The Atlassian share price is up 22% in the last month, here's why

Atlassian still considers there to be many opportunities, and plans to continue investing heavily and playing offense in its markets.

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International investors might have noticed the thunderous performance of the Atlassian Corporation (NASDAQ: TEAM) share price in recent weeks. In the space of one month, the Aussie software developer has increased nearly 23% in value.

The surge in the Atlassian share price means Australian co-founders Mike Cannon-Brookes and Scott Farquhar are hot on the tails of spots 1 and 2 on the Australian rich list.

At the time of writing, the Atlassian share price is US$329.42 (A$444.90). This puts the estimated net worth of Cannon-Brookes and Farquhar at around A$25.85 billion each, excluding other ventures.

So what is driving this astonishing growth in wealth? Well, in the words of management, it was "a ripper" quarter.

Results that beat expectations

A quick look at the one-month chart shows how the Atlassian share price had been chilling between US$260 and US$270 for most of the month. That was until 29 July, when the company reported its Q4 FY21 results.

  • Revenue increased 30% year over year (YOY) to US$560 million
  • Gross profit increased 28% YOY to US$462 million
  • Net loss narrowed to US$213 million compared to US$385 million in Q4 FY20
  • Over 23,000 net new customers added during the quarter

The metrics contained in the company's quarterly report exceeded expectations. A strong focus on a cloud-first approach resulted in a more than doubling of cloud migrations year over year.

Likewise, the strong performance was underscored by Atlassian surpassing the 200,000 customers milestone and US$2 billion in revenue. A huge push towards cloud is leading the charge in growth for the company. In fact, cloud revenue increased 47% YOY as large customers make the shift.

Guidance for FY22 gave investors more optimism. The company put year-over-year subscription revenue growth estimates at the low-to-mid 40% range. Adding, "Subscription revenue will continue to be the primary driver of revenue growth."

What did management say?

Highlighting the accomplishments of the quarter, Cannon-Brookes and Farquhar said:

There's a lot to celebrate, but we won't pause to party. Our sleeves are rolled up and we're keen to keep putting in the hard yards to seize the massive opportunities in front of us. Our job in FY22 is to keep building on our cloud migration momentum, invest to further strengthen our offerings so we can keep winning in our three addressable markets, forge human connections with each other as we figure out new ways of working in this digital-first world, and to just. keep. executing.

What's next for Atlassian?

According to the report, the company plans to continue investing heavily and playing offense in its markets. Atlassian still considers there to be many opportunities across agile development, IT service management, and work management tools.

As a consequence, gross margins are expected to decrease in FY22. This is due to the continued shift from server to cloud hosting. Similarly, operating margins and free cash flow will decline for the same reasons.

The Atlassian share price has delivered a return of 85.6% over the past 12 months. For comparison, the S&P/ASX 200 Index (ASX: XJO) has climbed 24% higher over the same timeframe.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Atlassian. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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