Salesforce stock drops 21% after revenue miss, first since 2006

Salesforce's stock took a hit, dropping by as much as 21% after the company reported its first revenue miss since 2006. Analysts noted that this was due to weaker-than-expected first-quarter revenue and light second-quarter guidance, signaling ongoing macroeconomic challenges for enterprise software providers.

The company reported first-quarter revenue of $9.13 billion, falling short of analyst estimates of $9.17 billion. Adjusted earnings per share came in at $2.44, surpassing analyst estimates of $2.38. For the second quarter, Salesforce provided revenue guidance of $9.2 billion to $9.25 billion, below analyst estimates of $9.37 billion.

Analysts at Citi and Bank of America both acknowledged the tough macroeconomic environment impacting Salesforce's results. Questions also arose regarding how the company will monetize opportunities in generative AI technologies.

Despite the disappointing results, Wall Street largely defended Salesforce, with Goldman Sachs and Bank of America reiterating their "Buy" ratings. Goldman Sachs highlighted the potential for growth catalysts such as easing interest rates and outsized growth potential from generative AI. Bank of America saw signs of improvement in Salesforce's core business and found the stock price sell-off to offer an attractive risk/reward profile.

On the other hand, Citi took a more cautious approach, maintaining a "Neutral" rating due to slowing growth and the need for more evidence of momentum in Data Cloud/Gen AI monetization. Wedbush analyst Dan Ives viewed Salesforce's results as a minor setback and suggested investors take advantage of the decline to buy shares, citing the company's strong leadership and potential for a turnaround.

Overall, while Salesforce faces challenges in the current economic environment, analysts remain optimistic about the company's long-term prospects and believe it has the potential to bounce back from this setback.


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