Unlike Zoom, Slack’s Earnings Didn’t Impress Investors

Slack Technologies (NYSE:WORK) stock fell over 14% on June 5 after reporting its first-quarter earnings on June 4 after the closing bell. The software company delivered better-than-expected numbers in the first quarter. However, investors were still disappointed. The company didn’t deliver noteworthy growth, just like Zoom Video Communications (NASDAQ:ZM) experienced during the COVID-19 outbreak.

Slack’s revenue growth versus Zoom’s growth

The company reported losses of $0.02 per share on an adjusted basis in the quarter. In comparison, analysts expected losses of $0.06 per share. Slack also reported upbeat revenues of $201.7 million in the quarter, which was above analysts’ expectations of $188.1 million. Slack’s revenues grew 50% year-over-year in the quarter. However, the revenue growth rate hardly grew from 49% in the previous quarter despite a surge in customers amid the COVID-19 pandemic.

Notably, many businesses and organizations resorted to work-from-home options during the lockdown. In such a scenario, Zoom Video and Slack’s products helped businesses and organizations communicate. While Slack’s revenue growth remained almost flat from the previous quarter, Zoom Video’s revenues skyrocketed 169% YoY in its recent quarter last week. Zoom Video’s earnings also more than doubled in the quarter.

Slack’s user growth

Slack didn’t disclose the daily user count during the quarter. However, the company had 12.5 million connected users on its platform on March 25, which was much higher than 10 million connected users on March 10, as disclosed in a CNBC report. Slack also recorded 12,000 net new paid subscriber additions during the quarter. The paid subscriber additions were much higher than the additions of about 5,000 in the previous quarter.

Microsoft (NASDAQ:MSFT) Teams had over 75 million daily active users at the end of April, which was much higher than 44 million users in March and 20 million daily users in November 2019.

What to expect in the coming months?

Slack still expects losses in the coming months. The company anticipates an adjusted loss of $0.03 to $0.04 per share in the second quarter. For fiscal 2021, Slack has narrowed its loss forecast and expects a loss of $0.17 to $0.19 per share on an adjusted basis. Earlier, the company expected losses of $0.19–$0.21 per share. Analysts expect a loss of $0.03 per share in the second quarter and $0.16 per share in fiscal 2021.

The company also expects its revenues to be $206 million–$209 million in the second quarter. For fiscal 2021, Slack forecasts $855 million–$870 million in revenue, which is higher than the previous guidance of $842 million–$862 million. Analysts expect revenues of $207.9 million in the second quarter and $869.2 million in fiscal 2021.