Salesforce issues weak revenue guidance even as earnings beat estimates

Salesforce has recently provided lackluster guidance, leading to a 4% dip in its stock during after-hours trading, despite reporting earnings and revenue that exceeded analyst expectations for the fiscal second quarter. According to the company’s announcement, revenue rose by 10% year-over-year, reaching $9.33 billion. Net income also saw a significant increase, climbing to $1.89 billion, or $1.96 per share, compared to $1.43 billion, or $1.47 per share, a year prior. For the upcoming fiscal third quarter, Salesforce’s management forecasted adjusted earnings per share between $2.84 and $2.86, with anticipated revenue of $10.24 billion to $10.29 billion. This falls slightly short of the analyst expectations of $2.85 per share and $10.29 billion in revenue, according to LSEG. While Salesforce has maintained its full-year revenue outlook, it has adjusted its earnings estimates upward, projecting adjusted earnings per share to be in the range of $11.33 to $11.37, based on revenues of $41.1 billion to $41.3 billion. The consensus estimate from LSEG suggests $11.31 in earnings per share and $41.2 billion in revenue. This updated forecast is an increase from the previously stated range of $11.27 to $11.33. Despite these solid figures, Salesforce has struggled to gain traction on Wall Street this year, experiencing a 23% decline in stock value, making it one of the underperformers in the Dow. Concerns over the company’s stagnant revenue growth, which has remained in the single digits since mid-2024, have contributed to this downturn. Analysts from Jefferies noted that Salesforce's enterprise value to free cash flow ratio has reached a decade low, primarily due to fears surrounding AI disruption. In a bid to counteract this downward trend, Salesforce is focusing on its Agentforce AI software designed to automate customer service inquiries. Additionally, the company announced plans to hike prices on certain products and intends to acquire Informatica, a data management software firm, for $8 billion. Salesforce executives are set to discuss these results further during a conference call scheduled for 5 p.m. ET.