Unlike Zoom’s blowout, Slack’s earnings could ‘underwhelm’ despite the surge in remote work, an analyst says, thanks to fierce competition with Microsoft

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Despite the increase in remote work, Slack’s revenue growth in its first quarter earnings in June were on par with past reports, and Futurum Research founding partner Daniel Newman said that he doesn’t expect the company to perform any better in its Q2 numbers come Tuesday.

“The guidance once again looks like the growth is going to underwhelm,” Newman told Business Insider.

Even if the workplace collaboration app shows healthy increases, it might not be enough to please Wall Street, he said. 

“I think the market is going to continue to scrutinize growth even if it’s good,” he said, “Because there’s probably not going to be a more opportune moment in existence for Slack — or any other work from home technology — to gain adoption.”

The firm’s stock plunged 17% after-hours following its last report, and the stock is up a meager 6% since the beginning of the year.

Collaboration apps like Microsoft Teams, Zoom, and Slack have skyrocketed in popularity during the pandemic as remote work became the norm across the US and the world. Zoom, for example, reported blowout Q2 earnings in early September, boasting whopping 355% revenue growth from the year prior.

This follows Zoom’s 169% revenue growth year-over-year in Q1 compared to Slack’s 50% growth, and Zoom’s massive success with the work-from-home surge may not translate for Slack this quarter, either. This is in part because Zoom came into the coronavirus pandemic on an upswing, Newman said. 

“This didn’t all happen around COVID. [Zoom] was already picking up momentum,”  he said. “I think companies really needed that fast, go-live-on-video solution.”

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Meanwhile, Slack entered the pandemic with already-heavy competition from Teams, which has the benefit of being built into Microsoft’s 365 suite of collaboration tools.

“When companies were forced to go remote, they were also forced to standardize on platforms,” Newman said. “Microsoft got the biggest wave of full end-to-end collaboration.”

Teams and Cisco Webex offered more “holistic” solutions than Slack, according to Newman. Teams has also recently added new, competitive features, including AI tools in June that make participants look like they’re sitting together. 

Slack has had a few significant pieces of news this quarter, too: It announced in June that Amazon would use Slack for its internal workplace internal communications, and it bought the $41.9 million employee directory startup Rimeto in July for an undisclosed amount.

While analysts initially anticipated a more material impact on Slack’s business due to the remote work boom, Q1 failed to deliver on the hype. Whether the firm’s second quarter results will reaffirm Newman’s lackluster expectations or be a pleasant surprise, remains be seen on Tuesday. 

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Source:: Businessinsider – Tech


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