IT project management software company, Atlassian (NASDAQ:TEAM) reported results ahead of analyst expectations in the Q3 FY2023 quarter, with revenue up 23.6% year on year to $915.5 million. The company expects that next quarter's revenue would be around $910 million, which is the midpoint of the guidance range. That is slightly below analyst expectations. Atlassian made a GAAP loss of $209 million, down on its loss of $31.1 million, in the same quarter last year.
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Atlassian (TEAM) Q3 FY2023 Highlights:
- Revenue: $915.5 million vs analyst estimates of $901.8 million (1.52% beat)
- EPS (non-GAAP): $0.54 vs analyst estimates of $0.33 (62.5% beat)
- Revenue guidance for Q4 2023 is $910 million at the midpoint, below analyst estimates of $918.9 million
- Free cash flow of $349.7 million, up 139% from previous quarter
- Customers: 259,775, up from 253,177 in previous quarter
- Gross Margin (GAAP): 81.6%, down from 83.9% same quarter last year
“Connecting with the Atlassian community in-person at Team ’23 was incredible, and the enthusiasm for our product announcements, particularly Atlassian Intelligence, was unmatched,” said Mike Cannon-Brookes, 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 two years, growing from quarterly revenue of $568.7 million in Q3 FY2021, to $915.5 million.
This quarter, Atlassian's quarterly revenue was once again up a very solid 23.6% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $42.7 million in Q3, compared to $65.3 million in Q2 2023. 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 19.8% year on year to $910 million, slowing down from the 35.8% 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 19.9% over the next twelve months.
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Customer Growth
You can see below that Atlassian reported 259,775 customers at the end of the quarter, an increase of 6,598 on last quarter. That is a little better customer growth than last quarter and in line with what we have seen in previous quarters, demonstrating the company has the sales momentum required to drive continued growth. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is running smoothly.
Key Takeaways from Atlassian's Q3 Results
Sporting a market capitalization of $37.2 billion, more than $1.98 billion in cash and with positive free cash flow over the last twelve months, we're confident that Atlassian has the resources it needs to pursue a high growth business strategy.
We were very impressed by Atlassian’s very strong acceleration in customer growth this quarter. And we were also happy to see it topped analysts’ revenue expectations, even if just narrowly. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter slightly missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. But investors might have been expecting more and the company is down 11.6% on the results and currently trades at $134.99 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.