Salesforce (CRM) Stock: Big Earnings Beat, But the Guidance Spoils the Party

TLDR

• Salesforce Q1 adjusted EPS came in at $3.88, well above the $3.13 Wall Street estimate
• Revenue hit $11.13 billion, up 13% year-over-year, but Q2 guidance came in ~$40 million short of expectations
• Current remaining performance obligations grew 14% to $33.6 billion, missing analyst forecasts
• Agentforce now tracks $1.2 billion in annual revenue, up from $440 million nine months ago
• CRM stock fell around 2% in after-hours trading after closing at $177.51, down about 33% this year

Salesforce posted better-than-expected earnings for its fiscal first quarter but gave a revenue outlook that fell just short of Wall Street’s target, sending the stock down roughly 2% in after-hours trading.

Salesforce, Inc., CRM

The stock closed Wednesday at $177.51, and has dropped about 33% so far this year. That puts it in line with other application software names like ServiceNow and Adobe, which have faced similar pressure.

Adjusted earnings per share came in at $3.88 for the quarter ended April 30. That beat the consensus estimate of $3.13 by a wide margin and compares to $2.58 in the same quarter last year.

Revenue for the quarter reached $11.13 billion, up 13% on the year and just above expectations of $11.05 billion. A chunk of that growth came from the $8 billion acquisition of Informatica last November, which contributed $444 million in sales.

Outlook Falls Short

For Q2, Salesforce guided for revenue of around $11.3 billion. Analysts had expected $11.4 billion. Adjusted EPS guidance of $3.26 was only a penny ahead of estimates.

Current remaining performance obligations — a closely watched backlog metric — grew 14% to $33.6 billion, but came in below the $68.9 billion total RPO analysts had forecast.

For the full year, the company nudged up its sales forecast and raised adjusted EPS guidance by about 7% at the midpoint.

The weak spot in the report is familiar territory. Investors have been worried for over a year that AI agents could undercut Salesforce’s user-based pricing model, which carries a 75% gross margin. The concern: if customers can build their own CRM tools using AI, they may stop paying for Salesforce licenses.

Palantir drove that point home earlier this month when it said it had replaced its own CRM software with a custom-built solution.

Agentforce Gains Ground

Salesforce has been pushing its own AI agent product, Agentforce, as its answer to that threat. The product now tracks $1.2 billion in annual revenue, up from $800 million in February and $440 million about nine months ago.

Use of AI models within the Salesforce platform more than doubled quarter-over-quarter, the company said.

Agentforce currently prices by consumption rather than by user — a different model from its core software. Chief Financial and Operating Officer Robin Washington said the company plans to run a hybrid model going forward.

Washington also said the company has not seen any erosion in user numbers to date. Salesforce also said revenue from its infrastructure and data segment grew 23%, while application revenue rose 7%, both on a constant-currency basis.

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