Slack’s honeymoon on Wall Street may officially be over.
Shares of Slack (WORK) plunged 15% in after-hours trading Wednesday following the company’s first earnings report as a public company. The stock decline came even as Slack (WORK) boosted its outlook for the year.
The company’s sales growth has been slowing, a trend it expects to continue. Slack reported revenue of $145 million in the quarter, an increase of 58% from the same period a year earlier. That was slower than the 67% growth it generated in the first three months of its fiscal year. The company is now projecting total revenue for the year to increase by 51% to 52%, a notable decline from last year when revenue grew 82%.
Its revenue in the most recently completed quarter would have been even higher if not for some lengthy service outages. Slack said Wednesday that its results were hurt by $8.2 million of credits from the service disruptions during the quarter.
Slack, a workplace messaging app used by companies such as IBM (IBM), Lyft (LYFT) and CNN, made its Wall Street debut in June after choosing to list its existing shares directly on a stock exchange rather than going through a traditional public offering.
Like many of its tech peers, Slack’s revenue is growing, but the company remains unprofitable. The company posted a net loss of $0.14 per share in the July quarter, better than Wall Street analysts had expected. But Slack also said it now expects to lose between $0.40 and $0.42 per share for the year, worse than analysts had estimated.
Chief financial officer Allen Shim said on a call with analysts Wednesday that the yearly loss will be due in part to an increase in sales and marketing expenses. The company plans to spend more than 50% of its revenue on sales and marketing in the coming quarters as it works to win over more large, paying business customers, which it relies on for revenue.
Slack now has more than 720 business customers who pay more than $100,000 each year for the service, up 75% from the prior year.
Slack shares had ended Wednesday up 8% ahead of the earnings report.