(Reuters) – Slack Technologies Inc (WORK.N) on Thursday withdrew its 2021 billing outlook and reported a 50% jump in quarterly sales that failed to surpass lofty investor expectations driven by a surge in demand for workplace messaging platforms as more companies shift to remote work.
Shares of the company, which had surged nearly 80% this year, dropped 16% in extended trading after Slack withdrew its forecast for billings citing uncertainty driven by the COVID-19 pandemic.
Social distancing protocols have led many companies to rapidly adopt remote work, expanding the market for apps that allow workers to stay in touch and boosting Wall Street expectations for companies such as Slack.
Investors had heightened expectations going into the quarter, and may have expected growth to be higher than reported, said D.A. Davidson & Co analyst Rishi Jaluria.
Slack’s close competitor, Zoom Video Communications Inc (ZM.O), on Tuesday nearly doubled its expectations for annual sales as more people worked from home. Slack’s platform, unlike Zoom’s video focus, centers on messaging.
Jaluria added that billings are an important metric which investors view as a future indicator for growth of companies like Slack, which have a subscription-based model.
Slack’s first-quarter revenue rose 50% to $201.7 million from a year earlier, above analysts’ average estimate of $188.1 million, according to IBES data from Refinitiv.
However, the workplace messaging company’s total operating expenses in the first quarter jumped 63% to $252.2 million. (reut.rs/3dLITgh)
The economic damage brought on by the COVID-19 health crisis might also force companies to cut back on technology spending, Slack had warned in March.
Reporting by Neha Malara and Manas Mishra in Bengaluru; Editing by Devika Syamnath