Slack fails to reap Zoom-like revenue boost from remote working spike

9 Sep 2020356 Views

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While Slack’s revenue was up 50pc, it failed to meet the expected surge in demand with millions now working from home.

Slack shares dipped by up to 20pc in extended trading yesterday (8 September) despite its latest quarterly earnings beating expectations.

The published figures showed that revenue was $215.9m for the second quarter, versus the $209.1m expected by analysts. This marked growth of 49pc compared to the same quarter last year, meaning the company’s revenue has grown by approximately 50pc year on year in each of the last three quarters.

It reported a net loss of $73m, which is substantially less than the $360m it lost this time last year. The communication platform now has 130,000 paying customers, up 30pc year on year.

Slack co-founder and CEO, Stewart Butterfield, said this was driven by its Slack Connect communications tool, which has more than 52,000 paid customers – up 160pc on this time last year.

However, this growth may not be as dramatic as the boost seen by other remote working tools during Covid-19. Video conferencing platform Zoom announced earlier this month that its revenues jumped by 355pc year on year in the latest quarter. Founder and CEO Eric Yuan said Zoom’s revenue forecast for the full fiscal year has been raised to more than $2.37bn, anticipating an annual increase of more than 280pc for the company.

In an investor call, Butterfield said that his company had experienced some “macro-related headwinds” in Q2, and that the downsizing and hiring freezes placed on a number of its customers directly impacted its earnings.

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“Because of our fair billing policies and the substantial number of smaller customers on monthly plans, it shows up much more quickly than it would for others in our industry,” he said.

“On the enterprise side, there was also more budget scrutiny, especially from new categories, with longer adoption curves.”

Competition with Microsoft

In July, Slack filed an EU antitrust case against Microsoft over its rival messaging product, Teams, accusing the tech giant of being engaged in an “illegal and anti-competitive practice” by bundling Teams with its Office 365 enterprise suite in a way that is designed to eliminate rivals. This, Slack said, would be a breach of the European Commission’s antitrust rules.

When asked how the competition may impact Slack’s business, Butterfield said: “We’re now in quarter 14 of competing with Microsoft. We’ve won over and over again in Office 365-using customers.

“So while no doubt that it causes some friction and it’s another thing for us to overcome, it doesn’t put any kind of ceiling or limiter on our growth.”

Updated, 11.10am, 9 September 2020: This article was updated to include more recent financial results from Zoom.

Colm Gorey is a senior journalist with Siliconrepublic.com

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