Productivity software company Atlassian Corp. Plc saw its stock fall by almost 10% in after-hours trading today despite posting solid third-quarter financial results that beat expectations.

The company reported earnings before certain costs such as stock compensation of 21 cents per share on revenue of $309.3 million, up 38% from the same period a year ago. Wall Street was hoping for earnings of just 18 cents per share on revenue of $304.65 million. Atlassian’s net loss for the quarter came to $202.8 million.

The performance was good enough, but everything fell apart when it came to Atlassian’s earnings guidance for the next quarter, which was below the range analysts were targeting. Company executives said they’re expecting a fourth-quarter profit of 16 cents per share, with revenue falling to between $329 million and $331 million. But Wall Street analysts had pegged its earnings at 19 cents per share on revenue of $372.2 million.

The forecast on the profit side, at least, wasn’t terribly short of expectations, but it was enough to send investors scurrying in any case. Atlassian’s stock was down 8.9% in after-hours trading.

Atlassian’s lower guidance was something of a cold shower for investors given its strong third-quarter performance, all the more so given that there’s no clear indication as to why it’s taking such a cautious position, said Charles King, an analyst with Pund-IT Inc.

“It could be that executives are concerned about global economic factors, including continuing trade issues between the U.S. and China, or political tensions like those resulting from North Korea’s hardening line on weapons development,” King said. “Then again, Atlassian’s debt levels likely make its leadership sensitive to potential challenges. Whatever the case, with its stock value having risen from just over $60 to $113 during the past 12 months, today’s selloff is hardly a kiss of death. In fact, it may simply reflect cautious shareholders taking profits while times are good.”

Another analyst, Holger Mueller of Constellation Research Inc., said Atlassian’s problem is it still needs to learn the art of managing guidance and then delivering on that guidance.

“This isn’t easy for vendors at Atlassian’s level of maturity, but it’s better to learn sooner rather than later,” Mueller said. “The good news is Atlassian has solid product and an attractive product roadmap. It’s also a key vendor for CxOs who need tools to build next-generation applications faster and better.”

Mueller’s colleague at Constellation Research, David Chou, added that Atlassian is definitely in growth mode but that the question comes down to how much of its growth translates to its bottom line.

“Atlassian has done a great job of creating products for the developers and knowledge workers where the adoption continues to grow at a great rate,” Chou said. “The focus has to turn toward enterprise customers in order to hit the positive projection on the street.”

In any case, Atlassian co-founder and Chief Executive Officer Mike Cannon-Brookes insisted that the company remains in good shape, pointing to its growing subscription revenue that now accounts for $166.5 million of its total. He also alluded to the more than 5,000 new customers added in the quarter, bringing its total to 144,038.

“We achieved a strong third quarter and wrapped up another successful Atlassian Summit, our flagship user conference,” Cannon-Brookes said in a statement.

The user conference saw Atlassian announce several product updates, including new features for its incident response platform Opsgenie and its productivity software Confluence. Atlassian also found time to acquire a software management startup called AgileCraft LLC that sells tools for tracking business projects, paying $166 million to purchase the company last month.

Photo: Atlassian