Atlassian shares fall 23% after earnings, potentially wiping out more than $10 billion in valuation

Shares of Atlassian Corp. fell in Thursday’s extended session after the business collaboration software company’s earnings and revenue forecasts missed Wall Street expectations as executives saw signs of economic weakness.

Atlassian
TEAM,
+1.03%

shares tumbled 23% after hours, after rising 1% in the regular session, to close at $174.17.

The company reported a fiscal first-quarter loss of $13.7 million, or 5 cents per share, compared with a loss of $411.2 million, or $1.63 per share, in the year-earlier period. Adjusted earnings, which exclude stock-based compensation expense and other items, were 36 cents per share, compared with 37 cents per share in the year-ago period.

Revenue rose to $807.4 million from $614 million in the prior quarter. Analysts polled by FactSet had forecast 40 cents per share on revenue of $806.3 million.

Atlassian forecast second-quarter revenue of $835 million to $855 million, while analysts on average were expecting $879.3 million, according to FactSet. Executives also cut their full-year revenue guidance without providing a specific figure for total annual revenue; instead, they provided color in a letter to shareholders about the company’s various revenue segments.

In that letter to shareholders, Atlassian co-CEOs and co-founders Mike Cannon-Brooks and Scoot Farquhar said the company is tracking slower conversions from free to paid subscriptions for its free software and slower growth from its paying customers in quarter.

“The above two trends are the result of companies tightening their belts and slowing their hiring pace. In other words, Atlassian is not immune to broader macroeconomic impacts,” they wrote. “Our outlook suggests these trends will continue, but we will monitor, respond and inform you accordingly.”

“We will focus our investment on strengthening our market position and attracting top-level talent in this environment.” But we will balance these investments with the growth of our business and be responsive to macroeconomic conditions,” they continued. “So while we lower our FY23 revenue outlook based on macroeconomic headwinds, we maintain our mid-teen % operating margin outlook for the year.”

Atlassian was worth roughly $44 billion at its closing price, implying a loss of more than $11 billion in market cap if after-hours losses hold through Friday’s regular trading session. Atlassian shares are already down 54.3% so far this year, as the S&P 500
SPX,
-1.06%

decreased by 21.1%.

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