Source: Wall Street News
A cloud-based customer relationship management software solution provider that claims to be the “World's No. 1 AI CRM”$Salesforce (CRM.US)$The quarterly report for the 2025 fiscal year ending at the end of April was released after the market on Wednesday, May 29.
Since the company's revenue growth rarely falls short of market expectations, guidance for the next quarter was weak, and the year-on-year increase in revenue from its main business “subscription and support” was lowered for the full year of fiscal year 2025, which once plummeted by more than 17% after the market. If the decline continues until the opening of the market tomorrow, it will completely erase last year's increase. As of press time, the stock is down nearly 16%.
According to financial reports, Salesforce's revenue for the first fiscal quarter was 9.13 billion US dollars, up 11% year over year, including subscription and support revenue of 8.59 billion US dollars. The latter increased 12% year over year, but the total revenue fell short of market expectations of 9.17 billion US dollars.
According to some analysts, this is the first time since 2006 that the company's quarterly revenue has fallen short of market expectations. The brokerage firm RBC called it a “difficult quarter and disappointing guidance.”
Net profit jumped sharply from $199 million, or $0.20 per share, a year ago to $1.53 billion, or $1.56 per share. Adjusted earnings per share of $2.44 were also higher than market expectations of $2.38.
All five business areas contributed to revenue growth, but revenue in the “Professional Services and Other” category fell 9% to $548 million, which was lower than expected of $573 million. Service revenue of $2.18 billion and adjusted operating profit of $2.93 billion both fell slightly short of expectations.
For the second fiscal quarter, the company expected adjusted earnings per share of $2.34 to $2.36, lower than market expectations of $2.40. The company expects quarterly revenue of US$9.2 billion to US$9.25 billion, which is a year-on-year increase of 7% to 8%, but the market expects US$9.37 billion.
Furthermore, Salesforce raised its earnings forecast for FY2025, and adjusted EPS's earnings per share of $9.68 to $9.76 three months ago to $9.86 to $9.94, which is significantly higher than Wall Street's estimate of $9.76.
The company maintained its revenue guidance for fiscal year 2025 of 37.7 billion to 38 billion US dollars, which is equivalent to a year-on-year increase of 8% to 9%, and the upper limit of the range is still lower than the market forecast of 38.1 billion US dollars.
Furthermore, the company lowered its annual subscription and support revenue forecast to slightly less than 10%. Previously, it thought it would be an “increase of about 10%,” and lowered the GAAP operating margin guidelines for fiscal year 2025 to 19.9%, but kept the non-GAAP operating margin unchanged at 32.5%. The company also maintained its guideline of 21% to 24% year-on-year increase in operating cash flow for fiscal year 2025.
Subscription and support revenue accounts for the largest share of Salesforce's total revenue, followed by the “Professional Services and Others” category. Wall Street News mentioned that although the company turned a loss into a profit in the fourth quarter of FY2024, poor expectations for the first quarter of FY2025 caused the stock price to drop 7%.
Some netizens commented that Salesforce's financial report shows that the software industry is in full trouble, and Microsoft and Oracle cannot escape the negative impact.
Its quarterly report also showed GAAP operating margin of 18.7% and non-GAAP operating margin of 32.1%. Operating cash flow was $6.25 billion, up 39% year over year, and free cash flow was $6.08 billion, up 43% year over year. The current remaining performance obligations are $26.4 billion, an increase of 10% over the previous year. Shares were repurchased at $2.2 billion, and $400 million was returned to shareholders through dividends.
Salesforce Chairman and CEO Marc Benioff (Marc Benioff) said three months ago that over time, the company's internal adoption of artificial intelligence technology will help increase profit margins. This time he said in a statement:
“The company's profit growth trajectory continues to drive strong cash flow generation. Our capital return program has also made significant progress, returning more than $14 billion to shareholders since inception, including the first quarterly dividend in the company's history during the first fiscal quarter.
We are at the beginning of a huge opportunity for our customers to connect with their customers in new ways through artificial intelligence. As the number one AI CRM in the world, Salesforce is well-positioned to help companies deliver on their AI promises over the next ten years.”
Salesforce began selling its Einstein Copilot Assistant Sales and Customer Service Representatives during the reporting period. The company also said that all paid Slack (productivity management platform) customers can use artificial intelligence features such as conversation summaries and daily reviews.
Prior to the sharp fall after the market, Salesforce's stock price had originally risen 3.5% this year, but it lagged behind the S&P 500 market performance, which rose about 11% during the same period.
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