Investing.com — Shares in Salesforce (NYSE:) tumbled more than 16% in premarket trading after the workplace software group released a current-quarter forecast that fell short of analyst expectations.
The outlook was affected by weak spending on its business-focused products and services by customers facing inflationary pressures, denting optimism around the California-based company’s plan to use generative artificial intelligence to boost returns. However, Chief Executive Marc Benioff struck an optimistic tone on AI, saying the emerging technology continues to provide a “tremendous opportunity for our customers to connect with their customers in a whole new way.”
For the second fiscal quarter, Salesforce forecast adjusted earnings per share to be between $1.31 and $1.33 on revenue between $9.20 billion and $9.25 billion. Wall Street forecasts put the figures at $1.47 billion and $9.34 billion, respectively.
The company also lowered its expectations for annual subscription and support revenue growth to “just under” 10% compared to a year ago. It had previously forecast a 10% rise in February.
“We continue to see measured purchasing behavior similar to what we have experienced over the last two years and with the exception of the fourth quarter where we saw stronger bookings, the momentum we saw in the fourth quarter has moderated in the first quarter,” said Chief Operating Officer Brian Millham said in a press release. call after win.
Millham added that the company has also been hit by “prolonged deal cycles, deal compression and high levels of budgetary control.”
“[A]At this point there is a real question about the broader background to software spending, and whether that is the case [Salesforce]The updated outlook is at risk,” Evercore ISI analysts said in a note to clients.
Salesforce adjusted earnings per share (EPS) of $2.44 on revenue of $9.13 billion in the three months ended April 30. Analysts polled by Investing.com expected earnings of $2.37 per share and revenue of $9.15 billion.
Looking ahead to fiscal 2025, the company maintained its revenue guidance of $37.7 billion to $38.0 billion and adjusted earnings of $9.86 to $9.94 per share. Salesforce also lowered its annual operating margin guidance to 19.9%.
Analysts at Guggenheim Partners argued that investors are “probably wishing.”[ing]That Salesforce had “pulled the trigger” on its reported pursuit of an acquisition of data software management company Informatica. Salesforce abandoned the potential deal in April after neither company could agree on terms, Reuters reported.
Yasin Ebrahim contributed to this report.
