Slack Technologies signage was displayed outside of the New York Stock Exchange during the company's initial public offering last year.
Photo: Michael Nagle/Bloomberg NewsAs Slack Technologies showed Thursday, not all work-from-home stars are created equal.
Like its Bay Area counterpart Zoom Video, Slack has been a hot property for investors as the coronavirus pandemic has forced companies to send workers home en masse. Shares of the workplace collaboration software provider had soared 69% for the year ahead of its fiscal first quarter results Thursday afternoon. That blew away the 9% gain for the S&P 500’s software and services group and was even well ahead of most other hot cloud stocks. The BVP Nasdaq Emerging Cloud Index is up 43% for the year.
But unlike Zoom, Slack failed to deliver blowout results that would help justify such a run. Revenue jumped 50% to about $202 million. But that was only about 7% above the $188 million that was the high end of the company’s forecast. Two days prior, Zoom beat revenue consensus by 63% for the same period. Slack also raised the midpoint of its full fiscal year revenue guidance by only 1% while Zoom’s practically doubled. Slack’s shares slid following the results—down 13% in pre-market trades Friday.
Comparisons may not be fair. Like many other cloud-based software services, a world in which more employees work remotely is good for Slack. But Slack’s main selling point is to replace or enhance other forms of electronic communications that already exist. Zoom’s skyrocketing popularity was driven by the fact that video-conferencing suddenly was the only way to have a face-to-face conversation with someone you weren’t already living with.
That has quickly turned Zoom from a respected Silicon Valley upstart into a household name. The company noted in its own report Tuesday that its base of customers comprised of individuals and businesses with fewer than 10 employees surged, with many using Zoom “for personal and social reasons.” But that also sets up Zoom for the risk of a big comedown once the pandemic ebbs and face-to-face interactions are possible.
Slack’s more modest gains are likely more permanent. But the company also faces the same challenge of its many enterprise software peers in competing for corporate technology budgets that are shrinking in the wake of the pandemic’s shutdowns. The company withdrew its billings forecast for the fiscal year, noting that visibility is limited as it seeks to accommodate “distressed customers” with flexible contracts and billing terms. Still, having delivered 50% growth in a brutal quarter is impressive given the state of the world. The problem is, Slack’s stock was priced for some other kind of world.
Write to Dan Gallagher at dan.gallagher@wsj.com
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