What happened 

The technology stock segment of the market has been treated like a monolith for most of 2022, but that changed in a big way on Friday. Some companies continue to see growth and improving financials despite a weakening economy while others are seeing rough roads ahead. 

Three companies that exemplify this are Block (SQ -1.57%), Appian (APPN 0.19%), and Atlassian (TEAM -0.22%). Block traded as much as 18.2% higher on Friday and is up 10.1% at 1:30 p.m. ET. Shares of Appian were off 25.6% at their low and are currently down 24.6% while Atlassian plunged as much as 33.9% and is now down 32.3% on the day. 

So what 

Third-quarter financial results were the reason for the big reaction to each stock today and I think it's telling the direction each is going given their businesses and end markets. Block, which serves merchants with the Square app and consumers with the Cash App, said non-Bitcoin revenue was up 35.7% to $2.75 billion and net loss was a modest $14.7 million, or $0.02 per share.

Gross profit at Block increased 38% from a year ago to $1.57 billion with the Square ecosystem growing gross profit by 29% to $783 million and Cash App profits increasing 51% to $774 million. There's clearly strong momentum in the financial space and Block is growing and increasing margins simultaneously, which is key in a market like this. 

Appian said that quarterly revenue was up 27.5% to $117.9 million but the net loss widened from $25.4 million a year ago to $44 million, or $0.61 per share. A 37.3% increase in operating expenses to $121.9 million can be blamed for the growing losses, but also show how much work the company has to do to improve profitability.

Guidance for fourth-quarter revenue of $121.5 million to $123.5 million and a loss of $0.36 to $0.42 per share didn't leave a lot for investors to like either. 

Atlassian's fiscal first quarter of 2023 was similar with revenue up 31.5% to $807.4 million and non-GAAP (adjusted) net income declining $1.9 million to $92.5 million. What really spooked investors was management saying that customers of free versions of the company's products aren't upgrading to paid versions at the same rate as they have been in the past.

Now what 

The software-as-a-service (SaaS) business is supposed to bring with it great operating leverage and ultimately profitability, but that's not happening at the pace investors expect at Appian and Atlassian. And cutbacks in corporate spending already appear to be hitting their top lines. 

Block, on the other hand, is so essential to small businesses that there's little to cut. Management has also managed to contain expenses, leading to improving financial results and the company getting close to profitability. 

Investors have the bottom line more in focus than ever and that's balanced with expectations that revenue will continue to grow. Block was the only company to deliver in the third quarter, although Atlassian has a chance to recover if it can keep costs under control in fiscal 2023.