Sunday, June 23, 2024
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Salesforce projected second-quarter profit and revenue below Wall Street estimates on Wednesday, citing weak client spending on its cloud and enterprise business products. The announcement caused its shares to plummet more than 16% after the bell.

The company anticipates revenue between $9.20 billion and $9.25 billion, falling short of estimates of $9.37 billion, according to LSEG data. Salesforce’s forecast reflects clients scaling back spending amidst concerns about potential long-term interest rate hikes and elevated inflation, prompting a focus on cost control.

Analysts noted that the forecast suggests Salesforce’s slowest revenue growth in its history, signaling a deceleration in the cloud firm’s growth trajectory after years of rapid expansion. Despite heavy investments in AI integration into its product suite to drive revenue and margins, analysts remain cautious about the timeline for AI initiatives to yield results.

Salesforce’s strategic focus has shifted towards profit and share buybacks following pressure from activist investors advocating for management changes. While the company’s first-quarter adjusted earnings per share exceeded expectations, Salesforce revised down its operating margin expectations for fiscal 2025.

Analysts expressed concerns about the uninspiring growth narrative and decelerating margin expansion, leading investors to exercise caution. Salesforce’s COO highlighted prolonged deal cycles and budget scrutiny by clients as ongoing challenges.

In the first quarter, Salesforce reported revenue of $9.13 billion, slightly below expectations, while expecting adjusted EPS between $2.34 to $2.36 per share in the second quarter, compared to estimates of $2.40.

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