Investing.com -- Shares in Atlassian (NASDAQ:TEAM) spiked by more than 20% in premarket US trading on Friday after a surge in demand from enterprise clients for the company's cloud software led it to raise its annual revenue growth outlook.
The boom in enthusiasm around artificial intellgence has persuaded many businesses to start shelling out more cash on the cloud computing capacity needed to underpin the nascent technology. Many firms are also pushing to shift their operations onto the cloud in a bid to cut down on costs.
Revenue at Atlassian in the quarter ended in September jumped by 21% to $1.19 billion, above analysts estimates of $1.16 billion, according to LSEG data cited by Reuters. Cloud revenue in particular rose by around 31% to $792.3 million during the period.
Much of Sydney, Australia-based Atlassian's revenue is derived from its collaboration tools like Jira, a software platform for project management and planning, and its Confluence content creation offering. Its more than 300,000 customers include firms like social media group Reddit and automaker Mercedes-Benz (OTC:MBGAF).
For its current quarter, Atlassian said it now expects to post revenue of $1.23 billion to $1.24 billion, versus its previous outlook of $1.23 billion.
The company also sees fiscal year 2025 revenue expanding by 16.5% to 17.0%, an improvement from its prior forecast of roughly 16%.
Analysts at KeyBanc upgraded their rating of Atlassian's stock to "Overweight" from "Sector Weight," citing optimism around the opportunities facing the company. However, they flagged lingering caution around "potential execution risk" and potential deterioration in the broader economic environment.
"Coming off strong [fiscal first quarter] results, we feel better that guidance is appropriately set to facilitate a more consistent beat/raise cadence going forward," the analysts said in a note.
(Reuters contributed reporting.)