UPDATED 20:15 EDT / JANUARY 23 2020

CLOUD

Atlassian stock leaps on strong subscription revenue growth

Enterprise productivity software provider Atlassian Corp. Plc. has made a solid start to the year, posting fiscal second-quarter financial results today that easily beat expectations.

The results were boosted by strong growth in subscription revenue and helped the company’s stock jump almost 10% in after-hours trading.

The company reported a profit before certain costs such as stock compensation of 49 cents per share on revenue of $408.7 million, up 37% from a year before. Wall Street had pegged Atlassian’s profit at just 27 cents on revenue of $388.9 million.

Atlassian sells project management and collaboration software for developers and engineers. Its main products are its Jira product tracking tool and its Confluence collaboration software, which account for about two-thirds of its revenue.

The real highlight of the quarter was Atlassian’s impressive subscription revenue growth, which rose to $228.6 million, up from $152.5 million a year before. The company added that its customer count on a net basis grew by 5,003 in the quarter, giving it a total customer count of 159,787.

Atlassian co-founder and co-Chief Executive Scott Farquhar said the subscription revenue growth underscored the progress the company is making as it pursues a cloud-first strategy. “This is just another small step on our long-term journey to build an enduring company,” he said.

“Enterprise need to build software again, next-generation applications specifically,” said Holger Mueller, an analyst with Constellation Research Inc. “This allows them to be the disrupters in the era of digital transformation. Vendors like Atlassian that help enterprises build software and achieve enterprise acceleration are doing well.”

Atlassian has also been busy on the product front in the last quarter. In December it launched a new tool called Forge that’s designed to help developers build enterprise-ready cloud-based apps that can easily integrate with its products. That followed the addition in October of new artificial intelligence-based automation features in its Trello task-tracking tool.

For guidance, Atlassian said it expects third-quarter revenue of between $395 million and $399 million, with a profit in the region of 20 cents per share. Wall Street had earlier forecast revenue of $397.1 million, with a profit of 22 cents per share.

Photo: Atlassian

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