Shares of Salesforce, a cloud-based software firm, plunged 16% before the market opened on Thursday following its lowest quarterly revenue growth forecast ever. The disappointing forecast raised concerns that high interest rates and the emergence of artificial intelligence offerings from competitors were dampening demand for Salesforce’s products.
If the losses hold, the San Francisco-based company could lose more than $40 billion in market value, marking the first time since 2006 that its quarterly revenue fell below expectations. Analysts at Morgan Stanley noted in a client note that weak bookings in the first quarter were testing investor patience, as the company’s generative AI innovation cycle had yet to significantly impact its top-line results and was now becoming a competitive concern.
Some brokerages also cautioned that the forecast indicated a further slowdown in software demand in April, coinciding with signs of a cooling U.S. economy.
According to analysts from Barclays, the selling environment has worsened since the end of March, with April being particularly challenging. This could explain why companies like Workday or Salesforce, which are considered off-cycle, have suffered more compared to ServiceNow or Microsoft.
However, there is some optimism on Wall Street as Salesforce has reiterated its fiscal 2025 revenue forecast. Barclays analysts believe that with a strong focus on building pipeline, there is still hope for the fiscal year.
Following the company’s results, at least ten brokerages have lowered their price targets on the stock. Among the 49 analysts covering the stock, D.A. Davidson’s price target of $230 is the lowest.
So far this year, Salesforce and ServiceNow have seen gains of over 3%, Microsoft has gained 14%, while Workday has experienced a decline of 23%.