Salesforce stocks dropped as much as 17% in after-hours trading on Wednesday after the cloud software vendor unveiled lower-than-anticipated revenue and provided guidance that fell short of Wall Street’s projections.

Here is the breakdown of the company’s performance, in comparison to the LSEG consensus:

• Profit per share: $2.44 adjusted vs. $2.38 anticipated
• Income: $9.13 billion vs. $9.17 billion expected

Salesforce anticipated adjusted earnings per share in the ongoing quarter to be between $2.34 to $2.36 on a revenue range of $9.2 billion to $9.25 billion. Analysts surveyed by LSEG had predicted $2.40 in adjusted earnings per share on $9.37 billion in revenue.

The company reported that revenue in the fiscal first quarter, concluding on April 30, surged by 11% from $8.25 billion the previous year. It marks the first instance since 2006 that Salesforce missed revenue expectations, as per LSEG data.

Salesforce encountered budget scrutiny and prolonged deal cycles during the quarter, as mentioned by Brian Millham, President and Operating Chief, to analysts during a conference call. Changes in the go-to-market approach implemented by management impacted bookings, Millham disclosed.

All five segments of Salesforce’s products contributed to the growth. However, revenue from the Professional Services and Other category, totaling $548 million, saw a 9% decline, falling below the StreetAccount consensus of $572.9 million.

Net profit surged to $1.53 billion, or $1.56 per share, from $199 million, or 20 cents per share in the previous year.

Salesforce revised its earnings projection for the 2025 fiscal year, now expecting adjusted earnings to be $9.86 to $9.94 per share, compared to $9.68 to $9.76 three months ago. Revenue guidance remains steady at $37.7 billion to $38 billion. Analysts polled by LSEG were anticipating $9.76 in adjusted earnings per share and $38.08 billion in revenue.

Amy Weaver, Salesforce’s finance head, expressed expectations of deal compression and deceleration in projects within the professional services sector throughout the ongoing fiscal year.

During the quarter, Salesforce introduced the Einstein Copilot assistant for sales and customer service representatives. The company also announced that all paying Slack customers would gain access to artificial intelligence features like conversation summaries and daily recaps. Reports surfaced that Salesforce was negotiating the acquisition of data-integration firm Informatica, though talks later collapsed, as per the Wall Street Journal.

Weaver emphasized that Salesforce’s acquisitions must have “a distinct timeline for value accretion.”

Prior to the after-hours movement, Salesforce’s shares had risen by 3.5% thus far this year, lagging behind the S&P 500 index, which had appreciated by approximately 11% during the same period. A decline of this magnitude on Thursday would mark Salesforce’s most challenging day in the market since the 2008 financial crisis.

— contribution to this report was made by Robert Hum from good.

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