Salesforce Posts Slowest Quarterly Revenue Growth in 13 Years

[Edited] Salesforce Inc (CRM.N), the San Francisco-based cloud computing company, has posted its slowest quarterly revenue growth in 13 years, with an 11% rise in revenue.

Credit: REUTERS

This underwhelming growth comes as companies reduce spending on cloud-based software offerings due to economic uncertainty.

Following the announcement, Salesforce's shares fell nearly 5% in after-hours trading. Despite this, the company's stock has seen a significant surge of over two-thirds this year and reached its highest point in about 16 months during regular trading on Wednesday.

The slowdown in growth is not unique to Salesforce, as major cloud players like Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O) have also faced pressure this year. Businesses are tightening their belts in response to rising interest rates and the potential for an economic slowdown.

Amy Weaver, the Chief Financial Officer of Salesforce, acknowledged the continued macroeconomic pressures in the United States and noted that demand from financial services and technology companies had slowed in the quarter. The company also saw a significant increase in capital expenditure, with a jump of nearly 36% to $243 million, as it invested in AI-related tools to enhance its software products.

Salesforce reported revenue of $8.25 billion for the quarter ended April 30, slightly surpassing analysts' expectations of $8.18 billion. However, RBC analyst Rishi Jaluria attributed the stock's decline in extended trading to its strong performance earlier this year and the narrow revenue beat relative to its historical performance.

Salesforce faces fierce competition in the crowded cloud-computing market, particularly from legacy vendors like Oracle (ORCL.N). Additionally, the company has been a target for activist investors such as ValueAct, Inclusive Capital, and Starboard Value, who have all separately advocated for better cost control initiatives and improved efficiencies.

Looking ahead, Salesforce expects revenue for the current quarter to be between $8.51 billion and $8.53 billion, representing a growth rate of approximately 10% compared to the previous year. Analysts had anticipated revenue of $8.49 billion. On an adjusted basis, Salesforce earned $1.69 per share, surpassing estimates of $1.61 per share.

The slower revenue growth for Salesforce highlights the challenges faced by cloud computing companies in an uncertain economic climate. As businesses tighten their budgets, these companies must find innovative ways to maintain growth and stay competitive in the market.

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• Salesforce Inc has reported its slowest quarterly revenue growth in 13 years, with an 11% rise in revenue.

• The slowdown in growth is attributed to reduced spending on cloud-based software offerings in an uncertain economy.

• Shares of Salesforce fell nearly 5% in after-hours trading.

Source: REUTERS