Slack reports its latest earnings next week, and investors are hoping for a positive surprise from the work-chat app.
Shares of Slack (WORK) – Get Report have underperformed since its first quarter financial release, falling about 25% since its Q1 report in June. For the second quarter, analysts are expecting a non-GAAP loss of 3 cents per share on revenue of $209.1 million.
Here are a few key themes to watch when Slack reports its latest results on Tuesday, Sept. 8 after the bell.
As with most SaaS businesses, Slack’s billings — contracts that haven’t yet been recognized as revenue — are a key indicator of where revenue is headed. Writing in a recent note, Barclays analysts noted potential upside in Slack’s billings results in Q2.
Wall Street expects roughly 33% growth in billings to $236 million, and $1 billion for the full year. But according to Barclays, those estimates may prove “conservative and will continue to be revised up as Slack reports better than expected numbers.”
Some of Slack’s underperformance last quarter was likely tied to the ever-present threat of Microsoft (MSFT) – Get Report, which rolled out a slew of new updates to Teams over the past few months. But engagement has been higher on Slack, according to Barclays, and that bodes well for Q2.
“While other software companies are seeing weakness in Q2, customers are not likely to cut spending on Slack, in fact, it’s wallet share of IT spending should increase,” wrote analyst Raimo Lenschow. “The Microsoft threat will continue, but we believe that there is enough greenfield opportunity for Slack to continue to post strong results.”
In its first-quarter results, Slack left its full-year revenue guidance intact, forecasting total sales of between $855 million and $870 million, representing growth of 36% to 38%, for the full fiscal year. Citing COVID uncertainty, however, it withdrew its full-year billings guidance. That announcement, in early June, triggered an extended slide in shares.
Three months later, things could look a bit different. With a full quarter of COVID-19 under its belt, and the ensuing work-from-home standard adopted by many companies, Slack will likely offer more details and commentary on what the rest of the year has in store.