Atlassian (NASDAQ:TEAM) Q3: Beats On Revenue, Next Quarter Sales Guidance Is Optimistic

Jabin Bastian /
2022/04/28 4:11 pm EDT
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IT project management software company, Atlassian (NASDAQ:TEAM) announced better-than-expected results in the Q3 FY2022 quarter, with revenue up 30.2% year on year to $740.4 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $717.5 million at the midpoint, 3.38% above what analysts were expecting. Atlassian made a GAAP loss of $31 million, down on its profit of $159.8 million, in the same quarter last year.

Is now the time to buy Atlassian? Access our full analysis of the earnings results here, it's free.

Atlassian (TEAM) Q3 FY2022 Highlights:

  • Revenue: $740.4 million vs analyst estimates of $703.8 million (5.2% beat)
  • EPS (non-GAAP): $0.47 vs analyst estimates of $0.32 (46.8% beat)
  • Revenue guidance for Q4 2022 is $717.5 million at the midpoint, above analyst estimates of $694 million
  • Free cash flow of $312.2 million, up 58.1% from previous quarter
  • Customers: 234,575, up from 226,521 in previous quarter
  • Gross Margin (GAAP): 83.8%, down from 85% same quarter last year

“It was amazing to experience the enthusiasm of the Atlassian community in-person at Team ’22,” said Scott Farquhar, Atlassian’s co-founder and co-CEO.

Founded by Australian co-CEOs Mike Cannon-Brookes and Scott Farquhar in 2002, Atlassian (NASDAQ:TEAM) provides software as a service that makes it easier for large teams of software developers to manage projects, especially in software development.

The future of work requires teams to collaborate across departments and remote offices. Project management software is both driving this change and benefiting from it. While the trend of collaborative work management has been strong for a while, the Covid pandemic has definitively accelerated the demand for tools that allow work to be done remotely.

Sales Growth

As you can see below, Atlassian's revenue growth has been very strong over the last year, growing from quarterly revenue of $568.7 million, to $740.4 million.

Atlassian Total Revenue

And unsurprisingly, this was another great quarter for Atlassian with revenue up 30.2% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $51.9 million in Q3, compared to $74.5 million in Q2 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Atlassian is expecting revenue to grow 28.2% year on year to $717.5 million, in line with the 29.9% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 21.5% over the next twelve months.

There are others doing even better than Atlassian. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Customer Growth

You can see below that Atlassian reported 234,575 customers at the end of the quarter, an increase of 8,054 on last quarter. That is a little slower customer growth than last quarter but still in line with what we are used to seeing lately, suggesting that the company still has decent sales momentum.

Atlassian Customers

Key Takeaways from Atlassian's Q3 Results

With a market capitalization of $61.7 billion, more than $1.28 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We enjoyed the positive outlook Atlassian provided for the next quarter’s revenue. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, there was a slight slowdown in customer growth. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. But the market was likely expecting more and the company is down 3.8% on the results and currently trades at $250 per share.

Should you invest in Atlassian right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.