Salesforce, a leading company in cloud and enterprise business products, predicted revenue and profit figures for the second quarter that fell short of Wall Street projections on Wednesday. The announcement came as a blow to the firm’s share value, which plunged over 16% in after-market trading due to lacklustre client expenditure on its products. As per LSEG data, the tech giant’s forthcoming revenue is anticipated to fall between £8.5 and £9.25 billion, against a projected £9.37 billion.
These projections hint at clients cutting back on spending due to potential long-term higher interest rates and increasing inflation, causing them to rigorously manage costs. Despite first-quarter revenues reaching £9.13 billion, this was still less than the predicted average of £9.18 billion by financial analysts. This performance starkly contrasts with other cloud behemoths such as Amazon and Microsoft, who enjoyed increased client spending.
While the first quarter saw Salesforce’s adjusted earnings per share elevate by 44% to reach $2.44, surpassing analysts’ predictions of $2.38, discrepancies arose from other factors. Salesforce has traditionally leveraged its vast cash reserves for acquisitions, but mounting pressure from activist investors triggered a surge in share buybacks, a dismantled mergers and acquisitions committee, and refocus on profit.
The firm has also committed heavily to AI investment, hoping to infuse this technology into its vast range of products to stimulate revenue and margin growth. However, despite maintaining its annual revenue forecast, Salesforce has slashed its operating margin expectations for fiscal 2025 to 19.9% from approximately 20.4%. For the second quarter, the tech giant anticipates its adjusted earnings per share to hover between $2.34 and $2.36, against £2.40 estimates, as reported by Reuters.