Atlassian Expands API Capabilities with Optic

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Enterprise collaboration solutions provider Atlassian (Nasdaq: TEAM) recently announced its third quarter results that surpassed market expectations. The company’s outlook outpaced market expectations as well, but the news of its co-founder and co-CEO Scott Farquhar stepping down caused some angst in the market.

Atlassian’s Financials

For the third quarter, revenues grew 30% to $1.19 billion, ahead of the market’s forecast of $1.1 billion. Adjusted EPS was up 65% to $0.89 and was ahead of the market’s forecast of $0.62.

By segment, Subscription revenues 41% to $1.07 billion. Maintenance revenues continued to fall 69% to $29.5 million. Other revenues grew 45% to $88.2 million.

During the quarter, Cloud revenues grew 31% to $703 million, and revenues from the Data Center surged 64% to $364.1 million. Marketplace and services revenues improved 43% to $92.2 million, and revenues from server fell 69% to $29.7 million.

Among other metrics, customers with greater than $10,000 in Cloud annualized recurring revenue (Cloud ARR), increased 19% to 44,336.

This was a milestone quarter for Atlassian Marketplace. The Atlassian Marketplace surpassed $4 billion in lifetime sales since its inception in 2012. The marketplace boasts of over 1,800 partners who have created more than 5,700 apps and integrations for their customers.

For the fourth quarter, Atlassian expects revenues of $1.12-$1.135 billion, compared with the Street’s estimate of $1.106 billion.

Co-founder Scott Farquhar announced plans to step down from his position of Co-CEO and Co-Founder and that Mike Cannon-Brookes will continue as CEO.

Atlassian’s API Focused Growth

Yesterday, Atlassian announced its plans to acquire San Francisco-based Optic, an API documentation and management tool that makes it easier for developers to publish accurate API docs, avoid breaking changes, and improve the design of their APIs. Optic’s test runner analyses test traffic using a local proxy and compares every request to the OpenAPI documentation and reports differences between an API’s actual behavior and its documentation. It helps manage API version control by computing the semantic difference between any two versions of the API and updating API changelogs to identify these version changes so every developer can review the code changes and the API changes before approving them. Optic is a smart API that enforces the latest API style-guide on new endpoints and helps ensure that existing API rules are met.

Atlassian plans to integrate Optic with Compass, to accelerate its ability to empower engineering teams and improve productivity by helping developers find the required documentation for faster shipping. Terms of the acquisition, or past financial details of Optic are not known. Prior to the acquisition, Optic was privately held and has less than 10 employees. It was being led by founder and CEO Aidan Cunniffe.

Atlassian’s stock is trading at $179.45 with a market capitalization of $46.1 billion. It touched a 52-week high of $258.69 in January and a 52-week low of $128.02 in May last year.

Atlassian’s stock has fallen since the start of the year as the market is troubled about its cloud growth. For the last quarter, data center and marketplace segments reported a much stronger growth than the cloud segment despite the $975 million acquisition of Loom last November.?The results so far suggest that organic growth for the company has slowed down.

Disclosure:?All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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