Atlassian shares slump on poor revenue outlook

Fresh from sacking 500 workers, the company led by Mike Cannon-Brookes and Scott Farquhar says economic headwinds will create new revenue pain.

Mike Cannon-Brookes at the Atlassian Team `23 Las Vegas event. The company says macroeconomic headwinds are affecting its outlook.

Shares in Australian tech giant Atlassian dropped by as much as 16 per cent in after hours trading after the software firm reported a poor revenue outlook in its Q3FY23 results.

Atlassian shares had gained 3.4 per cent in regular trading before falling 13 per cent after hours to $US131 ($196), wiping millions from the paper net worth of billionaire co-founders Scott Farquhar and Mike Cannon-Brookes.

The company is forecasting revenue of between $US900m to $US920m for the fourth fiscal quarter, compared to analyst average expectations of $US919.4m. It posted a third-quarter loss of $US209m, compared with $US4.7m in net income a year earlier, while quarterly revenues rose to $US916 million from $US741m a year earlier.

After-hours trading is generally based on smaller volumes and can exaggerate price swings.

Atlassian’s revenues will be impacted by “increasing macroeconomic impacts on paid seat expansion from existing customers and new customer conversions, as well as headwinds in areas we have yet to see significant impact,” co-founders Scott Farquhar and Mike Cannon-Brookes wrote in a letter to shareholders.

The company last month unveiled an ‘AI virtual teammate’ at its Team 23 conference in Las Vegas, in partnership with ChatGPT maker OpenAI.

“Connecting with the Atlassian community in-person at Team 23 was incredible, and the enthusiasm for our product announcements, particularly Atlassian Intelligence, was unmatched,” Mr Cannon-Brookes said on Friday.

“With more than 20 years of knowledge reflecting how hundreds of thousands of software, IT, and business teams plan, track, and deliver work, Atlassian Intelligence has a unique understanding of teamwork. We are beyond thrilled about AI’s ability to unleash our customers’ potential and strengthen our competitive advantage.”

Mr Farquhar described Atlassian’s results for the quarter as solid.

“We delivered a solid quarter of financial results exceeding our expectations with quarterly revenue of $US915m, up 24 per cent year-over-year, driven by subscription revenue growth of 37 per cent year-over-year,” he said.

“Our customers are turning to Atlassian for help to transform the way work gets done and we’re incredibly excited about the significant opportunities in front of us. We’ve made tough calls and now, looking ahead, we’re laser-focused on executing to drive faster at our largest growth opportunities and strategic initiatives.”

Atlassian Team `23 Las Vegas

With Atlassian Intelligence, workers will be able to automatically summarise decisions and action items from meeting minutes, draft tweets based on product specs, and ask questions such as “how much can I spend on my home office set up?”.

“It’s awesome for us, it’s exciting,” Mr Cannon-Brookes said last month.

“We’ve done machine learning and AI for a long time, but we’ve now got a lot of new capabilities and we’re building it in as a core capability of our cloud platform, no matter what market you’re in and what product you’re using.

“This will enable our customers to be far more productive: I think about it as a superpower for individuals to be able to generate things, summarise things very rapidly and it’s almost like giving individuals a multiplier, in terms of a fundamental productivity improvement across all of our software.”

Its collaboration and IT service management applications, including Jira, Confluence and Trello, have more than 250,000 customers globally.

Atlassian in March laid off 5 per cent of its workforce, and said it will be “reinvesting in roles that better support our priorities.” Its shares are down 29 per cent over the past 12 months.

Mr Cannon-Brookes said last month he could not rule out more redundancies to come, but that the company was still hiring.

“We have no plan (of more) for the moment. But yeah we did what we did and we’re moving forward,” he said.

“We’re still recruiting really hard at the moment. We tried to be really clear in all our explanations that it’s about rebalancing, and making sure we’ve got people on the most important priorities at the given time, given everything that’s going on around economic climate and AI, and everything else that’s changing in our world.

“Unfortunately that was a necessary thing to do … But we still have twice as many jobs open as we did people that unfortunately we had to let go. So we’re still hiring.”

Shares in Atlassian slumped by more than 20 per cent in after hours trading in November amid its last set of financial results, when the company swung to an annual operating loss and posted earnings and revenue that missed market expectations.

Originally published as Atlassian shares slump on poor revenue outlook