What Happened?
Shares of IT project management software company, Atlassian (NASDAQ: TEAM) jumped 22% in the pre-market session after the company reported strong fourth-quarter (Q2 FY25) results, which reflected stabilization in the mid-market, improved enterprise execution, and continued adoption of its cloud platform. Fourth quarter results blew past analysts' estimates for key top-line metrics, including billings, and revenue. Notably, the company recorded a convincing beat in cloud revenue, which is a key focus of the market, and raised its FY25 Cloud growth forecast to approximately 26.5% (vs. previous guidance of 24%). Growth in the data center segment also exceeded Wall Street's expectations as the company observed more large deals and renewals. Adding to the good news was that revenue guidance for next quarter came in higher than Wall Street's estimates. Zooming out, we think this was a very solid quarter.
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What The Market Is Telling Us
Atlassian’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. But moves this big are rare even for Atlassian and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 22.9% on the news that the company reported a "beat and raise" quarter. Third-quarter earnings results beat analysts' revenue expectations, with all-important Cloud segment revenue growth handily beating expectations. Its gross margin also improved.
Looking ahead, guidance was strong, with next quarter's cloud revenue growth of 27% year-on-year also above expectations and strong on an absolute basis. The company also raised its full-year revenue guidance for the Cloud and Data Center segments. There had been doubts about top line momentum, especially for Cloud revenue, so this quarter puts a big dent in the bear case. Overall, this was a very solid quarter.
Atlassian is up 27.8% since the beginning of the year, and at $310.07 per share, has set a new 52-week high. Investors who bought $1,000 worth of Atlassian’s shares 5 years ago would now be looking at an investment worth $2,108.
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