April 23, 2024

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Salesforce sees annual revenue below estimates due to weak cloud demand

Salesforce sees annual revenue below estimates due to weak cloud demand

Written by Zaheer Kachwala

(Reuters) – Salesforce Inc expanded its stock buyback program by $10 billion and announced a new dividend, but its annual revenue forecasts that fell short of estimates sent its shares down about 2% in after-hours trading.

The company's downbeat outlook points to a potential slowdown in cloud and technology spending as customers face high interest rates and rising inflation, forcing them to curb costs.

The company expects revenue of $37.7 billion to $38 billion for all of 2025, compared to analyst estimates of $38.62 billion, according to LSEG data.

Warnings of a slowing economy prompted Salesforce to lay off about 700 employees, or roughly 1% of its global workforce, last month, adding to a slew of layoffs across the technology and media industry.

“Salesforce expects growth of only 8-9% (for the full year), which takes it out of the high growth category. In order to compensate for this, it is offering a decent dividend at the lower end of the scale,” said Jill Loria, analyst at DA Davidson.

Cloud data analytics Snowflake also expects first-quarter revenue to fall short of estimates, adding to the woes for cloud companies as they face uncertainty this year.

However, Salesforce beat revenue estimates for Q4 revenue and earnings as it benefited from higher cloud spending, joining other cloud giants like Amazon.com and Microsoft.

The company reported revenue of $9.29 billion for the quarter ending January 31, beating analysts' estimates of $9.22 billion.

On an adjusted basis, the company earned $2.29 per share compared to estimates of $2.26 per share.

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In early 2023, Salesforce became a target of activist investors pushing for changes that would cut costs, increase stock buybacks and break up its mergers and acquisitions committee.

Salesforce expects adjusted earnings of $9.68 to $9.76 per share for the full year, compared with estimates of $9.57 per share.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Maju Samuel and Shailesh Kuber)