Why Coronavirus-Triggered Work From Home Surge Won’t Make Slack Rich

Slack posted weaker than expected revenue outlook for the upcoming quarter on Thursday. ERIC BARADAT/AFP/Getty Images

As more and more people work from home to reduce the risk of contracting Covid-19, you might think that virtual conferencing and messaging apps like Slack would see a surge in business and revenue despite the broader financial market heading toward a total meltdown due to the coronavirus.

That’s only partly true. In its 2019 fourth quarter earnings release on Thursday, Slack reported smaller-than-expected losses, but shares plummeted nearly 20 percent after the company predicted slow revenue grow in the current quarter.

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For the final quarter of 2019, Slack posted $89.1 million in losses, or 16 cents a share, on a $182 million in revenue. Wall Street analysts were expecting a loss of 20 cents per share on a revenue of $174.2 million.

Yet, it’s alarming that Slack’s fourth-quarter loss more than doubled the loss a year ago.

For the first quarter of 2020, the company is aiming for a  revenue of $185 million to $188 million, which is about $50 million below what analysts were expecting.

Slack CEO Stewart Butterfield confirmed that its messaging app did see a massive increase of users recently due to the coronavirus outbreak, but whether that would translate into profits depends on how many of these new users will become paying subscribers.

“The headline is there’s just a massive outpouring of interest on the customer side and it’s really all over the place,” Butterfield told analysts on Thursday. “There [are] existing customers who are accelerating some of their plans. A lot of it is changing.”

Meanwhile, Slack is facing a challenge of keeping existing paying customers. The company’s executives warned investors that, if the Covid-19 spread worsens, it could make its corporate customers more hesitant to spend as business slows down.

Why Coronavirus-Triggered Work From Home Surge Won’t Make Slack Rich