Atlassian (TEAM) falls 11% on earnings, analysts highlight disappointing cloud performance

Shares of Atlassian (NASDAQ: TEAM) are trading about 11% lower in pre-market Friday after the company reported a weaker-than-expected subscription revenue.

Atlassian reported FQ2 EPS of $0.45 on revenue of $873 million, which compares to the analyst consensus for earnings of $0.43 on revenue of $877.18M. Revenue increased by 27% while subscription revenue jumped by 40%, still missing the analyst consensus.

For this quarter, the company sees revenue in the region of $890-910M, in line with the consensus of $900.92M.

Raymond James analyst Adam Tindle reiterated the Market Perform rating on TEAM stock as “cloud continues to disappoint.”

“We should note that customer adds suggest churn is not an issue, and we believe this is more of a timing issue than structural problem at present. However, this trend coincides with pressure in the SMB customer cohort that has become increasingly reluctant to move from free to paid subscriptions, and we're increasingly concerned that this may become contagious across the customer base. We await stabilization in the business alongside a better setup for FY24,” Tindle said.

Truist analyst Joel Fishbein Jr. said the results show that headwinds are picking up for TEAM.

“Increasing headwinds in the quarter drove a second consecutive cut to their growth outlook in the cloud business. Peeling back the layers further, the segments that drove the outperformance in the quarter were centered around their on-prem businesses, while disappointment in the cloud segment raises concerns for the remainder of the year. We believe that the company has reset guidance to a beatable level, but after the valuation run-up to start the year, we remain Hold rated as we await better visibility and a more attractive entry point to put new money to work,” the analyst wrote in a client note.

By Senad Karaahmetovic

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