Salesforce has reported the slowest growth in 13 years, with its Q1 2024 revenue increasing by 11 percent year-over-year.
Amy Weaver, Chief Financial Officer at Salesforce, partly attributed the “modest increase” in Q1 to the addition of Tableau to its finance metrics.
Yet, Weaver believes the growth was hampered by its weaker-than-usual marketing and commerce departments, which saw major layoffs in January, followed by further job cuts in February this year.
Nevertheless, Marc Benioff, Chairman and Co-Chief Executive Officer was positive about the company’s quarterly performance: “Our Q1 results show that we continue to make great progress.
“As I said in March, we’re just getting started with this incredible transformation.
“We continue to scrutinize every dollar of investment, every resource, and every spend. And we’re transforming every corner of our company.
Our progress over the last five months [has been] very impressive, and I cannot be more grateful to our entire team for their leadership.
He seemingly has good reason to be pleased too. After all, the results – although showing slow growth relative to previous quarters – surpassed analysts’ quarterly revenue predictions of $8.18BN, bringing in $8.25BN.
Salesforce also significantly exceeded its margin target for the quarter, achieving a non-GAAP operating margin of 27.6 percent, up 1,000 basis points year-over-year.
Finally, Benioff pointed to some major partnerships and customer wins with the likes of NASA, Siemens, Spotify, Paramount, Northwell Health, and the U.S. Department of Agriculture.
The AI Revolution
During an earnings call, mentions of its core CRM business were generally accompanied by AI developments, such as Einstein GPT, Slack GPT, Tableau GPT, and Netscape Navigator.
Weaver explained that the company is “hyper-focused on delivering the next wave of innovation led by Data Cloud and Einstein GPT.”
She added: “Salesforce is well positioned to remain the market leader in this new AI-first world.”
Einstein GPT uses generative AI to tailor customer experiences, improve agent efficiency, and access and utilize relevant knowledge.
Benioff recalled its release at Trailhead DX in San Francisco in March this year and announced that it will generate a milestone of one trillion predictions for customers this week.
Salesforce also applied generative AI technology for Slack, releasing Slack GPT last month to increase business productivity by leveraging CRM and conversational data.
Tableau GPT was also launched last month, enabling data inquiries using Einstein GPT and AI insights at scale.
Benioff was bullish on the future of AI. He said:
The coming wave of generative AI will be more revolutionary than any technological innovation that’s come before in our lifetime, or maybe any lifetime.
“Like Netscape Navigator, which opened the door to a greater internet, a new door has opened with generative AI, and it is reshaping our world in ways that we’ve never imagined.
“Every CEO realizes they’re going to have to invest in AI aggressively to remain competitive, and Salesforce is going to be their trusted partner to get them to do just that.”
What Lies Ahead?
Looking to the future, Benioff said they will raise the non-GAAP operating margin to 28 percent for the full fiscal year, with a view to hitting 30 percent in Q1 2025.
The 2024 revenue guidance is being maintained at $34.5BN to $34.7BN, which equates to a ten percent growth year-over-year.
Revenue expectations for Q2 2024 are $8.51BN to $8.53BN, which would also be approximately ten percent growth.
More generally, he summarised the future of its customers and industry as “AI plus data plus CRM”.
These are three vital engines powering Salesforce, which can be useful indicators of its performance going forwards. As the CFO said, its data ‘engine’ was affected this quarter in the form of Tableau, as well as resistance from market forces and recovery from layoffs, which we can call the universal fourth engine.
To excel in the next quarter, Salesforce will need to address the issues it has in data and hope not to be too held back by market headwinds, which have been praying havoc on the technology sector in recent times.
