Not everything is going well for Slack Technologies Inc (WORK). The enterprise-focused messaging company expects its third-quarter losses to be bigger than expected which has sent shivers down the spine of investors.
The first report is a disappoint
This is the first time Slack has published a release after going public and just like most other companies that went public this year; the results are not very pleasing. On Wednesday, the company said that it is suffering more losses in the third quarter than expected. The news led to a 13% fall in the company’s shares in extended trading sessions. As of Wednesday close, the company’s shares had experienced a 19.3% fall from its IPO price of $38.50 in June.
The company suggests that it will be raking in $154 million to $156 million in revenue during the quarter, which marks a 46% to 48% increase. Though it is decidedly a high number, it fades in comparison to the 67% increase in the first quarter and the 58% increase in the second quarter. The company is facing a declining trend in revenue. Slack predicts a loss of $0.08 to $0.09 per share in the third quarter of 2019. However, data from Refinitiv shows that the analyst consensus was at $0.07 per share. Now analysts are looking at the company’s ability to make profits twice.
Is Slack in troubled waters?
Last quarter, the company was able to subvert expectations by posting a smaller loss than what analysts agreed on. Revenue estimates for the quarter ending July 31 were $141.3 million, but the company brought in $145 million. The company received about $8.2 million less in revenue because of a service disruption. Rishi Jaluria, D.A. Davidson analyst commented, “I imagine the reaction is picking on the year-over-year revenue growth deceleration from Q1 to Q2. Slack did have an outage in Q2, which led to $8.2 million in credits … adjusted for this factor, growth would have been 66% Y/Y, which is a solid trend.”
The space Slack operates in is now being populated by tech giants. Microsoft Office365 users now have Microsoft Team, a similar chat platform that comes as an add-on for the users. Facebook Inc. also has a Workplace by Facebook while Cisco’s Webex Teams is also fighting for more market space. Microsoft Teams is the biggest rival for Slack right now. The rival had 13 million active users by July, as compared to 10 million who use Slack.