Enterprise software company Atlassian (TEAM) exceeded Wall Street’s sales and profit targets for its fiscal second quarter, but its cloud revenue missed views. TEAM shares plummeted on Friday on the news.
The San Francisco-based company said late Thursday that it earned adjusted profit of 73 cents per share on revenue of $1.06 billion in the quarter ended Dec. 31. Analysts had expected earnings of 62 cents per share on revenue of $1.02 billion. On a year-over-year basis, Atlassian’s revenues rose 62%, while sales rose 21%.
However, Atlassian’s December quarter cloud revenue of $653 million was light if we exclude the recent acquisition of Loom, Morgan Stanley analyst Keith Weiss said in a client note.
That and the cloud guidelines have investors concerned that the company’s growth story has stalled after the shift to a cloud computing business model, Weiss said.
“Missing a Cloud number puts Atlassian in the penalty box,” Weiss said. “For investors focused solely on Cloud revenue, the results indicate a moderating growth outlook.”
Still, Weiss rates TEAM stock as Overweight, or Buy, with a 266 price target.
TEAM stock falls despite over-beat-and-raise report
For the March quarter, Atlassian expects revenue between $1.085 billion and $1.105 billion. The midpoint of $1.095 billion is well above the consensus estimate of $1.065 billion.
Atlassian forecast 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.
Shares of Atlassian were up 7% in 2024 heading into the earnings report. TEAM stock is up 49% in the past 52 weeks.
Founded in Sydney in 2002, Atlassian sells project management and collaboration software for software developers and information technology engineering teams.
Atlassian shifts to the cloud
Atlassian is phasing out sales of on-premise software used in enterprise customers’ data centers. The company has implemented price increases on contract renewals for the remaining data center customers.
TEAM stock has an IBD Composite Rating of 98 out of a best possible 99, according to IBD Stock Checkup. The Composite Rating rates a stock’s key growth metrics relative to all other stocks, regardless of industry group.
In late 2023, Atlassian agreed to buy video messaging platform Loom for approximately $975 million. The deal aims to improve workplace collaboration tools during remote working. Based in San Francisco, Loom has more than 25 million users worldwide.
Follow Reinhardt Krause on X, formerly known as Twitter, @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
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