By Kanchana Chakravarty and Arsheeya Bajwa
(Reuters) -Salesforce shares fell about 18% on Thursday after its lowest quarterly revenue growth forecast on record raised concerns that high interest rates and competing AI offerings were hampering demand at the cloud-based software company.
The company could lose more than $48 billion in market value if losses continue, as it also reported quarterly revenue below expectations for the first time since 2006.
“Weak bookings in the first quarter further test investor patience as the GenAI (generative AI) innovation cycle has yet to impact revenue results and is now increasingly becoming a competitive concern,” Morgan Stanley analysts said.
Salesforce’s (NYSE:) AI-focused data cloud business contributed to 25% of deals worth more than $1 million in the first quarter, unchanged from the previous quarter. It did not disclose further financial details about the company, which had nearly $400 million in annual recurring revenue in the last fiscal year.
Some brokers warned that Salesforce’s forecast also meant demand for software had fallen further in April.
“It appears that the selling environment worsened from late March and became clearer in April, which could explain why the off-cycle names, such as Workday (NASDAQ:) or Salesforce, suffered more than ServiceNow (NYSE:) or Microsoft ( NASDAQ: ),” Barclays analysts said.
Salesforce could turn to big deals to accelerate growth and the company would consider them if they were “additive” and “had the right metrics,” CEO Marc Benioff said in a post-earnings call Wednesday.
Activist investors pressured Salesforce last year to prioritize profitability after years of growth through big deals, including its $27.7 billion acquisition of Slack in 2021.
“I don’t think investors would react well to most big deals right now. With growth slowing, a big acquisition would be seen as buying growth,” said RBC analyst Rishi Jaluria.
At least ten brokers lowered their price targets for the stock following the results. DA Davidson’s PT of $230 was the lowest among the 49 analysts covering the stock.
