Salesforce Predicts Lower Q2 Revenue and Profit Amid Soft Cloud Demand
Salesforce predicts Q2 revenue between US$9.20 billion and US$9.25 billion, below estimates of US$9.37 billion. Weak client spending on cloud and enterprise products leads to a decline in profit forecasts. First-quarter adjusted earnings per share exceed expectations, rising by 44% to US$2.44.
The company attributes this decline to weak client spending on its cloud and enterprise business products. As a result, Salesforce's shares plummeted by over 16% after the announcement.
According to LSEG data, Salesforce expects its revenue for the second quarter to be in the range of US$9.20 billion to $9.25 billion. This falls short of Wall Street estimates, which predicted revenue of US$9.37 billion. The forecast suggests that clients are cutting back on spending due to concerns about higher interest rates and inflation, prompting them to tighten their budgets.
In the first quarter, Salesforce reported revenue of US$9.13 billion, slightly below the analysts' average estimate of $9.18 billion. This stands in contrast to cloud giants like Amazon.com and Microsoft, who experienced a strong quarter due to increased customer spending.
Despite the lower revenue forecast, Salesforce's first-quarter adjusted earnings per share saw a significant increase of 44% to US$2.44, surpassing analysts' expectations of US$2.38. This positive performance can be attributed to the company's focus on profit and share buybacks, driven by activist investors advocating for management changes.
Over the past few months, Salesforce has heavily invested in artificial intelligence (AI) and has been integrating this technology into its suite of products. The aim is to enhance workflows and drive revenue and margins. While these investments show promise, the soft cloud demand has impacted the company's overall financial outlook.
Although Salesforce has maintained its full-year revenue forecast, it has revised its operating margin expectations for fiscal 2025. The company now expects an operating margin of 19.9%, down from the previous forecast of around 20.4%.
Looking ahead to the second quarter, Salesforce anticipates adjusted earnings per share between US$2.34 and $2.36. This falls short of estimates of US$2.40 per share.
Salesforce predicts Q2 revenue between $9.20 billion and $9.25 billion, below estimates of $9.37 billion.
Weak client spending on cloud and enterprise products leads to a decline in profit forecasts.
First-quarter adjusted earnings per share exceed expectations, rising by 44% to $2.44.
Source: REUTERS