Atlassian Stock Skyrockets to Record Highs on Earnings Beat

Enterprise software provider Atlassian Corporation (NASDAQ: TEAM) reported fiscal fourth quarter earnings on Thursday evening, delivering better-than-expected results and offering a rosy outlook for the next quarter.

The company’s cloud transition is progressing well, while Atlassian’s suite of productivity and collaboration tools are critical in enabling remote work.

As of 12 p.m. EDT, Atlassian stock had skyrocketed by 24%.

The first $2 billion fiscal year

Revenue in the fiscal fourth quarter increased 30% to $559.5 million, ahead of the consensus estimate of $525.3 million in sales. That top line included $385.5 million of subscription revenue, which was up 50%. Atlassian just topped $2 billion in annual revenue for the first time as it closed out its fiscal 2021.

Atlassian added 23,000 new customers during the quarter, bringing the company’s total customer base to over 236,000. The number of large customers is also climbing at a steady clip.

There are now 178 customers that spend $1 million or more, and 412 organizations that spend over $500,000. Large customers (with over 1,000 users) are migrating to Atlassian’s cloud-based platform, driving a 47% increase in cloud revenue. 

“Building a world-class cloud platform and migrating our installed base of server customers continues to be our primary focus,” co-CEOs and co-founders Mike Cannon-Brookes and Scott Farquhar wrote in a letter to shareholders. 

During the quarter, Atlassian launched its cloud app development platform, Forge, in general availability. Forge was initially introduced as a closed beta program in late 2019 but is now finally ready for prime time, allowing developers to easily create cloud apps for the Atlassian Marketplace.

Adjusted net income in the fiscal fourth quarter was $62.2 million, or $0.24 per share. Wall Street was looking for just $0.18 per share in adjusted profits.

Broad-based momentum going forward

Guidance for the fiscal first quarter was also strong, with Atlassian forecasting revenue in the range of $575 million to $590 million. The consensus estimate currently calls for just $541.3 million in sales next quarter.

Gross margin should be around 85% on an adjusted basis, and Atlassian expects to report an adjusted operating margin of 25%. That should all translate into adjusted earnings per share of $0.38 to $0.39, which is also better than the $0.31 per share in adjusted profits for which analysts are modeling.

Atlassian had stopped selling server licenses approximately five months ago as part of its shift to cloud-based subscription revenue. That shift will help drive subscription revenue growth in fiscal 2022, CFO James Beer said on the conference call with analysts. 

Cannon-Brookes also noted that Atlassian is seeing strength across all of its offerings. It’s not just one area driving results, but rather broad-based momentum across the business.

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Evan Niu, CFA owns shares of Atlassian. The Motley Fool owns shares of and recommends Atlassian. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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