Slack shares plummet after it reports steady revenue growth – but sees little benefit from coronavirus-related trend toward remote working
Shares in Slack plunged late last week as investors showed their disappointment that the company had not particularly benefited from remote working trends, although it continued to show steady revenue growth.
Slack reported its first-quarter earnings only two days after Zoom Video said it had seen a 169 percent revenue jump from the same period a year earlier.
The boost came from surging demand, including from corporate customers, raising hopes that Slack would deliver similar numbers.
Slack, however, said its revenue had grown only 50 percent during the quarter, compared with 49 percent the previous quarter.
Revenue reached $201.7 million (£160m) for the three months to the end of April, with the company forecasting $206m to $209m for the second quarter, above the $200m analysts forecast.
The company reported a pro forma loss of 2 cents per share in the quarter, compared with the 6 cents analysts expected.
But the figures were not enough to please investors, who drove Slack’s share price down by up to 17 percent in extended trading on Thursday evening.
The shares dropped another 17 percent on Friday morning before closing down 14.12 percent.
Slack chief executive Stewart Butterfield said Slack was more complex than Zoom’s straightforward videoconferencing service, and as such as “a harder lift” for new customers.
But he said the service was also unlikely to see increased churn as users return to office working patterns.
Remote working shift
Slack is not designed specifically for remote working, but to make it easier for teams to collaborate. The company sees it being used alongside existing tools, such as videoconferencing apps.
However, Butterfield did say he sees remote working as a shift of “generational magnitude” that affects the outlook of companies such as Slack, and noted that the company added a record 12,000 paid customers during the quarter, bringing the total to 122,000.
In the prior two quarters Slack added about 5,000 new paid customers.
Butterfield said the company is focused on acquiring new customers, and sees the benefits of this drive should show up in the next year and in 2021.
Amazon cloud deal
Slack said it has expanded its relationship with Microsoft cloud rival Amazon, with Amazon to adopt Slack for its own staff and to integrate Slack with Amazon Web Services applications, including the Chime communications service.
Up to the earnings announcement Slack’s shares had more than doubled from a low in mid-March to trade for the first time above their level when the company made its stock market debut last year.
A significant drop in Slack’s share price in March came after the company told investors it was unlikely to gather any near-term benefit from the shift to remote working.