The shares of Salesforce Inc. (NYSE: CRM) plunged yesterday following the release of lower-than-anticipated fiscal 2025 second-quarter earnings and revenue guidance. However, the customer relationship management solution provider reported better than anticipated first-quarter results. The stock of Salesforce ended Wednesday’s trading session at $218.01, down $53.61, or 19.74%, from the prior close.
The San Francisco, California-based company reported first-quarter revenues of $9.13 billion, an increase of 11% from $8.25 in the comparable quarter of fiscal 2024.
The cloud software vendor posted Q1 2025 net income of $1.53 billion, or $1.56 per share, compared with $199 million, or $0.20 per share, in Q1 2024.
Excluding amortization of purchased intangibles, stock-based compensation expense, restructuring, and income tax effects and adjustments, among others, Salesforce recorded 1Q 2025 non-GAAP net income of $2.41 billion, or $2.44 per share, up from $1.67 billion, or $1.69 per share, in 1Q 2024.
Analysts surveyed by LSEG anticipated the company to report adjusted earnings of $2.38 per share on revenues of $9.17 billion. Notably, the last time Salesforce missed revenue expectations was in 2006.
Commenting on the quarterly results, Marc Benioff, Chair and CEO, of Salesforce, stated, “Our profitable growth trajectory continues to drive strong cash flow generation. We are at the beginning of a massive opportunity for our customers to connect with their customers in a whole new way with AI.”
Segment wise:
- Subscription and support revenues were $8.58 billion, up 12.30% from last year.
- Professional services and other revenues declined 9.40% y-o-y to $548 million, missing StreetAccount forecasts of $572.90 million.
Salesforce recorded a 1Q 2025 non-GAAP operating margin of 32.10% and a free cash flow of $6.08 billion, reflecting a y-o-y gain of 43%. The company also paid $2.20 billion through share repurchases and $0.40 billion in the form of dividend payments.
Looking forward, Salesforce projects 2Q 2025 revenues from $9.20 billion to $9.25 billion. The company also forecasts adjusted earnings of between $2.34 and $2.36 per share. Wall Street analysts anticipate Salesforce to post adjusted earnings of $2.40 per share on revenues of $9.37 billion.
Furthermore, Salesforce increased its FY 2025 earnings outlook while reaffirming its revenue guidance. The company anticipates FY 2025 adjusted earnings in the range of $9.86 to $9.94 per share, an increase from the prior range of $9.68 to $9.76 per share. Salesforce also reaffirmed its FY 2025 revenue guidance of $37.70 billion to $38 billion. Analysts surveyed by LSEG anticipate the company to report adjusted earnings of $9.76 per share on revenues of $38.08 billion.
The quarterly revenue miss and weak Q2 outlook are expected to keep the stock of Salesforce slightly bearish in the near term. The company issued weak Q2 guidance as it sees a slowdown in customer spending on its enterprise and cloud business solutions. Salesforce’s CFO, Amy Weaver, indicated that she expects deal compression and a slowdown in projects within the professional services sector throughout the current fiscal year.
The historical price chart indicates that the stock of Salesforce is declining after breaking the support level of $270. The next major support is anticipated to be only near $205. Additionally, the stock is trading below its 50-day moving average, while the stochastics indicator is in the bearish zone. Therefore, we anticipate Salesforce’s stock to remain in a downtrend for the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
