Weak guidance just hit Salesforce stock: What it means for 2025

Salesforce (CRM) reported fiscal fourth-quarter earnings that disappointed analysts, causing shares to drop during extended trading on Wednesday. The cloud software company’s revenue for the quarter grew 8% year-over-year to $9.99 billion, slightly missing analyst consensus estimates.

Adjusted earnings per share (EPS) for the fourth quarter came in at $1.75, compared to $1.74 a year earlier, but also fell short of expectations. For fiscal 2026, Salesforce projected full-year revenue of $40.5 billion to $40.9 billion, along with adjusted EPS of $11.09 to $11.17, both below analyst consensus of $41.32 billion in revenue and EPS of $11.19.

In response to the earnings report, shares of Salesforce fell approximately 5% in extended trading on Wednesday. The stock has lost about 8% since the beginning of the year, while the S&P 500 index has gained around 1% during the same period.

Key metrics from Salesforce’s earnings report included an increase in revenue to $9.99 billion versus a $10.04 billion expectation. Net income for the quarter rose to $1.71 billion, or $1.75 per share, up from $1.45 billion, or $1.47 per share, a year earlier. The subscription and support revenue from services totaled $2.33 billion, an 8% increase, though it was below the $2.37 billion consensus. The sales category generated $2.13 billion, also an 8% rise but below the expected $2.17 billion.

During the quarter, Salesforce introduced its second-generation Agentforce AI technology, which addresses employee questions within the Slack communications platform. The company noted that it has completed over 3,000 paid deals involving Agentforce since its launch in October. The technology has engaged in 380,000 conversations through Salesforce’s help website, with human intervention required in only 2% of cases.

Co-founder and CEO Marc Benioff emphasized during a conference call that few competitors demonstrate agent capabilities at scale as Salesforce does. He indicated that Agentforce is expected to make a modest contribution to revenue in fiscal 2026, with a more significant impact anticipated in fiscal 2027. Salesforce also mentioned plans for a new product in IT service management.

The company forecasted adjusted EPS of $2.53 to $2.55 for the fiscal first quarter, with expected revenue ranging from $9.71 billion to $9.76 billion. Analysts had predicted adjusted earnings of $2.61 per share and $9.9 billion in revenue. Salesforce is targeting adjusted EPS of $11.09 to $11.17 for fiscal 2026, implying a 7.4% growth. LSEG consensus anticipated adjusted EPS of $11.18 on $41.35 billion in revenue.

Salesforce reported significant year-over-year gains across various metrics, achieving $10 billion in revenue for the fourth quarter for the first time and $37.9 billion for the full fiscal year, a 9% increase. Operating cash flow rose to $13.1 billion for the year, an increase of 28%. The company’s non-GAAP operating margin reached 33%, and GAAP operating margin was reported at 19%.

Salesforce’s Remaining Performance Obligation (RPO) increased to $63.4 billion, up 11% year-over-year. The company reported Data Cloud and AI annual recurring revenue (ARR) of $900 million, marking 120% growth year-over-year. The subscription and support revenue saw a 9% year-over-year growth in constant currency for fiscal 2026, with free cash flow reaching $12.4 billion, up 31% year-over-year.

Despite its growth, Salesforce noted challenges, including foreign exchange headwinds impacting revenue growth, with a $300 million FX headwind affecting its CRPO. The professional services business is predicted to constrain growth in fiscal 2026. The company is also facing slower growth in its exploration base and weaknesses in marketing and commerce due to management transitions and executive departures.

In a recent Q&A session, Benioff discussed the evolution of Salesforce’s pricing model, shifting towards consumption elements and highlighting a recent $20 million deal with a telecommunications company involving Agentforce. He also expressed Salesforce’s commitment to assisting U.S. government agencies in achieving efficiency, particularly through digital labor solutions. Benioff noted that digital labor could enhance productivity without the need for increased human labor, reflecting on Salesforce’s own efficiency gains, including a 30% boost in engineering productivity.

Featured image credit: Salesforce