Software stocks have been shaky for investors this year, and Salesforce Inc.’s latest earnings report makes things worse.
The company, which was thought to be a giant in the software industry, missed its quarterly revenue guidance. As a result, its shares fell 16% in trading after the market closed on Wednesday.
If this drop lasts until Thursday night, it will be the biggest drop in Salesforce shares CRM, +0.66% since they dropped 18% on August 21, 2008.
Salesforce thinks that it will make $9.20 billion to $9.25 billion in sales this quarter and $2.34 to $2.36 per share in adjusted earnings. On the other hand, most people think it will be $9.35 billion and $2.40.
“We continue to see behaviour that is similar to what we saw over the last two years,” said Chief Operating Officer Brian Millham during the earnings call. “Except for Q4, when bookings were stronger, the momentum we saw in Q4 slowed down in Q1, and we saw longer deal cycles, tighter deals, and a lot of budget scrutiny.”
He also said, “Some changes were made on purpose to our go-to-market organisation to drive long-term productivity and create better customer experiences. These changes also played a role in the weaker bookings performance.”
The company cut its prediction for subscription and support revenue for the whole year. That now calls for growth just below 10%, or 10% growth when currency is not taken into account. Before, people thought that growth would be around 10%, or just above 10% when foreign exchange rates were taken into account.
Salesforce is sticking with its $37.7 billion to $38 billion revenue estimate for the whole year.
Kirk Materne, an analyst at Evercore ISI, saw some good things in Salesforce’s most recent results. For example, growth sped up to 25% in the data cloud and to 27% in Mulesoft. He did say, “at this point there is a real question as to the broader spending backdrop in software and whether [Salesforce’s] updated outlook is at risk.”
“Software Pain Train Continues” was the title of Materne’s note to clients.
The cloud software company had a net income of $1.53 billion, or $1.58 per share, in the first quarter of its fiscal year. This was up from $199 million, or 20 cents per share, in the same time last year. Salesforce made $2.44 a share after adjustments, while analysts whose work is tracked by FactSet thought the company would make $2.37 a share.
Salesforce’s sales went up 11% to $9.13 billion, while the consensus estimate from FactSet was $9.15 billion.
