Salesforce shares slumped about 18% on Thursday, after its lowest-ever quarterly revenue growth forecast raised fears that high interest rates and rival AI offerings were hampering demand at the cloud-based software firm.
The company could lose more than $48bn in market value if losses hold, as it also reported quarterly revenue that was below expectations for the first time since 2006.
“Weak bookings in Q1 further test investor patience as the GenAI [generative AI] innovation cycle has yet to inflect top-line results and now increasingly becomes a point of competitive concern,” Morgan Stanley analysts said.
Salesforce’s AI-focused data cloud business contributed to 25% of the deals valued above $1m in the first quarter, unchanged from the prior quarter. It did not disclose more financial details about the business, which was nearing $400m in annual recurring revenue in its last fiscal year.
Some brokerages warned that Salesforce’s forecast also meant software demand had slowed further in April.
“It seems like the selling environment got worse from the end of March and more pronounced in April, which could explain why the off-cycle names, like Workday or Salesforce, suffered more than ServiceNow or Microsoft,” Barclays analysts said.
Salesforce could turn to large deals to accelerate growth and the company would consider them if they were “accretive” and had “the right metrics”, its CEO, Marc Benioff, had said on Wednesday in a post-earnings call.
Activist investors pressured Salesforce last year to prioritize profitability, after years of growing its business through big deals including the $27.7bn acquisition of Slack in 2021.
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“I think investors wouldn’t react well to most large deals at this point. Given growth is slowing down, a big acquisition would be viewed as buying growth,” said the RBC analyst Rishi Jaluria.
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