Mike Cannon-Brookes’ Atlassian swings to loss as it Trump-proofs itself, shares dive

The software titan has booked a quarterly loss as it spends heavily on artificial intelligence – a move chief executive Mike Cannon-Brookes says will strengthen the company amid a ‘turbulent’ global economy.

Mike Cannon-Brookes is spending big on AI to strengthen the company amid a ‘turbulent’ global economy.

Investors have questioned Atlassian’s growth strategy as the software titan swings to a quarterly loss after spending big on artificial intelligence and giving away one of its most popular products for free.

Atlassian shares dived more than 16.6 per cent in after hours trade, wiping off more than $US10bn ($15bn) from its market value and a combined $US4bn from the fortunes of co-founders Mike Cannon-Brookes and Scott Farquhar, who own 40 per cent of the company.

During a 60-minute investor call, analysts questioned Atlassian’s plans after its forecast for the next quarter narrowly missed estimates and Mr Cannon-Brookes warned of a “turbulent” global economy.

Since Mr Farquhar stepped aside as co-CEO in April last year, Mr Cannon-Brookes has bet the company’s future on AI, expanding on its origins as a maker of workflow software used by engineers. But he is also pitting Atlassian against better resourced rivals like Microsoft in the race for enterprise customers.

Sanjit Singh from Morgan Stanley asked why Atlassian gave away its AI agent platform, Rovo, for free.

“When we think about that, maybe in relation to the midterm outlook of sort of 20 per cent CAGR (compound annual growth rate), does that move the needle? And when you think about the uncertainty in the macro (environment), does that cause (Atlassian) to reassess that 20 per cent growth outlook?” Mr Singh said.

Mr Cannon-Brookes said while making Rovo free would cost near-term sales, it would ultimately strengthen the company as more of its corporate customers look to AI tools to lift productivity. Launched last year, Rovo allows companies to build their own AI-powered “agents”. It was previously priced at $US20 per user a month and competes alongside Microsoft’s Copilot.

“We are seeing continued growth and adoption of Rovo and our AI capabilities … past 1.5 million monthly active users,” Mr Cannon-Brookes said.

“And the cloud customers who have deployed Rovo agents to now tens of thousands of unique workflows connected to automations are seeing great value. We feel very good about the capabilities that we’ve built and we want to get them into as many hands as possible and as fast as we can among our user base.

“We've always been patient with monetisation, but we think we have a massive user expansion opportunity, both in terms of additions and also going wall-to-wall with more knowledge workers in those organisations. So that fits really well with the way that we think about building software in general.”

Keith Bachman from BMO Capital Markets asked if “there was more conservatism” in Atlassian’s fourth quarter guidance. Chief financial officer Joe Binz said there was no change to how the company forecast earnings and the guidance reflected “macroeconomic uncertainty”.

Mr Cannon-Brookes said Atlassian was “not immune to pressures that may arise from a potential global economic slowdown”.

He said it was too early to say how Donald Trump’s trade war and retaliatory tariffs will affect Atlassian. But Mr Cannon-Brookes was adamant the company was poised for growth, particularly after it secured access to US federal agencies for its software, which it claims can accelerate productivity – one of the mandates of President Donald Trump’s Department of Government Efficiency.

“On the effect of tariffs on the business, first thing I would call out is … we feel the business remains really healthy, so nothing to call out on a sort of macro impact at this point. Pipeline looks strong. Customers continue to want to upgrade to the cloud. They’re expanding their usage of Atlassian.

“It doesn’t mean we’re unaware that there is a complex environment out there, and we continue to remain vigilant about where that where that flows.

“I’m now quite experienced in leading Atlassian for 23 plus years through various different cycles and periods of uncertainty. We had this in 2008, we had it in 2020, so we have a really strong exec team with a broad experience. You can learn a lot from that experience.”
Mr Cannon-Brookes said Atlassian’s customer base was also more balanced than it was five years ago.

“From a resilience point of view, look, we have more than 300,000 customers, pretty diverse in terms of the industries and the countries that they come from.

“We’re a lot more balanced. In 2020 our enterprise customers represented 15 per cent of sales. Today that’s more than 40 per cent of sales. So a big change in the last five years.”

During the quarter Atlassian achieved FedRAMP, or the Federal Risk and Authorisation Management Program, certification, which is a baseline of security requirements which cloud-based companies must meet if they want to work with US federal bodies like the public service.

To capitalise on this certification, Mr Cannon-Brookes said Atlassian had created a new “Government cloud” offering.

Overall revenue jumped 14 per cent to $US1.36bn in the three months to March 31, fuelled by a 25 per cent burst in its cloud business.

But it reported a $US70.8m loss versus net income of $US12.8m in the same period last year. Its revenue forecast for next quarter also slightly missed analysts’ estimates of $US1.36bn.

Atlassian boss, Mike Cannon-Brookes (centre) pictured with Williams Formula One Drivers, Carlos Sainz (left) and Alexander Albon has signed a long-term sponsorship deal with the team.

Atlassian is expecting to deliver full-year revenue growth of 19 per cent and cloud growth of 27 per cent.

During the quarter, Atlassian also signed a “long-term” sponsorship deal with Formula One team Williams. The partnership is designed to showcase Atlassian’s “system of work” and help catapult Williams back up the grid after it finished second last in 2024 championship.

Originally published as Mike Cannon-Brookes’ Atlassian swings to loss as it Trump-proofs itself, shares dive