Atlassian’s AI bet pays off as it marks first $US1bn revenue quarter, shares fall 8.6pc

The $US65.8bn tech darling has halved its operating loss as it steps up its artificial intelligence capabilities and doubles down on remote working.

Atlassian co-founders and co-chief executives Mike Cannon Brookes (left) and Scott Farquhar, who says he is “extremely proud” of the company’s accomplishments but remains “laser-focused on executing against our top strategic priorities”.

Software titan Atlassian has halved its quarterly loss as it generated $US1bn ($1.52bn) of revenue during a three-month period for the first time and launches AI across its suite of products.

The Australian-headquartered, Nasdaq-listed group’s operating loss fell to $US49.1m in the three months to December 31 from $US99.22m in the previous corresponding period.

Revenue jumped 21 per cent to $US1.06bn as it surpassed 300,000 customers and announced the general availability of AI across its products portfolio.

While this exceeded analyst estimates of $1.02bn in quarterly revenue, it was an easing from 27 per cent revenue growth in the same period last year.

Atlassian shares fell 8.6 per cent to $US232.95 in after market trade in the US on Friday morning (Australian time).

It comes as the company – which has a market value of $US65.8bn –has been “aggressively” approaching customers in an effort to migrate them from server to cloud products. It will end support for its serve products in the next two weeks.

But Atlassian co-founder and co-chief executive Scott Farquhar said he expected cloud migrations to “continue for a long time to come”.

“In a few short years, we’ve heard “whys” turn to “whens” from customers exploring a cloud migration,” Mr Farquhar said in a letter to shareholders with fellow co-founder and co-chief executive Mike Cannon Brookes.

“Since October 2020 when we announced Server end-of-support (EOS), the number of enterprise seats that migrated to Cloud has increased by nearly 7x. However, as we have always said, Server EOS is just one milestone in our multi-year migration story.

“Today, migrations from data centre are driving more than 60 per cent of cloud migrations, and we’ll only see this trend accelerate. We’re also seeing less Server churn than we had originally assumed, which means the overall migration opportunity is larger than we had expected.”

In the past three months the Atlassian has doubled down on remote working being here to stay. It bought video messaging platform Loom for $1.5bn – which was its biggest acquisition in dollar terms to date.

It has also stepped up its AI capabilities. It joined a group of investors, including Telstra Ventures, to tip $US25m into Israeli start-up Tabnine, which has been touted as the first AI-powered assistant for software developers.

Mike Cannon-Brookes (baseball cap) and fellow founder of Atlassian, Scott Farquhar pictured together in their Sydney HQ.

Mr Farquhar he was “extremely proud” of Atlassian’s accomplishments but remains “laser-focused on executing against our top strategic priorities”

“We continue to take every opportunity to drive hard at our top priorities: cloud migrations, enterprise, ITSM (IT service management), and now, AI,” he said.

Mr Cannon-Brookes said: “The steady drumbeat of delivering innovation across our cloud platform continues as we rolled out our first wave of Atlassian Intelligence capabilities into general availability accelerating our customers’ productivity”.

“With over 20 years of experience and knowledge about how technical and non-technical teams plan, track, deliver, and collaborate, we are uniquely positioned to supercharge teams through the power of AI,” he said.

“While generative AI is now readily accessible, those looking past the smoke and mirrors know it’s only as good as the data it’s fed. That’s why we believe AI will be a true differentiator and opportunity for Atlassian. We bring a huge amount of experience and knowledge about how technical and non-technical teams work; how they plan, track, deliver, and collaborate.”

One customer, Mercedes-Benz said migrating to the cloud meant less time checking networks and running server updates.

“With data centres, we had to maintain a big team who was only checking networks, seeing if servers are running, installing updates, checking availability, things like that. In the Atlassian cloud, everything is done for us, and there’s less downtime and better performance,” said Mehmet Sari, of Mercedes-Benz’s modern collaboration platform team.

“To be competitive, we have to enable R&D (research and development), support, and all our teams. We do that by making it easier for them to collaborate with each other and enabling them to work faster on the cloud.”

Atlassian’s net loss fell to $US84.5m from $US205m in the previous corresponding period.