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Atlassian (NASDAQ: TEAM) quarterly results revealed high revenue growth in both its Data Center and Cloud segments, but UBS analysts question the long-term sustainability of these increases, particularly in Data Center.
“Of the 64% growth of DC, 36pts was the net result of migrations (both server and cloud) and 8 points of forward seat expansions to avoid price increases,” UBS analysts Karl Keirstead, Jeff Hickey and Jack Fyda said in a Friday report. “Growth of 20% with price increases and organic seats “The expansion of the expansion is decent, however, the slowdown of next year's DC is an open question.”
“Management noted that the timeline for larger customers to migrate from DC to the cloud could take 'a few years,'” they added.
While UBS maintains its Neutral rating on Atlassian, the firm cut its 12-month price target on the stock by 20%, reducing it to $200 from $250.
Atlassian era down 7% during premarket trading on Friday.
Atlassian handily beat expectations for the third quarter of fiscal 2024 when it released its results Thursday afternoon.
The news that co-founder and co-CEO Scott Farquhar will step down from his role on August 31 does not signal significant changes for the software development and IT service management company, with co-founder Michael Cannon-Brooks remaining at the helm, UBS noted. .
Atlassian plans to host an Investor Day next Wednesday at 3 pm EST during its user conference, Team '24, in Las Vegas. It will be broadcast live here.
