Key Highlights
- First quarter adjusted earnings per share reached $3.88, crushing Wall Street’s $3.13 projection
- Q1 sales totaled $11.13 billion with 13% annual growth, though Q2 projections missed targets by approximately $40 million
- The closely monitored backlog metric (current remaining performance obligations) increased 14% to $33.6 billion but fell short of analyst predictions
- Agentforce platform now generates $1.2 billion in annualized revenue, a significant jump from $440 million nine months earlier
- Shares declined roughly 2% during extended trading hours following a regular session close at $177.51, marking a 33% year-to-date decline
The cloud software giant delivered impressive fiscal first-quarter results that exceeded analyst predictions, yet shares retreated approximately 2% in extended trading as the company’s forward-looking revenue projections disappointed investors.
Shares concluded Wednesday’s regular session at $177.51, reflecting a steep 33% decline year-to-date. This performance mirrors broader weakness across the application software sector, with peers including ServiceNow and Adobe experiencing comparable headwinds.
The company reported adjusted earnings of $3.88 per share for the period ending April 30, substantially surpassing the $3.13 Wall Street consensus and representing significant growth from $2.58 in the prior-year quarter.
Quarterly revenue climbed to $11.13 billion, representing 13% year-over-year expansion and narrowly exceeding the $11.05 billion analyst estimate. The Informatica acquisition, finalized last November for $8 billion, added $444 million to the top line.
Future Projections Underwhelm
For the current quarter, Salesforce projected revenue of approximately $11.3 billion, falling short of the $11.4 billion Wall Street expectation. The adjusted EPS forecast of $3.26 barely edged past consensus by one cent.
Current remaining performance obligations — a critical indicator of future business — expanded 14% to $33.6 billion, yet trailed the $68.9 billion total RPO figure analysts anticipated.
Management modestly increased full-year revenue projections while lifting adjusted earnings guidance by roughly 7% at the midpoint.
The report’s vulnerability centers on a persistent concern among investors. For more than twelve months, market participants have questioned whether AI-powered agents might erode Salesforce’s traditional user-based licensing model, which delivers 75% gross margins. The risk: enterprises could develop proprietary CRM solutions using artificial intelligence, eliminating their need for Salesforce subscriptions.
Palantir reinforced this anxiety earlier this month by announcing it had transitioned away from commercial CRM software in favor of an internally developed alternative.
AI Agent Strategy Accelerates
The company has aggressively promoted its proprietary AI agent product, Agentforce, as a strategic response to competitive threats. The platform now generates $1.2 billion in annualized revenue, accelerating from $800 million in February and $440 million approximately nine months prior.
Platform utilization of AI models more than doubled from the previous quarter, according to company disclosures.
Unlike its traditional software offerings, Agentforce employs consumption-based pricing rather than per-user fees. Chief Financial and Operating Officer Robin Washington indicated the organization intends to maintain both pricing approaches simultaneously.
“We will adapt to a consumption model,” Washington explained. “I think we’ll always be hybrid.”
Barclays analyst Raimo Lenschow suggested the Agentforce metrics, while encouraging, might prove insufficient to reverse investor sentiment. “We are not sure this will be enough to drive a meaningful reaction,” he noted.
Washington emphasized that the company has experienced no decline in user counts thus far. Management also highlighted 23% revenue growth in its infrastructure and data division, while application revenue advanced 7%, both measured on a constant-currency basis.
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