Shares of Salesforce fell approximately 6% despite the company surpassing fiscal first-quarter earnings estimates and raising its full-year guidance, buoyed by momentum in artificial intelligence (AI) initiatives.
The cloud-based software leader reported adjusted earnings per share (EPS) of $2.58, exceeding analyst expectations of $2.54, while revenues rose 7.6% year-over-year to $9.83 billion, surpassing a $9.75 billion estimate. For the full fiscal year, Salesforce now anticipates adjusted EPS between $11.27 and $11.33 and revenue ranging from $41.0 billion to $41.3 billion, up from the prior forecast of $11.09 to $11.17 EPS and $40.5 billion to $40.9 billion in revenue.
Citi analyst Tyler Radke highlighted that the first-quarter results indicate a stable demand environment, with particular strength seen in Salesforce’s new Agentforce product cycle. The company’s performance emerged shortly after it disclosed plans to acquire data management firm Informatica for $8 billion, a move intended to enhance its AI capabilities. This transaction would mark Salesforce's largest acquisition since its previous major deal years ago.
However, some analysts expressed caution. JPMorgan's Mark Murphy pointed to a slight shortfall in current remaining performance obligations for the second quarter, falling 30 basis points below Wall Street forecasts, along with a marginal miss on operating margins. Morgan Stanley's Keith Weiss noted that after several quarters of exceeding margin expectations, this slight miss combined with guidance reiteration influenced market reaction negatively.
RBC Capital Markets downgraded Salesforce’s shares from 'outperform' to 'sector perform,' citing execution risks and potential innovation concerns tied to the Informatica acquisition. Analyst Rishi Jaluria questioned the strategic necessity of the purchase and cautioned it might encroach upon Salesforce's core business focus.
Despite the challenging macroeconomic backdrop, including recent tariff uncertainties causing volatility among tech companies, the results were perceived as resilient. Bernstein’s Mark Moerdler remarked that Salesforce delivered an in-line quarter with no apparent adverse impact from broader economic concerns or recession fears.
Net income remained steady year-over-year at $1.54 billion, or $1.59 per share, compared to $1.53 billion, or $1.56 per share, in the previous year.
Summary of Key Financials:
- Q1 Adjusted EPS: $2.58 (vs. $2.54 estimate)
- Q1 Revenue: $9.83 billion (7.6% increase, above $9.75 billion estimate)
- Full Year Adjusted EPS Guidance: $11.27 - $11.33 (raised)
- Full Year Revenue Guidance: $41.0 billion - $41.3 billion (raised)
- Net Income: $1.54 billion, flat year-over-year
Salesforce continues to leverage AI advancements and strategic acquisitions to sustain growth, though investor sentiment remains cautious due to integration risks and margin pressures.
