Investors pummeled software stocks Atlassian, Twilio and Cloudflare Friday for issuing weak guidance.
TEAM stock plunged 29% to close at 123.73 on the stock market today. TWLO stock plummeted 34.6% to close at 42.74. Meanwhile, Cloudflare stock fell 18.4% to 41.09.
Atlassian reported fiscal first-quarter earnings of 36 cents, down 3% from a year earlier, missing Wall Street estimates for 38-cent profit. Revenue rose 31% to $807.4 million, edging by views of $806.4 million.
Billings, a sales growth metric, came in at $798 million, up 27%. But that missed forecasts of $830 million.
The Australia-based company said it expects December quarter revenue of $845 million at the midpoint of its outlook, below views for $879 million.
"We are surprised by the magnitude of the slowdown in consolidated growth and cloud growth more particularly," BMO Capital Markets analyst Keith Bachman said in a note to clients.
Software Stocks Transition To The Cloud
"Management lowered fiscal 2023 cloud revenue guidance from 50% year-over-year to a range of 40% to 45%, driven by a more pronounced decrease in the rate of free-to-paid conversions," Bachman went on to say. "(They also cited) a slowing in the rate of paid user growth from existing customers as customers slow down hiring."
Atlassian said it expects December quarter revenue of $845 million at the midpoint of its outlook. That's up 23% but below analyst estimates of $879 million.
Founded in Sydney in 2002, Atlassian sells project management and collaborative software for software developers and information technology engineering teams.
The software maker is transitioning to a cloud-computing business model. Atlassian is phasing out sales of on-premise software used in the data centers of corporate customers.
TWLO Stock: Crypto, Consumer Weakness
Meanwhile, San Francisco-based Twilio reported a smaller-than expected loss of 27 cents a share compared with estimates for a 36-cent loss. Revenue rose 33% to $983 million, topping estimates of $972 million.
But Twilio forecast December quarter revenue in a range of $995 million to $1 billion, up 18.5% at the midpoint of guidance, missing forecasts of $1.07 billion.
"The macro continues to worsen and is the core driver of the step down. Weakness continued in crypto, consumer-on-demand, social and more recently spread to e-commerce and retail," Jefferies analyst Samad Samana said in a note.
Twilio's communications tools enable app developers to embed voice, text messaging and video into their products. In addition, Twilio's software makes it easier for cloud-based applications to communicate.
Software Stocks Headwind
Also, Cloudflare reported a 6-cent profit, topping estimates for zero earnings. Revenue rose 47% to $253.9 million, edging by estimates of $250.6 million.
San Francisco-based Cloudflare said it expects December quarter revenue of $274 million, up 42%, at the midpoint of its outlook, just above forecasts of $273.7 million.
"Q3 upside delivered the most modest beat versus prior quarter," Cowen analyst Shaul Eyal said in a note. "Q4 guidance reflects potential headwinds including macro deceleration, elongating sales-cycles and currency exchange rate headwinds."
Cloudflare Stock: New Chief Revenue Officer
Cloudflare announced that Chris Meritt, the company's chief revenue officer, will be stepping down. Further, he will be replaced by former Twilio executive Marc Boroditsky.
"Management acknowledged the weak macro conditions are starting to have an impact on revenue," Wells Fargo analyst Andrew Nowinski said in a note. "(It) noted sales cycles are taking longer to close at the high-end of the market, which is what nearly all other companies in the space are reporting. However, given the valuation, expectations are certainly higher for Cloudflare."
Started in 2009, Cloudflare speeds up and provides security for web applications routed through its intelligent global network. In addition, the company competes in both corporate and consumer markets.
September-quarter earnings reports for all three software stocks came in after the market close Thursday.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
