Salesforce investor sentiment dampened after the company’s recent earnings report failed to meet expectations, with the stock price cratering by almost 20 percent.
The company reported $9.13 billion in revenues for the first quarter of fiscal year 2025 ended April 30, 2024, which was lower than market forecasts. This was the first time since 2006 that Salesforce’s quarterly revenue came in below estimates. The firm’s second-quarter revenue forecast of $9.20—9.25 billion failed to meet expectations as well.
During the earnings call, executives admitted that clients were becoming more cautious about spending on the company’s services. Even though the revenue of $9.13 billion was up 11 percent year over year, it was at the lower end of the company’s projected range “due to continuing pressures on professional services, some license revenue volatility, and the continued measured buying environment,” said CFO Amy Weaver.
COO Brian Milham said the company continued to see “measured buying behavior similar to what we experienced over the past two years.” In fourth quarter 2024, the company had seen “stronger bookings.” However, this momentum “moderated” during first quarter 2025.
Canada was a “strong region” for the company in the first quarter, as was Japan. But in the United States with “more exposure to technology,” Salesforce has been facing challenges over the last several quarters. The firm also saw weak performance in the Europe, Middle East, and Africa (EMEA) region in the first quarter.
Ms. Weaver said the company assumes the buying conditions seen during the first quarter would “continue throughout our fiscal year.” The firm is expecting a $100 million foreign exchange headwind on its accounts.
Salesforce “also continue to expect our professional services business to be a headwind to revenue with deal compression and customers delaying or slowing projects,” she said.
The stock market did not take kindly to Salesforce revenues falling below expected levels and the company’s projections of a challenging business environment ahead.
Salesforce stock price crashed from $272.18 on Wednesday to $218.04 on Thursday, a decline of 19.89 percent.
Market capitalization fell from $264.56 billion to $212.34 billion on Thursday, wiping out more than $52 billion from the firm’s valuation in a day.
Salesforce’s stock plummet had wider impacts on the stock market, with the Dow Jones Industrial Average falling by roughly 330 points, or 0.86 percent, while the benchmark S&P 500 Index declining by 0.6 percent on Thursday.
“$CRM every dollar drop in stock price is 6.6 DOW pts, at $43 down takes 281 pts off the DOW,” said Ben Lam, a founding partner of Bluestar Properties Inc. CRM is the Salesforce ticker symbol.
The Kobeissi Letter, a commentary on global capital markets, stated it was expecting “more volatility ahead” for the share.
“The stock is now down 15 percent in 2024 and has erased all of its gains over the last 12 months. We continue to see areas of weakness in a market backdrop that is incredibly euphoric.”
Salesforce CEO Marc Benioff expressed optimism about the company, saying the firm is seeing “strong cash flow generation,” with first-quarter operating cash flow rising by 39 percent year over year.
Layoffs, DEI
According to Layoffs.fyi, a website tracking employee terminations in the tech sector, Salesforce laid off 700 workers in January this year.“The environment remains challenging, and our customers are taking a more measured approach to their purchasing decisions,” Mr. Benioff said at the time. “As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.”
The layoffs came as the company was pushing diversity programs. Salesforce has committed itself to pursuing environmental, social, and governance (ESG) initiatives, including diversity, equity, and inclusion (DEI)agendas.
Since 2022, 10 percent of executive variable pay for the company’s executive vice president and higher positions have been determined by ESG measures.
Salesforce’s equality measures aim to boost “representation of black, Latinx, indigenous, and multiracial employees in the U.S., and of women employees globally.”
According to a February 2023 update from the company, over 50 percent of American employees were “underrepresented groups” comprising women, black, Latino, indigenous, multiracial, LGBTQ+, people with disabilities, and veterans.
The company doubled the representation of black leaders at VP level or above in the United States. Salesforce said it was working toward raising “underrepresented” identities at the VP level or above by 50 percent.
In terms of gender representation, the company set a goal to ensure that 40 percent of its global workforce is “women-identifying and non-binary employees” by the end of 2026.
At the time of the report, women made up 36.4 percent of the firm’s global workforce and 39.3 percent of the American workforce. “Underrepresented minorities” accounted for 14.5 percent of the workforce in the United States.
