Salesforce shares fall for first time since 2006
CALIFORNIA, UNITED STATES — Salesforce shares plummeted as much as 17% in extended trading on Wednesday, May 29, after the cloud software vendor reported weaker-than-expected revenue and issued guidance that trailed Wall Street’s expectations.
This is the first time that Salesforce has missed its revenue targets since 2006.
Financial performance disappoints
For the fiscal first quarter ending April 30, Salesforce reported adjusted earnings per share of $2.44, surpassing the expected $2.38. However, revenue came in at $9.13 billion, falling short of the $9.17 billion anticipated by analysts.
According to the London Stock Exchange Group (LSEG), despite an 11% year-over-year increase from $8.25 billion, the revenue miss was significant enough to trigger a sharp decline in the company’s stock.
Outlook trails expectations
Salesforce’s forecast for the current quarter also disappointed investors. The company projected adjusted earnings per share of $2.34 to $2.36 on revenue of $9.2 billion to $9.25 billion. Analysts had expected $2.40 in adjusted earnings per share on $9.37 billion in revenue.
For the full fiscal year 2025, Salesforce maintained its revenue guidance of $37.7 billion to $38 billion but raised its adjusted earnings forecast to $9.86 to $9.94 per share, up from the previous range of $9.68 to $9.76.
Market reacts to guidance shortfall
The revenue miss and weak guidance led to a significant drop in Salesforce’s stock, which had been up 3.5% year-to-date before the after-hours trading session.
Salesforce President and COO Brian Millham said the firm faced budget scrutiny and longer deal cycles during the quarter.
“Management implemented go-to-market changes that cut into bookings,” he added.
Revenue from the Professional Services and Other category was particularly weak, falling 9% to $548 million, below the StreetAccount consensus of $572.9 million.
AI innovations amid challenges
Despite these challenges, Salesforce continues to innovate. The company started selling its Einstein Copilot assistant for sales and customer service representatives and announced that all paid Slack customers would gain access to new artificial intelligence features.
Amy Weaver, Salesforce’s finance chief, expects deal compression and slowing projects in the professional services business to continue through the current fiscal year. She emphasized the need for acquisitions to have “a clear timeline to value accretion.”
Salesforce’s first revenue miss in nearly two decades has shaken investor confidence, leading to a significant drop in its stock price. The company’s future performance will depend on its ability to navigate budget scrutiny, elongated deal cycles, and the successful integration of AI into its product offerings.
Read more here.
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