(Bloomberg) – Atlassian Corp. continues to show its strength amid a pivot that defines the company in the cloud, a testament to the unique niche the vendor has carved into the increasingly crowded world of enterprise software.
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Since its inception, Atlassian, which makes tools to help with software development and collaboration in the workplace, has directly targeted developers and groups of employees within a business-rather than spending of resources to woo the company’s consumers such as chief information officer. The company, for example, invested early on making its signature project management tool Jira easy to download and use. That self-service approach has been key to Atlassian’s growth.
“We’re constantly evolving and getting better with that model every year,” said co-founder and co-Chief Executive Officer Mike Cannon-Brookes. “The cloud is even better for that. We still have a lot of expansion vectors. “
Atlassian seems to be encouraging its customers to move to the cloud. Sales grew 37% to $ 688 million in the three months to December, boosted by a 58% increase in cloud revenue, the Sydney -based company said in a statement on Thursday. Sales could be as much as $ 705 million in the current quarter, the company said, which is beyond expectations on Wall Street.
The shares, which have more than tripled in the past two years, jumped 9.7% to $ 319.17 Friday in New York, the best single-day earnings in more than five weeks.
“There’s still no other vendor we can see that really presents itself as a viable competitor,” said Mizuho managing director Gregg Moskowitz.
But some hurdles remain. In February, the company was poised to raise prices for its data center services and products, which could provoke backlash from customers. Its code repository known as BitBucket is now under pressure after Microsoft Corp’s 2018 purchase. of GitHub. And as Atlassian continues to invest in its IT services product – including previous acquisitions of Mindville, Halp and OpsGenie – the company will certainly lead larger competitors as it looks to expand its footprint within large corporation, a segment currently led by ServiceNow Inc.
Most critical, however, is its ongoing efforts to move customers from in-place products to the cloud. Such a move would allow Atlassian to more easily pitch existing users of other tools, as well as develop new products faster-both enhancements that could ultimately help give- emphasis on higher sales growth.
Atlassian did not disclose what percentage of its end users jumped. However, those who have completed the transfers so far are largely small to medium -sized businesses, according to Wells Fargo & Co analysts. and Michael Turrin. The real test comes as some of the company’s biggest customers decide whether to give up as well. And that transition should be accelerated soon.
“It’s very rare to encounter a customer who doesn’t understand that the cloud is their final destination,” Cannon-Brookes said. “We’ve provided long timeline leads, notice stages, so I think they’re clear where we’re standing.”
Data center subscriptions, viewed as a stepping stone to the cloud, grew 83% to $ 139 million in the most recent quarter. And more than 98% of the 10,021 new customers Atlassian acquired in those three months were for its cloud products.
Atlassian strives to put essential compliance protocols in place on its products to meet data regulations in countries like Germany and Australia, a step that is often required for global businesses before using cloud-based products. In the three months to December, one-third of the transfers were from data center products, the company said in a letter to shareholders.
That “tends to be bigger, more complex customers,” Cannon-Brookes said.
To help continue to motivate those steps, Atlassian is offering customers a 40% discount on the price. That promotional offer will be down 20% in June. It also raises the price on its products that still run on data centers or servers by up to 25%, increases that won’t affect Atlassian’s cloud customers.
“We’re not forcing them down any path,” Chief Revenue Officer Cameron Deatsch said in a conference call after the revenues were released. “It just comes down to the timing, budget and prioritization of IT projects.”
Some users may be hesitant to move to the cloud. Server revenue in the most recent quarter was $ 135.5 million. Although that is a 12% year-over-year drop and follows several quarters of similar declines, it shows that Atlassian products in place are still attracting some customers.
However, Atlassian isn’t ending support for its server products until 2024. And the momentum is clearly on the edge of the cloud.
“It’s a long-term transition we’re making,” Cannon-Brookes said.
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