TEAM — Cloud growth and cash
Atlassian's latest results offer a useful lesson: a company can raise its annual outlook while still facing questions about the pace of growth ahead.
On November 5, $TEAM reported fiscal first-quarter revenue of $1.77 billion, up about 24% from a year earlier. Cloud revenue grew 31%. Management raised its forecast for full-year revenue growth to about 13.75%, but expects cloud revenue growth of approximately 27% in the next quarter.
That difference does not prove the cloud business is weakening permanently. Quarterly comparisons and the timing of customers moving to cloud products can change reported growth. But it does give investors a reason to examine what happens after the migration wave, when growth needs to come from additional users, products and spending by existing customers.
The profit figures also need context. Adjusted operating margin rose, but adjusted earnings exclude stock-based compensation, which has an economic cost for shareholders. Quarterly buybacks exceeded free cash flow.
In the next report, compare cloud growth with customer expansion, stock compensation and free cash flow. The combination is more informative than either a raised forecast or a single quarter's growth rate.