What happened
Shares of business software expert Atlassian (TEAM -8.97%) closed Friday's trading session 13.5% lower. The company posted analyst-stumping results for the third quarter of 2022, but the bears found enough motivation in a mixed slate of fourth-quarter guidance to take the stock down anyway.
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So what
Your average analyst expected Atlassian to report adjusted earnings of roughly $0.32 per share on sales near $701 million in the third quarter. Instead, the company served up top-line revenues of $740 million and earnings of $0.47 per share. Revenues rose by 30% year over year, led by a 60% surge in cloud-based revenues.
Looking ahead to the fourth quarter, Atlassian's management set up the midpoint of their guidance target at $718 million, just ahead of the Street consensus at $710 million. However, earnings guidance was aimed at $0.24 per share, falling short of the average analyst target near $0.30 per share.
Now what
The maker of business tools such as the Jira project-tracking suite and the Trello collaboration platform tends to pump a large portion of its gross profits directly into growth-promoting operating budgets at every turn. The company is hiring software engineers at a record pace right now, for example. Furthermore, Atlassian held its global user conference at the start of the fourth quarter, adding significant operating costs to the period. So it's no surprise to see the bottom-line guidance come in a bit light.
And this is not Atlassian's first rodeo. The company has a long history of setting up modest guidance targets, only to knock them down with ease.
The stock isn't cheap, trading at 160 times forward earnings and 29 times trailing sales, but the premium price buys you a market leader with a stellar growth record.
