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Slack revenue growth fails to impress, shares tank

[BENGALURU] Slack Technologies on Thursday posted slowing quarterly sales growth, disappointing investors who had expected a surge in demand for its workplace messaging app as companies rapidly adopt remote working tools and technology.

Slack also withdrew its 2021 billing outlook citing uncertainty driven by the Covid-19 pandemic, and said it had seen sales from some large customers slow down in the worst-affected industries, such as travel, hospitality and ride-sharing.

"There's less visibility into how spending will trend for the remainder of the year, particularly if the economic effects of the Covid-19 pandemic persist or worsen," chief financial officer Allen Shim said in a post-earnings call with analysts.

Shares of the company, which had surged nearly 80 per cent this year, dropped 16 per cent in extended trading.

Social distancing protocols have led many companies to shift to remote work, expanding the market for apps that allow workers to stay in touch and boosting Wall Street expectations for companies such as Zoom Video Communications and Slack.

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But unlike Zoom, which earlier this week nearly doubled its expectations for annual sales, Slack's lukewarm guidance and revenue growth underwhelmed investors who were expecting a blowout quarter.

The company's first-quarter sales rose 50 per cent, compared with a 49 per cent increase in the fourth quarter and a 67 per cent jump in the first quarter last year.

On Thursday, Slack forecast 2021 sales between US$855 million and US$870 million, representing a growth rate of 38 per cent at the top end of the range.

Investors had heightened expectations going into the quarter, and may have expected growth to be higher than reported, said DA Davidson & Co analyst Rishi Jaluria.

Slack's revenue of US$201.7 million came in above analysts' average estimate of US$188.1 million, according to IBES data from Refinitiv.


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