Salesforce shares dropped 17% in extended trading on Wednesday following the announcement of lower-than-expected financial results and disappointing forecasts compared to Wall Street’s estimates.
Results Compared to Expectations
Here is how the company’s results compared to market expectations:
- Earnings per share (EPS): $2.44 adjusted versus $2.38 expected, an increase of 2.5% compare to the forecasts.
- Revenue: $9.13 billion versus $9.17 billion expected.
Revised Forecasts
Salesforce announced adjusted EPS forecasts for the current quarter between $2.34 and $2.36, while analysts had expected $2.40, a difference of 2%. In terms of revenue, the company forecasts between $9.2 billion and $9.25 billion, below the $9.37 billion expected by analysts, representing a gap of 1.3%.
Performance and Sector Contributions
Despite the disappointing results, first fiscal quarter revenue increased by 11%, reaching $9.13 billion. All of Salesforce’s product sectors contributed to this growth. However, the Professional Services and Other segment saw a 9% decline, reaching $548 million, below the $572.9 million expected by StreetAccount.
Annual Forecast Revisions
Despite the challenges, Salesforce raised its earnings forecast for fiscal year 2025. The company now anticipates adjusted earnings between $9.86 and $9.94 per share, up from the previous range of $9.68 to $9.76. Revenue forecasts remain unchanged, between $37.7 billion and $38 billion. Analysts polled by LSEG had anticipated adjusted earnings of $9.76 per share and revenue of $38.08 billion.
Market Context
Before the results announcement, Salesforce shares had risen 3.5% since the beginning of the year, underperforming the S&P 500 index, which had increased by about 11% over the same period. The 17% drop in shares on Thursday would mark Salesforce’s worst market day since the financial crisis of 2008.
This severe correction reflects investor disappointment with the company’s results and forecasts, highlighting the challenges Salesforce faces in a competitive market environment.
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