Last year, during the same quarter, only 10 customers moved from the higher paying bracket to a lower paying one. He added that less than 20% of its customers are in industries directly impacted by the pandemic.Īs businesses shrank and reduced spending on Slack, it also saw 50 customers who were paying between $100,000 to $150,000 annually drop down to paying between $50,000 to $100,000 a year for the service. Slack's growth in the first quarter of this year was also underwhelming, so given the results reported Tuesday, Slack's now had two quarters of growth on par with pre-pandemic levels, while its peers have show much more growth.īutterfield said on the analyst call that many companies were scrutinizing budgets more during the last quarter and that "the urgency at the moment favors short-term solutions to solve immediate problems," suggesting that this dynamic is not benefiting Slack. CFO Allen Shim also said that the current situation makes its sales cycle longer.įor the first half of the year, Slack gave customers affected by the pandemic $11 million in concessions to help lighten their financial burdens, though $7 million of that was in the first quarter alone, Shim said on the analyst call. While Slack did sign on new customers - 8,000 new paid customers during the quarter, to be precise - overall growth wasn't as fast as Wall Street was expecting. That means more paid customers are reducing the number of people in their organization using Slack, or electing to not renew subscriptions.Īnalysts also speculate that competition from rival Microsoft Teams could be playing a factor in why Slack hasn't seen rapid growth. Slack has seen more paid customer "churn" and a decrease in expansion within existing paid customers since the beginning of the year, according to a quarterly filing. On a call with analysts following the earnings release, CEO Stewart Butterfield said many of Slack's customers are themselves facing economic pressures in the pandemic. Davidson was more optimistic, and said he thinks this is "a case of just the near-term headwinds outweighing the longer-term tailwinds." "And given the work from home boom, the company failed to impress in either quarter." If Slack was going to show growth like Zoom did, "it likely would have been last quarter, but this quarter should also have been strong," Futurum Research analyst Newman said. So despite beating the consensus view for the quarter on its earnings, it wasn't a blockbuster win like Zoom, which is what investors were expecting, analysts told Business Insider. But the growth of Zoom, Teams, Webex and others in the space leaves a lot of questions as to whether Slack will see continued growth," said Dan Newman, an analyst at Futurum Research. However, compared to other remote work beneficiaries like Zoom, which reported a 355% year-over-year revenue increase last week, Slack's numbers have been underwhelming to many observers. Slack's revenue of $215.9 million for the second quarter showed 49% revenue growth from a year prior, on par with the growth the work chat company saw in the previous two quarters. Slack shares fell almost 20% after hours, as it reported earnings results that beat Wall Street expectations, but still showed slower growth than many expected. Visit Business Insider's homepage for more stories. ![]() Some analysts also speculate that competition from rival Microsoft Teams continues to weigh on Slack, making it that much harder for the company to show growth.The slower growth could be attributed to Slack customers reducing the number of employees covered by their subscriptions, or electing not to renew their paid plans with the company amid the economic pressures of the pnademic.Compared to remote work beneficiaries like Zoom, which last week reported a 355% year-over-year revenue increase, Slack's numbers have been underwhelming to analysts.Slack posted revenue growth of 49% year-over-year - the same as its pre-pandemic growth rate.Slack shares fell almost 20% after hours, as it reported earnings results that beat Wall Street expectations, but showed slower growth than many on Wall Street expected.Account icon An icon in the shape of a person's head and shoulders.
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