Salesforce (CRM) Shares Plunge 20% on Weak Earnings Forecast, Impacting US Stock Markets

• Salesforce Inc. shares tumbled about 20 per cent on Thursday after the company posted weaker revenue than Wall Street estimates for the first quarter.
• Citing weak client spending on cloud and enterprise business products, the company also predicted profit and revenue below Street estimates for the second quarter.
• Highlighting the long-term potential of artificial intelligence as positive for the company, Salesforce chief executive officer Marc Benioff said: “We’re incredibly well positioned to help companies realize the promise of AI over the next decade.”

Salesforce shares plummet as weak earnings forecast shakes investor confidence.

Salesforce Reports Weaker-than-Expected Revenue

Salesforce Inc. shares experienced a significant drop of approximately 20 per cent on Thursday following the release of its first-quarter earnings report, which fell short of Wall Street’s revenue expectations. The company reported a revenue increase of 11 per cent, reaching $9.13 billion, but this was not enough to meet the market’s high expectations.

Impact of Weak Client Spending

The primary factor behind Salesforce’s disappointing performance was weak client spending on cloud and enterprise business products. This trend has been a growing concern for the company, as it also projected profit and revenue below Street estimates for the upcoming second quarter. At 12:13 p.m. EDT, Salesforce shares were trading at $217.93, down 19.77 per cent.

AI-Focused Initiatives and Future Prospects

Despite the current challenges, Salesforce remains optimistic about its future, particularly with its AI-focused data cloud business. This segment contributed to 25 per cent of the deals valued above $1 million in the first quarter, consistent with the previous quarter. The company has been actively promoting the potential of artificial intelligence-oriented software and features to drive future growth.

CEO Marc Benioff’s Vision

Marc Benioff, Salesforce’s CEO, emphasized the long-term potential of AI for the company, stating, “We’re incredibly well positioned to help companies realize the promise of AI over the next decade.” This statement underscores Salesforce’s commitment to leveraging AI to enhance its product offerings and maintain a competitive edge in the market.

Strategic Acquisitions and Financial Adjustments

In its pursuit of growth, Salesforce has considered acquiring data-organization software maker Informatica Inc. However, Benioff stressed the importance of ensuring that any large-scale acquisition is not dilutive to customers and is accretive with the right metrics. The company has also increased buybacks and declared a dividend to bolster investor confidence.

Revised Financial Forecasts

Salesforce has kept its fiscal year 2025 revenue forecast unchanged but has revised its operating margin expectations down to 19.9 per cent from the previous forecast of around 20.4 per cent. The company expects second-quarter revenue to be between $9.20 billion and $9.25 billion.

Conclusion

Salesforce’s recent earnings report has highlighted the challenges it faces with weak client spending and the need to meet high market expectations. However, the company’s focus on AI and strategic acquisitions, along with its commitment to maintaining strong financial metrics, offers a positive outlook for its future. Investors will be closely watching Salesforce’s performance in the coming quarters to see if it can capitalize on its AI initiatives and achieve sustained growth.