(Bloomberg) — Salesforce Inc. fell about 16% in extended trading after the software maker said sales growth in the current quarter will stagnate and hit its slowest level in its history, fueling concerns about the company’s capacity. company to remain relevant as the industry shifts to the artificial. -intelligence tools.
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Revenue will increase as much as 8% to $9.25 billion in the period ending in July, the San Francisco-based company said in a statement Wednesday. This would be the first quarter of single-digit sales growth for Salesforce in nearly two decades as a public company.
Analysts, on average, estimated $9.35 billion, according to data compiled by Bloomberg. Earnings, excluding some items, will be about $2.35 per share, compared with the average estimate of $2.40.
Investors have been concerned about Salesforce’s declining sales growth over the past year as the company turned its attention to improving profits. Management touted the potential of artificial intelligence-driven software and features to increase revenue. The company also increased buybacks and started dividends to keep Wall Street happy.
“I would question whether much of the CIO focus on AI is coming at the expense of expansions at Salesforce,” said RBC Capital Markets analyst Rishi Jaluria in an interview with Bloomberg Television.
CEO Marc Benioff highlighted the recent emphasis on profit and the long-term potential of artificial intelligence as positive for the company. “We are incredibly well positioned to help companies realize the promise of AI over the next decade,” Benioff said in the statement. Most analysts don’t expect generative AI capabilities in Salesforce apps to increase revenue until 2025 or 2026.
Shares fell to a low of $223.10 in extended trading after closing at $271.62 in New York. Shares are up just 3.2% this year – many software companies have lagged others in the technology sector as hardware and chip companies like Nvidia Corp. and Dell Technologies Inc.
Salesforce’s Data Cloud, which organizes information for analytics and artificial intelligence, is a big focus for executives and investors. The business unit containing Data Cloud, Mulesoft and Tableau increased 24% to $1.4 billion. Analysts, on average, expected US$1.36 billion.
Business strategy
Salesforce recently considered buying data organization software maker Informatica Inc., highlighting its investment in the product category before talks fell through. While some investors oppose any major acquisition, especially after Salesforce bought Slack for $27 billion in 2021, “inorganic is part of our strategy — it always will be,” said executive vice president Mike Spencer, who declined to comment on the Informatica reports.
Benioff, speaking on a conference call after the results, said that if the company looks at “a large-scale acquisition, we’re going to make sure it’s not dilutive to our customers, it’s accretive, it has the right metrics, and we’re also going to be quick to walk away.” of things we are not completely confident in.”
In the fiscal first quarter ended April 30, revenue increased 11% to $9.13 billion. Earnings, excluding certain items, were $2.44 per share. Analysts, on average, estimated earnings of $2.38 per share and revenue of $9.15 billion.
The current remaining performance obligation, a measure of contracted sales, increased 10% to $26.4 billion, below estimates. This underperformance may have been due to large deals not closing or employee numbers stagnating among clients, wrote Anurag Rana, an analyst at Bloomberg Intelligence.
Customers were more cautious in the quarter than the previous one — with smaller purchases and a longer wait before signing new deals, Chief Operating Officer Brian Millham said during the conference call. “It’s similar to what we felt in the first half of last year.”
(Updates with executive comments in ninth paragraph.)
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