Work management platform provider Asana (ASAN, Financial) slightly exceeded Q2 EPS and revenue estimates, signing a record number of multi-year deals. However, soft guidance for Q3 and FY25 has overshadowed these results, leading to a sharp decline in shares. This disappointing outlook contrasts with Monday.com (MNDY, Financial), which reported an impressive beat-and-raise Q2 earnings on August 12, indicating ASAN may be losing ground to its competitor.
- During the earnings call, CEO Dustin Moskovitz mentioned some deals were pushed out but remained in the pipeline. ASAN is facing weakness in the technology sector due to ongoing budget scrutiny and longer sales cycles. Excluding the technology vertical, ASAN's Q2 revenue growth was in the mid-teens, compared to a reported growth of 10.3%.
- ASAN's dollar-based net retention rate dropped to 98% in Q2 from 100% last quarter, due to large seat adjustments. Positively, ASAN believes its net retention rate is stabilizing, with the worst of the seat adjustment headwinds behind them.
- ASAN adjusted its FY25 revenue guidance to $719-$721 million, down from the previous $719-$724 million, due to unaccelerated trends.
- Despite current weaknesses, ASAN's innovations in AI could drive growth in the coming quarters. In October, ASAN plans to launch Asana AI Studio, allowing customers to build, deploy, and enhance workflows with AI. Additionally, new licensed add-on products like Resource Planning are under development.
The main takeaway is that ASAN's Q2 report did not meet the high standards set by MNDY, as the company faces significant headwinds in the technology sector. Although the FY25 revenue guidance revision was modest, investor concerns about slowing growth are making ASAN an easy target for selling.
