Enterprise software firm Atlassian topped Wall Street's sales and earnings targets for its fiscal second quarter, but its cloud revenue missed views. TEAM stock plummeted Friday on the news.
The San Francisco-based company late Thursday said it earned an adjusted 73 cents a share on sales of $1.06 billion in the quarter ended Dec. 31. Analysts had expected earnings of 62 cents a share on sales of $1.02 billion. On a year-over-year basis, Atlassian earnings rose 62% while sales increased 21%.
However, Atlassian's cloud revenue in the December quarter of $653 million was light when excluding its recent acquisition of Loom, Morgan Stanley analyst Keith Weiss said in a client note.
That and its cloud guidance are stoking investor concerns that the company's growth story has stalled following its shift to a cloud-computing business model, Weiss said.
"Missing a Cloud number puts Atlassian in the penalty box," Weiss said. "For investors focusing narrowly on the Cloud revenue line, results suggest a moderating growth outlook ahead."
Still, Weiss rates TEAM stock as overweight, or buy, with a price target of 266.
TEAM Stock Drops Despite Over Beat-And-Raise Report
For the March quarter, Atlassian said it expects revenue in a range of $1.085 billion to $1.105 billion. The midpoint of $1.095 billion is well above the consensus estimate of $1.065 billion.
Atlassian predicted cloud revenue growth of 30% to 32% year over year in the fiscal third quarter.
On the stock market today, TEAM stock fell 14.7% to close at 217.39.
Atlassian stock had gained 7% in 2024 heading into the earnings report. TEAM stock was up 49% over the past 52 weeks.
Founded in Sydney in 2002, Atlassian sells project management and collaborative software for software developers and information-technology engineering teams.
Atlassian Shifts To Cloud
Atlassian is phasing out sales of on-premises software used in the data centers of corporate customers. For remaining data-center customers, it has pushed through price hikes in contract renewals.
TEAM stock holds an IBD Composite Rating of 98 out of a best-possible 99, according to IBD Stock Checkup. The Composite Rating scores a stock's key growth metrics against all other stocks regardless of industry group.
In late 2023, Atlassian agreed to buy video messaging platform Loom for about $975 million. The deal aims to improve workplace collaboration tools amid remote work. Loom, which is based in San Francisco, has more than 25 million users globally.
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