Mike Cannon-Brookes handed down what could be a landmark earnings report for Atlassian, with the company swinging from a US$24 million loss a year ago to US$139 million of profit.
Key Takeaways
- Atlassian’s share price shot up as much as 35 per cent in after-hours trading after its strong quarterly earnings surprised investors.
- The company recorded US$139 million in profit for the three months to June 30, a turnaround from a US$24 million loss in the same quarter last year.
- Atlassian expects to enjoying operating profit under standard accounting principles for the entire current financial year.
- The company is cutting bigger deals, with the amount of companies paying over US$5 million growing 70 per cent year-on-year.
- Quarterly revenue was up 28 per cent year-on-year, and the all-important cloud revenue of US$1.2 billion was up 31 per cent.
- The earnings also announced Cannon-Brookes would purchase up to US$250 million-worth of Atlassian shares. That’s in addition to Atlassian’s ongoing buyback program, which saw US$348 million of its stock purchased this quarter.
- Atlassian also announced the appointment of former AWS vice president Ken Exner as chief product officer, enterprise and emerging.
Key background
It has been a tough year for Atlassian investors – before these earnings, its stock was down 40 per cent over the past 12 months. Much of that is due to the company being caught in the “SaaSpocalypse,” which saw investors dump software stocks en masse in February amid fears new capabilities from Anthropic and OpenAI would allow companies to vibe code the tools they currently pay the likes of Atlassian (and dozens of others) for.
The tumult led to Mike Cannon-Brookes in March slashing 1,600 jobs. But the quarterly profit of US$139 million was achieved not only by cutting costs, but continued growth. Revenue shot up 28 per cent, and the cloud revenue segment Atlassian has hitched its wagon to in recent years was up 31 per cent.
Atlassian’s forecast for the current financial year is also encouraging. Total revenue is expected to grow 13 per cent, driven mostly by cloud growth of 25.5 per cent, and the company is eyeing a GAAP (generally accepted accounting principles) operating margin of 4.5 per cent.
The GAAP acronym is significant. Like most software companies, there is a chasm between Atlassian’s GAAP and non-GAAP profit because the former counts stock-based compensation – of which there was US$394 million this quarter – as an expense. It has for years been profitable on a non-GAAP basis, but is now working to be in the black on an operating basis for the next financial year even counting stock-based compensation as an expense.
Big Number
US$146. That is Atlassian’s stock price in after-hours trading, a 33 per cent boost from the US$110 it traded at before earnings were handed down. That was down a touch from a post-report high of US$150. If this level can be sustained, Atlassian will have almost entirely recovered from its February selloff.
Atlassian’s all-time high came in 2021 when its share price reached US$458.
Crucial quote
“Q4 was another outstanding quarter, capping off an incredible financial year for Atlassian,” CEO Mike Cannon-Brookes said on a call with investors. “We had an all-time record quarter at the $1 million, $3 million and $5 million level of deals.”
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