Atlassian stock software, Twilio, Cloudflare take a beating on guidance

Investors hit software stocks Atlassian (Team), Twilio (TWLO) And the Cloud Flare (Clear) Friday to issue a weak directive.

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TEAM stock is down nearly 30% to 121.96 in morning trading on Thursday stock market today. TWLO stock fell 34.8% to 42.60. Meanwhile, Cloudflare stock fell 17.2% to 41.70.

Atlassian reported first-quarter earnings of 36 cents, down 3 percent from a year earlier, below Wall Street estimates for a profit of 38 cents. Revenue rose 31% to $807.4 million, surpassing views of $806.4 million.

Billings, a measure of sales growth, was $798 million, up 27%. But that was not expected to reach $830 million.

The Australia-based company said it expects December quarter revenue of $845 million in the middle of its forecast, below expectations of $879 million.

“We were surprised by the magnitude of the slowdown in consolidated growth and more specifically cloud growth,” BMO Capital Markets analyst Keith Bachman said in a note to clients.

Moving software inventory to the cloud

“Management lowered its cloud revenue guidance for fiscal year 2023 from 50% year over year to a range of 40% to 45%, driven by a more pronounced drop in the rate of free-to-paid conversions,” Bachmann continued. “(They also noted) the growth rate of paid users from existing customers is slowing as customers slow hiring.”

Atlassian said it expects December quarter revenue of $845 million in the middle of its forecast. This represents an increase of 23% but less than analysts’ estimates of $879 million.

Founded in Sydney in 2002, Atlassian sells project management and collaborative software to software developers and IT engineering teams.

The software maker is moving to the cloud computing business model. Atlassian is phasing out sales of native software used in data centers to corporate customers.

TWLO Stock: Crypto, Consumer Weakness

Meanwhile, San Francisco-based Twilio reported a lower-than-expected loss of 27 cents per share compared to estimates of a loss of 36 cents. Revenue rose 33% to $983 million, beating estimates of $972 million.

But Twilio forecast December quarter revenue in the $995 million to $1 billion range, up 18.5% in the middle of guidance, missing expectations of $1.07 billion.

“Macroeconomics continues to deteriorate and is the primary driver of abandonment. Weakness has continued in cryptocurrency, consumer-on-demand, social, and most recently in e-commerce and retail,” Samad Samana, an analyst at Jefferies, said in a note.

Twilio’s communications tools enable app developers to embed voice, text, and video messages into their products. In addition, Twilio software makes it easy for cloud-based applications to communicate.

Software inventory headwind

Also, Cloudflare reported a profit of 6 cents, beating the zero earnings estimates. Revenue rose 47% to $253.9 million, beating estimates of $250.6 million.

San Francisco-based Cloudflare said it expects revenue for the December quarter of $274 million, up 42%, in the middle of its forecast, just above expectations of $273.7 million.

“The rise in the third quarter delivered the best loss compared to the previous quarter,” Shaul Eyal, an analyst at Cowen, said in a note. “The fourth quarter guidance reflects potential headwinds including an overall slowdown, lengthening sales cycles and currency exchange headwinds.”

Cloudflare Stock: The New Revenue Manager

Cloudflare has announced that Chris Merritt, the company’s chief revenue officer, is stepping down. Furthermore, he will be replaced by the former CEO of Twilio, Mark Boroditsky.

“Management has acknowledged that weak macro conditions are beginning to affect revenue,” Andrew Nowinsky, an analyst at Wells Fargo, said in a note. “(She) has noticed that sales cycles take longer to close at the end of the market, which is what almost all other companies are reporting. However, given the assessment, expectations are definitely higher for Cloudflare.”

Started in 2009, Cloudflare is accelerating and providing security for oriented web applications across its smart global network. In addition, the company competes in the corporate and consumer markets.

September quarter earnings reports for all three software stocks came after the market closed on Thursday.

Follow Reinhardt Krause on Twitter Tweet embed For updates on 5G wireless networks, artificial intelligence, cybersecurity and cloud computing.

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