Atlassian Corporation Plc (NASDAQ: TEAM), a supplier of enterprise IT services, wants to modernize its business and phase out the supply of so-called server services, shifting all users to the cloud. It is expected that such a move will result in a large rise in revenue per client in three years.
Atlassian is a software company that specializes in remote and hybrid work. The client list is divided among technical and non-technical firms, with around half of them being technical. TEAM is one of the few companies that offers three product categories: development operations, IT service management, and team management. The majority of rival work management solutions concentrate on one of these categories, giving Atlassian the upper hand. The firm now has 226,500 consumers as a result of this advantage.
Atlassian Corporation Plc (TEAM) used to offer three types of solutions: cloud, data centres, and servers. Last but not least, a license for local versions of the company’s software is provided. Customers who had previously purchased licenses would be moved to the cloud, according to the developer. Atlassian has ceased upgrading these licenses and will no longer support server products in general in 2024.
In the immediate term, Atlassian Corporation Plc (TEAM)’s margins will be squeezed as a result of this move, since the firm will need to invest more in marketing. Atlassian’s gross margin declined from 84.1 percent to 83.3 percent in the second quarter of the fiscal year 2022, which ended December 31, 2021. Furthermore, the business anticipates a drop in gross margin to 82.5 percent in the third quarter of the fiscal year.
However, the organization anticipates considerable revenue growth in the long run, as cloud clients pay a monthly subscription price and may simply add more products to boost productivity. As a result, TEAM believes that a large customer that spends $30,000 per platform per year as a server-client would pay $94,500 per year three years from now if it becomes a cloud client.
As a result, Atlassian Corporation Plc (TEAM) is able to preserve its market-leading position in the $29 billion industry. The firm may feel confident and expect sales growth because of its distinct consumer base.
TEAM shares were worth $245.29 at the April 22 trade. Its market capitalization has risen to $65.11 billion.