Salesforce shares fall as software maker shows pockets of weakness

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Salesforce shares fall as software maker shows pockets of weakness

Marc Benioff, Chairman & CEO of Salesforce, speaking on CNBC’s Squawk Box outside the World Economic Forum in Davos, Switzerland on Jan. 22nd, 2025.

Gerry Miller | CNBC

Salesforce shares slumped about 6% despite topping Wall Street’s fiscal first-quarter estimates and lifting its full-year guidance due to artificial intelligence tailwinds.

The sales and customer service software giant said it now expects $11.27 to $11.33 in adjusted earnings per share and $41.0 billion to $41.3 billion in revenue for the fiscal year. That’s up from previous guidance that called for adjusted EPS between $11.09 and $11.17 and $40.5 billion to $40.9 billion in revenue.

“Q1 results, while not game changing, point to a stable demand environment, with continued strength in the Agentforce new product cycle,” wrote Citi analyst Tyler Radke.

Salesforce’s results come a day after the company announced its intent to buy data management company Informatica for $8 billion as it beefs up its AI offerings. The deal would be the company’s largest acquisition since its Slack deal.

JPMorgan analyst Mark Murphy attributed some of the post-earnings move to a slight miss on current remaining performance obligation growth for the second quarter, which he said came in 30 basis points below Wall Street’s expectations. The company also posted a slight operating margin miss, he added.

“After multiple quarters of beats/raises to margin, the slight Q1 miss and reiteration is a pick on the print,” said Morgan Stanley’s Keith Weiss.

Despite the upbeat results, RBC Capital Markets downgraded shares to sector perform from an outperform, citing execution risks and innovation concerns if the company continues acquiring. Analysts also questioned the company’s need for Informatica and whether it could interfere with its core business.

“Stepping back, while we like the margin expansion story at Salesforce and the valuation is undemanding, deal risk with Informatica has tipped the scales for us,” said analyst Rishi Jaluria.

Recent tariff uncertainty has spurred immense volatility for technology companies reliant on goods imported from abroad. Weiss called the results “better than feared” against the turbulent backdrop.

“With concerns about macro and the potential of a recession it is nice yet again to see a company deliver an in-line quarter with no visible macro effect,” said Bernstein’s Mark Moerdler.

Net income was flat year over year at $1.54 billion, or $1.59 per share. A year ago, net income reached $1.53 billion, or $1.56 per share.

Adjusted earnings for the first quarter were $2.58 per share adjusted, topping a $2.54 estimate from LSEG. Revenues grew nearly 7.6% from a year ago to $9.83 billion and beat a $9.75 billion estimate.

WATCH: Salesforce CEO Marc Benioff goes one-on-one with Jim Cramer

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