Work from home boosted Slack's quarter but revenue remains steady

Dive Brief:

Slack added "a record" 90,000 net new free and paid organizations in Q1 FY 2021, according to a company announcement and prepared statements for the earnings. More than 750,000 organizations use the communication platform. During Q1, Slack onboarded an additional 12,000 new paying customers, reaching 122,000 in total.
Slack and Amazon Web Services also entered a multiyear agreement, which includes enhanced integrations between the two solutions: AWS Chatbot, AWS Chime, AWS Sandstone, AWS CloudFormation, and AWS Key Management Services. Chime will power audio-based services in Slack and AppFlow, a new integration, will enable secure transfer of data between Slack and AWS services.
Slack relies on AWS's global infrastructure to promote "rapid adoption" of its platform. The companies will extend product integration and "deepen interoperability to help developer teams manage their AWS resources" in Slack channels, according to the announcement. AWS remains Slack's preferred cloud service provider, which it uses for storage and computing. As part of the deal, AWS will use Slack for company communications.

Dive Insight:

Just when the coronavirus pandemic hit stateside, Slack redesigned its platform. Slack, long-favored by developers, was remodeled to accommodate the customization demands users had.

The update was timely given the immediate adoption of remote work and the tools needed to facilitate it.

By the end of March, Slack's "simultaneously connected users" grew by 2.5 million in about two weeks. Between February and mid-March, the company saw an 80% increase in paying customers for "full quarterly total for the preceding two quarters."

The platform's adoption was boosted by "wall-to-wall" contracts, said CEO Stewart Butterfield in March. "But we literally have no idea what is going to happen and neither does anyone else, really."

Slack's momentum comes as the company nears its one-year anniversary on the New York Stock Exchange. The stock market has had a lukewarm reception of Slack, despite its claim the platform would eventually make email obsolete.

Slack's Q1 revenue grew 50% year-over-year to $202 million, but the company is anticipating "a negative impact" to deferred revenue," spurred by coronavirus-related headwinds, according to prepared remarks by CFO Allen Shim.

Though Slack's growth is stable — its Q4 2020 revenue grew by 49% year-over-year — other players in the collaboration space are faring better.

Zoom reached milestone numbers during the pandemic and celebrated its first year as a public company. Despite well-publicized "missteps," Zoom's Q1 2021 revenue was up 169% to $328.2 million, according to its earnings.

With eyes on Slack's market performance, bears of the stock market "believe its revenue growth could peak before it ever generates a profit," according to analysis from Motley Fool.