MarketWatch First Take: Slack was judged by Zoom standards, and it didn’t end well

MarketWatch First Take: Slack was judged by Zoom standards, and it didn’t end well

5 Jun    Finance News

After Zoom Video Communications Inc. reported one of the most spectacular quarters in enterprise software history, investors expected a lot from Slack Technologies Inc.

Too much, it turns out.

Slack WORK, -4.91% sank nearly 15% in after-hours trading Thursday, moving back to the range it had last week before a run-up ahead of its earnings report. Slack reported a 50% jump in revenue and surpassed $200 million in quarterly sales for the first time — a nice little quarter, but nothing compared with Zoom Video ZM, -6.03% .

Slack’s internal messaging and collaboration software and Zoom’s videoconferencing offering have been mentioned in the same breath as companies benefiting from workers being forced to stay home during the global COVID-19 pandemic. But the results were far different — while Zoom nearly doubled its annual revenue guidance, Slack raised its sales forecast less than 2%, to a range of $855 million to $870 million.

More from Therese: Zoom’s astounding quarter shows it expects to be a force even after workers go back to the office

Investor reception aside, the results from Slack were still impressive.

“We added a record of over 90,000 net new free and paid organizations using Slack in the quarter, bringing the total to more than 750,000,” Slack Chief Executive Stewart Butterfield said in Thursday’s earnings call. “We also added a record 12,000 net new paid customers in the quarter, bringing the total to more than 122,000.”

Slack’s need to convert many of its new, free users to paid subscribers is similar to Zoom’s, but Slack as a program is not as easy to pick up and use occasionally as videoconferencing. Butterfield said that most of the new additions in the quarter were trying Slack for the first time, and that he is seeing Slack becoming “a core part of the IT spend.”

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“We expect to be able to convert a large number of those over the course of the year,” Butterfield said.

Investors who have been lumping Zoom and Slack together need to see the differences. While Slack is a growth company that is also benefiting from the work-at-home trend, it will do so at a slower pace than the meteoric levels of the aptly named Zoom.

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