Key Points
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Asana’s revenue growth rate has been decelerating, which could limit how much its bottom line can grow once it achieves profitability.
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Competing offerings from Microsoft, Alphabet, and Atlassian further limit Asana’s ability to raise prices and boost margins.
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Peer Atlassian is growing revenue significantly faster.
- 10 stocks we like better than Asana ›
Software-as-a-service company Asana (NYSE: ASAN) has shed more than 40% of its value year to date and is a far cry from the $100-plus per share it commanded during the pandemic. Some investors view most dips as buying opportunities, but in this case, you shouldn’t.
Growth has been decelerating lately
Asan’s main product is a work and project management platform that leans on AI automation. The stock trades now at a price-to-sales ratio slightly above 2, but the company’s lack of profitability and meaningful revenue growth deceleration should be enough to keep savvy investors from accumulating shares. Revenue rose by 9.5% year over year in the company’s fiscal 2027 first quarter, which ended on April 30.
Growth rates looked better in previous years. Asana delivered 9% year-over-year revenue growth in its fiscal 2026 first quarter and 13% revenue growth in its fiscal 2025 first quarter. You’d have to go back to Asana’s fiscal 2024 to find a first-quarter growth rate above 20%.
Chief Financial Officer Aziz Megji made a point of mentioning the company’s “momentum in AI product adoption,” but not every AI stock is a winner. Asana is only projecting revenue growth of up to 9.2% in its fiscal 2027 second quarter. That’s the same maximum growth rate Asana anticipates for its full fiscal 2027.
Asana does not have pricing power
Asana’s workflow tools help organizations efficiently assign tasks, but it’s far from the only competitor in the space. Atlassian (NASDAQ: TEAM) competes with Asana through its Trello and Jira products. Microsoft offers a directly competing product, Microsoft Planner, which is included as a bonus in most Microsoft 365 plans. Alphabet has Google Sheets, Tasks, and Calendars, which can help with some task management.
Atlassian is also growing faster than Asana. The former posted 32% year-over-year revenue growth in its fiscal 2026 third quarter, which ended on March 31. If Asana had that growth rate, the conversation around the stock would be very different. However, the fact that a peer has much higher growth rates adds to the argument that investors should be cautious about buying Asana stock.
All this competition, particularly from big tech players, also limits Asana’s ability to raise prices. While cost management has gotten the company closer to breakeven, those moves are short-term profitability drivers. Eventually, the slow revenue growth will impose a tight ceiling on how much Asana can expand its profit margins.
The company improved its generally accepted accounting principles (GAAP) operating loss from 23% of its revenue in its fiscal 2026 first quarter to only 7% of revenue in its fiscal 2027 first quarter. In that light, the point at which it could reach profitability appears to be getting much closer, but those tepid growth rates suggest that investors should exercise caution with this stock.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Atlassian, and Microsoft. The Motley Fool has a disclosure policy.
