Atlassian cracks $US500 million revenue on back of remote work shift

Atlassian’s growth through COVID-19 has continued with the Australian software giant crossing $US500 million ($650 million) in quarterly revenue for the first time as the shift to remote work drives use of its products.

The Nasdaq listed company on Friday revealed revenue of $US501 million for the second quarter, which is up 23 per cent on the same time last year and ahead of expectations of $US471 million.

Atlassian booked a loss of $US621.5 million mainly as a result of a debt security, after reporting a profit of $US124 million for the same time last year.

Atlassian founders Mike Cannon-Brookes and Scott Farquhar.Credit:Louie Douvis

The company, which is valued at $US56 billion, recorded subscription revenue growth of 36 per cent and total customers rose to 194,000, an increase of more than 11,600 during the quarter.

On a call with analysts co-founder and co-chief executive Scott Farquhar emphasised Atlassian’s long-term focus on the cloud with its server licence sales scheduled to end on February 2.

“We’re off to a strong start in our multi-year initiatives to migrate our server customers to the cloud,” he said. “While we’re proud of these results there’s plenty of hard work that lies ahead.”

Atlassian forecast a drop in revenue for the next quarter to between $US475 million to $US490 million and said revenue growth would slow through the remainder of the financial year as a result of the company’s slowing server business.

The company said COVID-19 was also affecting revenue with customer churn having an impact on cloud revenue due to the loss of customer’s subscription dollars.

Co-founder and co-chief executive Mike Cannon-Brookes said the coronavirus pandemic had led to increased demand for Atlassian’s workplace software products which include project management tools such as JIRA and Trello and document sharing platform Confluence.

“A difference in how people think about working and structuring their day in knowledge work in broader areas [is] leading to activity and usage in our products,” he said. “It’s not a hockey stick jump or a step turns jump, I would say it’s a continued slow march of improvement for us.”

Ahead of the results David Hynes, analyst at Canaccord Genuity, characterised Atlassian’s transition as “short-term pain for long-term gain”.

“Atlassian has done a good job of trying to frame all moving parts of what could be a financially messy transition to the cloud over the next year plus,” he said.

Mr Hynes said there were “greener pastures ahead” for Atlassian as a large cloud customer base tended to expand users 20 per cent faster and Atlassian’s largest customers could increase their server maintenance spend.

Atlassian’s shares closed at $US227.02 on Thursday and rose by $US3.59 in after hours trade to $US230.61.

Ahead of its earnings announcement some Atlassian server customers were hit by a cyber attack reported to be by an advanced hacker group believed to be connected to the Lebanese Hezbollah cyber unit which accessed more than 250 Oracle and Atlassian servers.

Atlassian’s chief information security officer, Adrian Ludwig, said the hackers accessed a known vulnerability and Atlassian had issued a patch two years ago to address the issue.

“We recommend that our server and data centre customers apply the latest security patches as soon as available to receive the latest features and fixes,” he said. “We also recommend that our customers move to the cloud versions of Atlassian products to receive automatic upgrades and patches.”

Mr Ludwig said Atlassian would continue to investigate the attack and share any updates with its customers.

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