Salesforce Revenue Misses expectations, Shares Plunge 17%
Salesforce, the CRM software company, saw its shares plunge as much as 17% in the extended trading session on 29 May as it reported lower-than-expected revenues in its financial reports.
On May 29, the stock price of Salesforce (NYSE: CRM), the global leader in customer relationship management (CRM) software, plummeted as much as 17% in after-hours trading. This was due to its reported revenue falling short of expectations and its financial forecasts not meeting Wall Street's expectations.
According to data from the London Stock Exchange (LSEG), Salesforce reported earnings per share of $2.44, slightly higher than the expected $2.38, but revenue was $9.13 billion, lower than the expected $9.17 billion.
Salesforce projected adjusted earnings per share for the quarter at $2.34 to $2.36 and revenue at $9.2 billion to $9.25 billion, while analysts had expected $2.40 and $9.37 billion, respectively. This marked the first time since 2006 that Salesforce missed revenue expectations. President and COO Brian Millham stated that strict budget reviews and longer sales cycles in the quarter, along with changes in market strategies implemented by management, impacted booking volumes.
While all five product areas of Salesforce contributed to growth, revenue from professional services and other categories was $548 million, a decrease of 9%, falling short of StreetAccount's expected $572.9 million. However, net profit surged to $1.53 billion, or $1.56 per share, compared to $199 million, or $0.20 per share, in the same period last year.
Salesforce raised its profit forecast for fiscal year 2025, expecting adjusted earnings per share of $9.86 to $9.94, up from the previously forecasted $9.68 to $9.76 three months ago. Revenue guidance remains between $37.7 billion and $38 billion, with analysts expecting $380.8 billion. CFO Amy Weaver anticipates that transaction compression and project slowdown in the professional services business will continue through this fiscal year.
During the quarter, Salesforce began selling Einstein Copilot to assist sales and service representatives, and all paying Slack customers will also gain artificial intelligence features such as session summaries and daily digests. Despite reports of Salesforce negotiating to acquire data integration company Informatica, the negotiations ultimately fell through. Weaver stated that Salesforce's acquisitions need to have a clear value-added timeline.
Market reactions indicate that prior to the earnings report, Salesforce's stock had risen 3.5% year-to-date, lagging behind the S&P 500 index's 11%. The significant drop on May 30 will mark Salesforce's worst day since the 2008 financial crisis.
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