Salesforce Shares Plunge by Most Since 2008 After Weak Outlook
Salesforce Shares Plunge by Most Since 2008 After Weak Outlook
Salesforce Shares Plunge After Weak Sales Forecast
Historic Stock Drop
Salesforce Inc. experienced its most significant stock decline since 2004, with shares plummeting by up to 21% following a forecast of slow quarterly sales growth.
AI Integration and Revenue Concerns
The company's focus on artificial intelligence hasn't yet bolstered sales as expected, raising investor concerns about its growth prospects amid a booming AI market.
Strategic Acquisitions and Market Response
Despite considering strategic acquisitions to enhance its data organization capabilities, Salesforce faces skepticism regarding its investment decisions, especially after its $27 billion purchase of Slack in 2021.
Future Outlook
While Salesforce emphasizes its long-term AI potential, immediate revenue boosts from AI integrations are not expected until 2025 or later, contributing to current market apprehensions.
What measures is Salesforce taking to address its slowing sales growth and bolster profits?
Focus on Artificial Intelligence and Shareholder Returns: Salesforce is actively promoting artificial intelligence (AI) as a key area to potentially boost revenue in the future. Though analysts do not expect revenue from generative AI features in Salesforce applications to have a significant impact until 2025 or 2026, the company remains focused on this technology. Additionally, Salesforce has taken steps to increase shareholder value through financial strategies such as increasing stock buybacks and initiating a dividend.
Strategic Acquisitions: Despite some investor reservations, particularly following the large-scale acquisition of Slack in 2021, Salesforce continues to consider strategic acquisitions as part of its growth strategy6. The company remains open to large acquisitions but emphasizes that any future deals will be approached with a focus on non-dilutive, accretive transactions with favorable metrics6. This indicates that while Salesforce is cautious, it still views inorganic growth through acquisitions as a crucial part of its strategy.
Operational Adjustments: Salesforce is experiencing more cautious purchasing behavior from customers, with smaller transactions and longer decision times. This shift in customer behavior is prompting Salesforce to adjust its sales strategies and possibly refine its offerings to better align with current market demands. These operational adjustments are part of Salesforce's broader effort to navigate through slower growth periods more effectively.
What specific factors contributed to Salesforce's shares plunging by the most since 2008?
Salesforce's shares plunged by the most since 2008 due to the company projecting the slowest quarterly sales growth in its history. This renewed concerns that the company will be left behind in the artificial intelligence boom. Salesforce's revenue is expected to rise as much as 8% to $9.25 billion in the period ending in July. This would be the first quarter of single-digit sales growth for Salesforce in its almost two decades as a publicly traded company1. The stock sank by as much as 21% to $215.40, the biggest intraday decline since July 21, 2004. Additionally, Salesforce's outlook weighed on the performance of the software sector, with Oracle Corp., ServiceNow Inc., SAP SE, and others also declining.