The stock market has done extremely well lately, so it isn't surprising that at least for a short time, the rebound in major market benchmarks would have to take a pause. For the growth-heavy Nasdaq Composite (^IXIC 1.99%), investors seemed prepared for a decline on Friday morning, although the roughly 0.9% drop in the Nasdaq after the market opened was well off lows from earlier in the overnight period.
Not every cloud computing company has its stock trade on the Nasdaq, but collectively, the influence of share-price movements in the sector has made itself felt. Cloud stocks have followed the broader tech trend higher in recent weeks, but earnings from two companies late Thursday poured some cold water on the enthusiasm for the sector. Read on to learn why Bill.com (BILL +0.68%) and Atlassian (TEAM +2.20%) were falling sharply Friday morning.
Bill.com has shareholders worried about a slowdown
Shares of financial automation software company Bill were down 23% as of 10 a.m. ET. The cloud software business's fiscal second-quarter financial results for the period ending Dec. 31 featured ongoing growth, but shareholders seemed to react negatively to its outlook for 2023.
The numbers from Bill were a good example of the growth that investors have seen across the cloud space. Revenue of $260 million was up 66% year over year, with core revenue from subscription and transaction fees rising 49% from the year-earlier period. Adjusted net income soared from roughly breakeven results a year ago to a profit of $49.4 million, working out to $0.42 per share.
NYSE: BILL
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Fundamentally, Bill's performance looked strong. The company served 435,800 businesses during the quarter and processed $67.3 billion in payment volume, most of which came on its stand-alone payments platform. In total, about 20.8 million transactions took place using either the Bill platform or its Divvy card-based system.
Yet investors weren't happy with guidance for about $1 billion in revenue and adjusted earnings of $0.99 to $1.05 per share for the full 2023 year. Even a $300 million stock buyback program wasn't enough to drive interest in the shares, which are now down since the beginning of the year after a steep drop in 2022.
Atlassian looks ahead to a challenging 2023
Shares of Atlassian moved lower by 10% following its quarterly report. The workplace collaboration software specialist's fiscal second-quarter financial results for the period ending Dec. 31 were better than many had anticipated, but its outlook for 2023 included some comments that made shareholders take pause.
Atlassian's growth wasn't as impressive as Bill's. Revenue of $873 million was up 27% year over year, with subscription-based revenue climbing at a 40% rate. Adjusted net income inched higher by only 4% to $114.7 million, working out to adjusted earnings of $0.45 per share.
NASDAQ: TEAM
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Co-founder and co-CEO Scott Farquhar tried to cast what's to come in 2023 in a positive light. Having dealt with unpredictable market conditions, Farquhar noted the importance of Atlassian helping its customers deal with new challenges while making sure that macroeconomic impacts on the cloud-based software company's business performance don't have a negative impact on its long-term prospects.
Yet with 2023 annual sales growth expected to fall to 25%, it's clear that Atlassian has moved past its hypergrowth phase. What comes next depends on the company's ability to keep coming up with innovative software that meets its clients' needs and draws in new customers. Atlassian has put together a good track record until now, but shareholders don't seem as confident as they have been in the past.
