high volume, across new and existing customers, our business, results of operations and financial condition could be harmed.

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As our sales force develops, we may encounter challenges in identifying, recruiting, training, and retaining a qualified sales force, and we expect this growth to require significant time, expense, and attention.

Expanding our sales infrastructure also has impacts on our cost structure and results of operations, and we may have to reduce other expenses, such as our research and development expenses, in order to accommodate a corresponding increase in marketing and sales expenses and maintain positive free cash flow.

As our sales teams grow, we may face increased costs, longer sales cycles, greater competition, and less predictability in completing our sales.

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Due to these factors, we often must devote greater sales support to certain enterprise customers, which increases our costs and time required, without assurance that potential customers will ultimately purchase our solutions.

We also may be required to devote more services resources to implementation, which increases our costs, without assurance that customers receiving these services will renew or renew at the same level.

We also may be required to devote more resources to implementation, which increases our costs, without assurance that customers receiving these services will renew or renew at the same level.

Since the sales cycles for our enterprise offerings are multi-phased and complex, it is often unpredictable when a given sales cycle will close.

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As a result, a significant portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to subscription plans entered into during previous quarters.

Consequently, a decline in new or renewed licenses and subscriptions in any single quarter may only have a small impact on our revenue results for that quarter.

Consequently, a decline in new or renewed licenses and subscriptions or any challenges relating to accounts receivable collections or collection periods in any single quarter may only have a small impact on our revenue results for that quarter.

However, such a decline will negatively affect our revenue in future quarters.

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We may also be unable to reduce our cost structure in line with a significant deterioration in sales.

In addition, a significant majority of our costs are expensed as incurred, while a significant portion of our revenue is recognized over the life of the agreement with our customer.

In addition, a significant majority

of our costs are expensed as incurred, while a significant portion of our revenue is recognized over the life of the agreement with our customer.

As a result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier periods of the terms of certain of our customer agreements.

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If we do not continue to add new vendors and developers, are unable to sufficiently grow the number of cloud apps our customers demand, or our existing vendors and developers stop developing or supporting the apps that they sell on the Atlassian Marketplace, our business could be harmed.

In addition, third-party apps on the Atlassian Marketplace may not meet the same quality standards that we apply to our own development efforts and, in the past, third-party apps have caused disruptions affecting multiple

To the extent these apps contain bugs, vulnerabilities, or defects, such apps have in the past and may in the future create disruptions in our customers’ use of our products, lead to data loss or unauthorized access to customer data, damage our brand and reputation, and affect the continued use of our products, which could harm our business, results of operations and financial condition.

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If we are unable to provide efficient product support globally at scale, including through the use of third-party vendors and self-service support, our ability to grow our operations could be harmed and we may need to hire additional support personnel, which could harm our results of operations.

For example, in April 2022, a subset of our customers experienced a full outage across their Atlassian Cloud products due to a faulty script used during a maintenance procedure.

While we restored access for these customers with minimal to no data loss, these affected customers experienced disruptions in using our Cloud products during the outage.

Certain of our customers have in the past experienced outages across their use of our products and it is possible that similar incidents may occur in the future.

Our sales are highly dependent on our business reputation and on positive recommendations from our existing customers.

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For fiscal year 2024, we derived over 50% of our revenue from channel partners’ sales efforts.

As of December 31, 2024, one solution partner represented more than 10% of our total accounts receivables.

Successfully managing our indirect channel distribution efforts is a complex process across the broad range of geographies where we do business or plan to do business.

Our solution partners are independent businesses we do not control.

If any solution partners fail to pay us under the terms of our agreements, including any delays in payment, or we are otherwise unable to collect on our accounts receivable from these solution partners, we may be adversely affected both from the inability to collect amounts due

and the cost of enforcing the terms of our contracts, including litigation.

Additionally, our solution partners are independent businesses we do not control.

Notwithstanding this independence, we still face legal risk and reputational harm from the activities of our solution partners including, but not limited to, export control violations, workplace conditions, corruption, and anti-competitive behavior.

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We believe that maintaining and enhancing our reputation as a differentiated and category-defining company is critical to our relationships with our existing customers and to our ability to attract new customers.

The successful promotion of our brand attributes will depend on a number of factors, including our and our solution partners’

marketing efforts, our ability to continue to develop high-quality products, our ability to minimize and respond to errors, failures, outages, vulnerabilities, or bugs, and our ability to successfully differentiate our products from competitive products.

The successful promotion of our brand attributes will depend on a number of factors, including our and our solution partners’ marketing efforts, our ability to continue to develop high-quality products, our ability to minimize and respond to errors, failures, outages, vulnerabilities, or bugs, and our ability to successfully differentiate our products from competitive products.

In addition, independent industry analysts often provide analyses of our products, as well as the products offered by our competitors, and perception of the relative value of our products in the marketplace may be significantly influenced by these analyses.

If these analyses are negative, or less positive as compared to those of our competitors’ products, our brand may be harmed.

The promotion of our brand requires us to make substantial expenditures, and we anticipate that the expenditures will increase as our market becomes more competitive, as we expand into new markets, and as more sales are generated through our solution partners.

Our reputation could also be adversely impacted by, among other things, any failure or perceived failure in our social and environmental practices, public pressure from investors or policy groups to change our policies, or customer perceptions of our marketing efforts, sponsorship arrangements, social media or any statements made by us, our executives and employees, agents or other third parties.

Our sponsorship relationships and partnerships may also subject us to negative publicity as result of any actual or alleged conduct by, or consumers’ perceptions of, our partners or individuals and entities associated with such organizations, which could have an adverse effect on our reputation and brand.

Our sponsorship relationships and partnerships and the general promotion of our brand requires us to make substantial expenditures.

We anticipate that these expenditures will increase as our market becomes more competitive, as we expand into new markets, and as more sales are generated through our solution partners.

To the extent that these activities yield increased revenue, this revenue may not offset the increased expenses we incur.

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We have completed a number of acquisitions and strategic investments and continue to evaluate and consider additional strategic transactions, including acquisitions of, or investments in, businesses, technologies, services, products, and other assets in the future.

For example, in fiscal year 2024, we acquired Loom, Inc., an

asynchronous video messaging platform that helps users communicate through instantly shareable videos.

For example, in fiscal year 2024, we acquired Loom, Inc., an asynchronous video messaging platform that helps users communicate through instantly shareable videos.

We also from time to time enter into strategic relationships with other businesses to expand our products, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other companies.

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Our errors and omissions insurance covering certain security and privacy damages and claim expenses may not be sufficient to compensate for all liabilities we may incur.

Although we expend significant resources to create security protections that shield our customer data against potential theft and security breaches, the techniques used to obtain unauthorized access to systems or sabotage systems, or disable or degrade services, change frequently and are often unrecognizable until launched against a

target, and therefore such measures cannot provide absolute security.

We have in the past experienced breaches of our security measures and other inappropriate access to our systems.

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Data security breaches could also expose us to liability under various laws and regulations across jurisdictions and increase the risk of litigation and governmental or regulatory investigation.

Due to concerns about data security and integrity, a growing number of legislative and regulatory bodies have adopted breach notification and other requirements in the event that information subject to such laws is accessed by unauthorized persons and additional regulations regarding security of such data are possible.

We may need to notify governmental authorities and affected individuals with respect to such incidents.

Due to concerns about data security and integrity, a growing number of legislative and regulatory bodies have adopted breach notification and other requirements in the event that information subject to such laws is disclosed without authorization, accessed by unauthorized persons, lost or deleted, or otherwise impacted by a security breach.

There may be additional regulations regarding security of such data in the future.

Additionally, we may need to notify customers, governmental authorities and/or other affected individuals with respect to such incidents.

For example, laws in the EU and UK and all 50 U.S.

states may require businesses to provide notice to individuals whose personal information has been disclosed as a result of a data security breach.

states may require businesses to provide notice to customers, governmental authorities, and/or other individuals whose personal information has been impacted by a data security breach.

Complying with such numerous and complex regulations in the event of a data security breach would be expensive and difficult, and failure to comply with these regulations could subject us to regulatory scrutiny and additional liability.

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In addition, we rely almost exclusively on our websites for the downloading of, and payment for, all our products.

We have experienced, and may in the future experience, disruptions, data loss and corruption, outages and other performance problems with our infrastructure and websites due to a variety of factors, including infrastructure changes, introductions of new functionality, human

or software errors, capacity constraints, denial of service attacks, or other security-related incidents.

In some instances, we have not been able to, and in the future may not be able to, identify the cause or causes of these performance problems within an acceptable period of time.

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If our products and websites are unavailable, if our users are unable to access our products within a reasonable amount of time, or at all, or if our information technology systems for our business operations experience disruptions, delays or deficiencies, our business could be harmed.

We may be subject to regulations that require us to report extended services outages to governmental authorities and customers.

Moreover, we provide service level commitments under certain of our paid customer cloud contracts, pursuant to which we guarantee specified minimum availability.

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From time to time, we have granted, and in the future will continue to grant, credits to paid customers pursuant to, and sometimes in addition to, the terms of these agreements.

For example, in April 2022, a subset of our customers experienced a full outage across their Atlassian Cloud products due to a faulty script used during a maintenance procedure.

While we restored access for these customers with minimal to no data loss, these affected customers experienced disruptions in using our Cloud products during the outage.

We incurred certain costs associated with offering service level credits and other concessions to these customers, although the overall impact did not have a material impact on our results of operations or financial condition.

However, other future events like this may materially and adversely impact our results of operations or financial condition.

For example, we have in the past incurred costs associated with offering service level credits and other concessions to certain customers that experienced outages across their use of our products.

It is possible that large-scale outages in the future could materially and adversely impact our results of operations or financial condition.

Further, disruptions, data loss and corruption, outages and other performance problems in our cloud infrastructure may cause customers to delay or halt their transition to our Cloud offerings, to the detriment of our increased focus on our Cloud offerings, which could harm our business, results of operations and financial condition.

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Any loss of the right to use any of these services could result in decreased functionality of our products until equivalent technology is either developed by us or, if available from another provider, is identified, obtained and integrated into our infrastructure.

To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, results of operations and financial condition could be harmed.

To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and

continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, results of operations and financial condition could be harmed.

Real or perceived errors, failures, vulnerabilities, or bugs in our products or in the products on Atlassian Marketplace could harm our business and results of operations.

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In the United States, the Federal Trade Commission and state regulators enforce a variety of data privacy issues, such as promises made in privacy policies or failures to appropriately protect information about individuals, as unfair or deceptive acts or practices in or affecting commerce in violation of the Federal Trade Commission Act or similar state laws.

In addition, new U.S.

In addition, U.S.

state data privacy laws, such as the California Consumer Privacy Act as amended by the California Privacy Rights Act (“CPRA”), and laws that have recently passed and/or gone into effect in many other states similarly impose new obligations on us and many of our customers, potentially as both businesses and service providers.

These laws continue to evolve, and as various states introduce similar proposals, we and our customers could be exposed to additional regulatory burdens.

In the European Economic Area (“EEA”) and the UK, data privacy laws and regulations, such as the European Union General Data Protection Regulation (“EU GDPR”) and United Kingdom General Data Protection Regulation and Data Protection Act 2018 (collectively, the “UK GDPR,” and, together with the EU GDPR, the “GDPR”), impose comprehensive obligations directly on Atlassian as both a data controller and a data processor, as well as on many of our customers, in relation to our collection, processing, sharing, disclosure and other use of personal data.

Data privacy laws and regulations around the globe continue to evolve, and as various jurisdictions introduce similar legislation or regulation, we and our customers could be exposed to additional regulatory burdens that could increase our costs, reduce usage of our products, and adversely affect our business and results of operations.

We are also subject to evolving privacy laws on cookies, tracking technologies and e-marketing.

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Recent European court and regulator decisions are driving increased attention to cookies and similar tracking technologies.

In addition, various safe harbors have historically been provided to those who hosted content provided by others, such as safe harbors from monetary damages for copyright infringement arising from copyrighted content provided by customers and others, and for defamation and other torts arising from information provided by customers and others.

provided by customers and others, and for defamation and other torts arising from information provided by customers and others.

There is an increasing demand for repealing or limiting these safe harbors by either judicial decision or legislation.

Loss of these safe harbors may require altering or limiting some of our services or may require additional contractual terms to avoid liabilities for our customers’ misconduct.

We monitor the regulatory, judicial and legislative environment and have invested in addressing these developments, and these new laws may require us to make additional changes to our practices and services to enable us or our customers to meet the new legal requirements, and may also increase our potential liability exposure through new or higher potential penalties for noncompliance, including as a result of penalties, fines and lawsuits related to data breaches.

For instance, the Digital Services Act (“DSA”) in the EU came into force on November 16, 2022 and the majority of its substantive provisions took effect in February 2024.

We monitor the regulatory, judicial and legislative environment and have invested in addressing these developments.

These new laws may require us to make additional changes to our practices and services to enable us or our customers to meet the new legal requirements, and may also increase our potential liability exposure through new or higher potential penalties for noncompliance.

As one example of such a regulatory development, the Digital Services Act (“DSA”) in the EU came into force in November 2022 and the majority of its substantive provisions took effect in February 2024.

The DSA imposes new obligations around illegal services or content on our platform, traceability of business users, and enhanced transparency measures, and failure to comply can result in fines of up to 6% of total annual worldwide turnover.

Record-breaking enforcement actions globally have shown that regulators wield their right to impose substantial fines for violations of privacy regulations, and these enforcement actions could result in guidance from regulators that would require changes to our current compliance strategy.

In addition, changes to penalties, fines and action related to data breaches could impact our potential liability exposure.

Record-breaking enforcement actions globally have shown that regulators wield their right to impose substantial fines for violations of technology regulations, and these enforcement actions could result in guidance from regulators that would require changes to our current compliance strategy.

Furthermore, privacy laws and regulations are subject to differing interpretations and may be inconsistent among jurisdictions.

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Privacy Shield Framework, one of the mechanisms that allowed companies, including Atlassian, to transfer personal data from the European Economic Area (“EEA”) to the United States.

Even though the CJEU decision upheld the Standard

Contractual Clauses as an adequate transfer mechanism, the decision created uncertainty around the validity of all EU-to-U.S.

Even though the CJEU decision upheld the Standard Contractual Clauses as an adequate transfer mechanism, the decision created uncertainty around the validity of all EU-to-U.S.

data transfers.

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As another example, jurisdictions are considering legal frameworks on AI, which is a trend that may increase now that the first such framework has entered into force in the EU;

several others have been passed in various jurisdictions.

The costs of compliance with, and other burdens imposed by, privacy laws, regulations and standards may limit the use and adoption of our services, reduce overall demand for our services, make it more difficult to meet expectations from our commitments to customers and our customers’ users, lead to significant fines, penalties or liabilities for noncompliance, impact our reputation, or slow the pace at which we close sales transactions, in particular where customers request specific warranties and unlimited indemnity for noncompliance with privacy laws, any of which could harm our business.

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Further, public scrutiny of, or complaints about, technology companies or their data handling or data protection practices, even if unrelated to our business, industry or operations, may lead to increased scrutiny of technology companies, including us, and may cause government agencies to enact additional regulatory requirements, or to modify their enforcement or investigation activities, which may increase our costs and risks.

Our business also increasingly relies on AI to improve our services and tailor our interactions with our customers.

However, in recent years use of these methods has come under increased regulatory scrutiny.

New laws, guidance and/or decisions in this area may limit our ability to use our AI models, or require us to make changes to our operations that may decrease our operational efficiency, result in an increase to operating costs and/or hinder our ability to improve our services.

For example, there are specific rules on the use of automated decision making under the GDPR that require the existence of automated decision making to be disclosed to the data subject with a meaningful explanation of the logic used in such decision making in certain circumstances, and safeguards must be implemented to safeguard individual rights, including the right to obtain human intervention and to contest any decision.

New laws, guidance or decisions related to AI, as well as the related increased regulatory scrutiny in recent years, may limit our ability to use our AI solutions, products and features, or require us to make changes to our operations that may decrease our operational efficiency, result in an increase to operating costs or hinder our ability to improve our services.

While the GDPR already provides for transparency obligations and the imposition of safeguards where automated decision-making is used in certain circumstances, a number of U.S.

state data privacy laws that have recently passed and/or gone into effect similarly impose transparency obligations and provide the right for data subjects to opt-out of profiling that will have legal or similarly significant effects.

As these laws continue to evolve, we and our customers could be exposed to additional regulatory burdens that could increase our costs, reduce usage of our products, and adversely affect our business and results of operations.

Finally, the uncertain and shifting regulatory environment and trust climate may raise concerns regarding data privacy and cybersecurity, which may cause our customers or our customers’ users to resist providing the data necessary to allow our customers to use our services effectively.

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We may be unaware of the intellectual property rights of others that may cover some or all of our technology, or technology that we obtain from third parties.

Furthermore, the intellectual property ownership and license rights, including copyright, surrounding AI technologies has not been fully addressed by courts or national or local laws or regulations, and the use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation.

Furthermore, the intellectual property ownership and license rights, including copyright, surrounding AI technologies and the data used for training such technologies has not been fully addressed by courts or national or local laws or regulations, and the use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation.

Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty or license payments, prevent us from offering our products or using certain technologies, require us to implement expensive workarounds, refund fees to customers or require that we comply with other unfavorable terms.

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In addition, if the license terms for the open source software we utilize change, we may be forced to re-engineer our products or incur additional costs to comply with the changed license terms or to replace the affected open source software.

we have implemented policies and tools to regulate the use and incorporation of open source software into our products, we cannot be certain that we have not incorporated open source software in our products in a manner that is inconsistent with such policies.

Although we have implemented policies and tools to regulate the use and incorporation of open source software into our products, we cannot be certain that we have not incorporated open source software in our products in a manner that is inconsistent with such policies.

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.

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Our current Credit Facility and the indenture governing our Senior Notes (each defined below) contain certain restrictive covenants and any future debt financing obtained by us could involve restrictive covenants relating to financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of Atlassian, and any new equity or debt securities we issue could have rights, preferences and privileges senior to those of holders of our Class A Common Stock.

If we raise additional funds through issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of Atlassian.

Any new equity or debt securities we issue could also have rights, preferences and privileges senior to those of holders of our Class A Common Stock.

If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.

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In August 2024, we amended and restated our prior credit facility to eliminate the senior unsecured delayed-draw term loan facility and provide for a $750 million senior unsecured revolving credit facility (the “Credit Facility”).

As of September 30, 2024, we had no outstanding revolving loans under the Credit Facility.

As of December 31, 2024, we had no outstanding revolving loans under the Credit Facility.

Our Credit Facility requires compliance with various financial and non-financial covenants, including affirmative covenants relating to the provision of periodic financial statements, compliance certificates and other notices, maintenance of properties and insurance, payment of taxes and compliance with laws and negative covenants, including, among others, restrictions on the incurrence of certain indebtedness, granting of liens and mergers, dissolutions, consolidations and dispositions.

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We are subject to income taxes as well as non-income-based taxes in the U.S., Australia and various other jurisdictions.

Significant judgment is often required in the determination of our worldwide provision for income taxes.

Significant judgment is often required in the determination of our worldwide provision for (benefit from) income taxes.

Our effective tax rate could be impacted by changes in our earnings and losses in countries with differing statutory tax rates, changes in transfer pricing, changes in operations, changes in nondeductible expenses, changes in excess tax benefits of stock-based compensation expense, changes in the valuation of deferred tax assets and liabilities and our ability to utilize them, the applicability of withholding taxes, effects from acquisitions, and changes in accounting principles and tax laws.

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for the tax years ended June 30, 2019 to June 30, 2025 that resulted in us making a tax payment of $117.4 million.

We will continue to pursue advanced pricing arrangements in Australia and other jurisdictions to proactively manage and mitigate the risk of transfer pricing disputes with tax authorities.

We will continue to pursue advanced pricing arrangements in Australia and other jurisdictions to proactively

manage and mitigate the risk of transfer pricing disputes with tax authorities.

In addition, in the ordinary course of our business we are subject to tax audits from various taxing authorities.

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In March 2018, the EC proposed a series of measures aimed at ensuring a fair and efficient taxation of digital businesses operating within the EU.

As collaborative efforts by the OECD and EC continue, some countries have unilaterally moved to introduce their own digital service tax or equalization levy to capture tax revenue on digital

services more immediately.

As collaborative efforts by the OECD and EC continue, some countries have unilaterally moved to introduce their own digital service tax or equalization levy to capture tax revenue on digital services more immediately.

Notably France, Italy, Austria, Spain, the UK and Turkey have enacted this tax, generally 2% on specific in-scope sales above a revenue threshold.

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Many countries in which we operate, including the member states of the EU, have enacted Pillar Two.

Pillar Two rules will apply to us beginning in this fiscal year 2025.

Pillar Two rules will apply to us beginning in fiscal year 2025.

The potential effects of Pillar Two may vary depending on the specific provisions and rules implemented by each country that adopts Pillar Two and may include tax rate changes, higher effective tax rates, potential tax disputes and adverse impacts to our cash flows, tax liabilities, results of operations and financial position

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If we are deemed to be an investment company under the Investment Company Act of 1940, our results of operations could be harmed.

Under Sections 3(a)(1)(A) and (C) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), a company generally will be deemed to be an “investment company” for purposes of the Investment Company Act if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S.

securities having a value exceeding 40% of the value of its total assets (exclusive of U.S.

government securities and cash items) on an unconsolidated basis.

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Changes in export or import laws or corresponding sanctions may delay the introduction and sale of our products in international markets, or, in some cases, prevent the export or import of our products to certain countries, regions, governments, persons or entities altogether, which could adversely affect our business, financial condition and results of operations.

Changes in import and export laws are occurring in the jurisdictions in which we operate and we may fail to comply with new or changing regulations in a timely manner, which could result in

substantial fines and penalties for us and could adversely affect our business, financial condition and results of operation.

Changes in import and export laws are occurring in the jurisdictions in which we operate and we may fail to comply with new or changing regulations in a timely manner, which could result in substantial fines and penalties for us and could adversely affect our business, financial condition and results of operation.

We are also subject to various domestic and international anti-corruption laws, such as the U.S.

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In addition, if our practices are not consistent with new interpretations of existing laws, we may become subject to lawsuits, penalties, and other liabilities that did not previously apply.

Investors’ and other stakeholders’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors, customers, employees, other stakeholders and regulators concerning environmental, social and governance matters (“ESG”).

Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to ESG are inadequate.

We may face reputational damage in the event that we do not meet the ESG standards set by various constituencies.

As ESG best practices and reporting standards continue to develop, we may incur increasing costs relating to ESG monitoring and reporting and complying with ESG initiatives.

For example, in recent years, there has been a proliferation of climate and other ESG disclosure requirements at the local, national and international levels, which have required and may continue to require significant effort and resources in order to comply with differing requirements.

We publish an annual Sustainability Report, which describes, among other things, the measurement of our greenhouse gas emissions and our efforts to reduce emissions.

Investors’ and others’ expectations and scrutiny of our performance relating to environmental, social and governance efforts may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors, regulators, customers, employees, other stakeholders concerning environmental, social and governance matters (“ESG”).

Any failure to meet the ESG standards set by various constituencies may damage our reputation or otherwise harm our business or financial condition.

As ESG best practices and reporting standards continue to develop, we expect to incur increasing costs relating to ESG monitoring and reporting and complying with ESG initiatives.

In recent years, there has been a proliferation of climate and other ESG disclosure requirements at the local, national and international levels, which have required and will continue to require significant time, effort and resources in order to comply with differing requirements.

If our ESG practices and reporting fail to meet such requirements, we may be exposed to risks of government or regulatory enforcement or liability.

We voluntarily publish an annual Sustainability Report, which describes, among other things, the measurement of our greenhouse gas emissions and our efforts to reduce emissions.

In addition, our Sustainability Report provides highlights of how we are supporting our workforce, including our efforts to promote diversity, equity, and inclusion.

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Due to new regulatory standards and market standards, certain new or existing customers, particularly those in the European Union, may impose stricter ESG guidelines or mandates for, and may scrutinize relationships more closely with, their counterparties, including us, which may lengthen sales cycles or increase our costs.

Furthermore, if our competitors’ ESG performance is perceived to be better than ours, potential or current investors or other stakeholders may elect to engage with our competitors instead.

Furthermore, some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to ESG are inadequate.

If our competitors’ ESG performance is perceived to be better than ours, potential or current investors or other stakeholders may elect to engage with our competitors instead.

In addition, in the event that we communicate certain initiatives or goals regarding ESG matters, we could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals.

If we fail to satisfy the expectations of investors, customers, employees and other stakeholders or our initiatives are not executed as planned, our business, financial condition, results of operations, and prospects could be adversely

Alternatively, any negative perceptions of our pursuit of any ESG or diversity, equity, and inclusion initiatives could also result in adverse impacts, including potential stakeholder engagement or litigation.

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Shares of our Class B Common Stock have ten votes per share and shares of our Class A Common Stock have one vote per share.

As of September 30, 2024, stockholders who hold our Class B Common Stock collectively hold approximately 86% of the voting power of our outstanding share capital and in particular, entities affiliated with our Co-Founders, Michael Cannon-Brookes and Scott Farquhar, collectively hold approximately 86% of the voting power of our outstanding share capital.

As of December 31, 2024, stockholders who hold our Class B Common Stock collectively hold approximately 86% of the voting power of our outstanding share capital and in particular, entities affiliated with our Co-Founders, Michael Cannon-Brookes and Scott Farquhar, collectively hold approximately 86% of the voting power of our outstanding share capital.

The holders of our Class B Common Stock will collectively continue to control a majority of the combined voting power of our capital stock and therefore be able to control substantially all matters submitted to our stockholders for approval so long as the outstanding shares of our Class B Common Stock represent at least 10% of all shares of our outstanding Class A Common Stock and Class B Common Stock in the aggregate.

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federal court.

This case has been dismissed but it is possible there could be other securities litigation in the future that subject us to substantial costs, divert resources and the attention of management from operating our business, and harm our business, results of operations and financial condition.

This case has

been dismissed, but it is possible there could be other securities litigation in the future that subjects us to substantial costs, diverts resources and the attention of management from operating our business, and harms our business, results of operations and financial condition.

Substantial future sales of our common stock could cause the market price of our Class A Common Stock to decline.

The market price of our Class A Common Stock could decline as a result of substantial sales of shares of our Class A Common Stock, particularly sales by our directors, executive officers and significant stockholders, or the perception in the market that holders of a large number of shares intend to sell their shares.

As of September 30, 2024, we had 160,713,952 outstanding shares of Class A Common Stock and 99,995,049 outstanding shares of convertible Class B Common Stock.

As of December 31, 2024, we had 163,081,602 outstanding shares of Class A Common Stock and 98,977,705 outstanding shares of convertible Class B Common Stock.

We have also registered shares of Class A Common Stock that we issue under our employee equity incentive plans.

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The timing, manner, price, and amount of any repurchases will be determined by us at our discretion and will depend on a variety of factors, including business, economic and market conditions, prevailing stock prices, corporate and regulatory requirements, and other considerations.

guarantee that any Share Repurchase Program will be fully consummated or that it will enhance long-term stockholder value.

We cannot guarantee that any Share Repurchase Program will be fully consummated or that it will enhance long-term stockholder value.

The Share Repurchase Programs could also affect the trading price of our Class A Common Stock and increase volatility, and any announcement of a reduction, suspension or termination of the Share Repurchase Program may result in a decrease in the trading price of our Class A Common Stock.

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These provisions provide for the following:

• a dual-class structure which provides our holders of Class B Common Stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A Common Stock and Class B Common Stock;

• a dual-class structure which provides our holders of Class B Common Stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if such holders own significantly less than a majority of the shares of our total outstanding stock;

• no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

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and (b) the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint.

Any person or entity purchasing or otherwise acquiring any

interest in any security of the Company will be deemed to have notice of and consented to these provisions.

Any person or entity purchasing or otherwise acquiring any interest in any security of the Company will be deemed to have notice of and consented to these provisions.

Nothing in our amended and restated certificate of incorporation or amended and restated bylaws precludes stockholders that assert claims under the Exchange Act, from bringing such claims in federal court to the extent that the Exchange Act confers exclusive federal jurisdiction over such claims, subject to applicable law.

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A key element of our strategy is to operate globally and sell our products to customers around the world.

Operating globally requires significant resources and management attention and subjects us to regulatory, economic, geographic, and political risks.

Operating globally requires significant resources and management attention and subjects us to regulatory,

economic, geographic, and political risks.

In particular, our global operations subject us to a variety of additional risks and challenges, including:

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• reduced protection for intellectual property rights in some countries and practical difficulties associated with enforcing our legal rights abroad;

• imposition of travel restrictions, modifications of employee work locations, or cancellation or reorganization of certain sales and marketing events as a result of pandemics or public health emergencies;

• impacts of pandemics or public health emergencies;

• compliance with the laws of numerous foreign taxing jurisdictions, including withholding obligations, and overlapping of different tax regimes;

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Although we have implemented policies and procedures designed to ensure compliance with these regulations and policies, there can be no assurance that all of our employees, contractors, business partners and agents will comply with these regulations and policies.

Violations of laws, regulations or key control policies by our employees, contractors, business partners, or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, reputational harm, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences, or the prohibition of the importation or exportation of our products and could harm our business, results of operations, and financial condition.

Violations of

laws, regulations or key control policies by our employees, contractors, business partners, or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, reputational harm, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences, or the prohibition of the importation or exportation of our products and could harm our business, results of operations, and financial condition.

We depend on our executive officers and other key employees and the loss of one or more of these employees or the inability to attract and retain highly skilled employees could harm our business.

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In addition, in order to execute our growth plan, we must attract and retain highly qualified personnel.

Competition for these personnel is intense, and many of the companies with which we compete for experienced personnel have greater resources than we have.

For example, we hired a new Chief Revenue Officer, effective January 1, 2025.

Competition for highly qualified personnel is intense, and many of the companies with which we compete for experienced personnel have greater resources than we have.

We have from time to time experienced, and we expect to continue to experience, difficulty hiring and retaining employees with appropriate qualifications.

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As we grow our business, the need for business continuity planning and disaster recovery plans will grow in significance.

If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster, disease or pandemic, or catastrophic event, or if we are unable to successfully execute on those plans, our business and reputation could be harmed.

If we are unable to develop adequate plans to ensure that our business functions continue to operate

during and after a disaster, disease or pandemic, or catastrophic event, or if we are unable to successfully execute on those plans, our business and reputation could be harmed.

Climate change may have a long-term impact on our business.

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however, we recognize that there are inherent climate related risks wherever business is conducted.

Climate-related events, including but not limited to the increasing frequency of extreme weather events and their impact on critical infrastructure in the U.S., Australia and elsewhere, have the potential to disrupt our business, our employees, our third-party suppliers, and/or the business of our customers, and may cause us to experience extended product downtimes, higher attrition, and losses and additional costs to maintain and resume operations.

Climate-related events, including but not limited to the increasing frequency of extreme weather events and their impact on critical infrastructure in the U.S., Australia and elsewhere, have the potential to disrupt our businesses, our employees, our third-party suppliers, and/or the business of our customers, and may cause us to experience extended product downtimes, higher attrition, and losses and additional costs to maintain and resume operations.

Furthermore, failure to achieve or advance towards our public sustainability commitments and objectives regarding climate action may have an adverse effect on our standing with investors, suppliers, and customers, as well as on our financial results and our capacity to attract and retain skilled individuals.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors