Digitalization Initiatives to Aid Salesforce's (CRM) Q1 Earnings

Zacks Equity Research

27 May 2024 at 8:39 am·3-min read

Salesforce CRM is set to announce its first-quarter fiscal 2025 results on May 29. The company’s performance is expected to reflect positive demand trends driven by ongoing cloud migration and digital transformation efforts despite challenging macroeconomic conditions.

The widespread adoption of software-as-a-service (SaaS) platforms, driven by the hybrid working trend, is expected to boost the demand for Salesforce’s cloud-based solutions. The company's diverse cloud offerings are likely to have helped expand its customer base, thereby driving revenue growth.

The rising demand for generative artificial intelligence (AI)-powered cloud solutions is anticipated to have bolstered Salesforce’s revenue growth in the first quarter. Salesforce has been strategically integrating AI tools across its product lineup to stay ahead of competitors. This emphasis on AI, coupled with significant advancements in its Einstein Analytics platform, creates optimism for the upcoming quarterly results.

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Salesforce’s strategy to leverage international demand for cloud applications is also expected to enhance revenues during the quarter. The company's ability to offer integrated solutions for business challenges and improve customer experience is anticipated to have been a crucial factor in its cloud segment’s success.

Nevertheless, reduced software spending by small and medium-sized enterprises due to economic and geopolitical uncertainties may have impacted Salesforce’s performance. The company previously noted that customers are scrutinizing deals more thoroughly, resulting in longer deal cycles and compressed deals. The Subscription and Support segment is estimated to generate around $8.52 billion in revenues for the first quarter.

Salesforce also revealed earlier that its professional service business had been seeing less demand for multi-year transformation deals, as well as project delays in some cases. Our estimate for the Professional Services segment’s first-quarter revenues is pegged at approximately $609.4 million.

Furthermore, stiff competition from Oracle and Microsoft is a concern, along with forex headwinds.

Zacks Rank & Stocks to Consider

Salesforce currently carries a Zacks Rank #3 (Hold). Shares of CRM have soared 3.4% year to date (YTD).

Some better-ranked stocks in the broader technology sector are NVIDIA NVDA, CrowdStrike Holdings CRWD and Palo Alto Networks PANW. NVIDIA sports a Zacks Rank #1 (Strong Buy), while CrowdStrike and Palo Alto each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for NVIDIA’s fiscal 2025 earnings has been revised 74 cents upward to $25.10 per share in the past seven days, which suggests year-over-year growth of 93.7%. The long-term estimated earnings growth rate for the stock stands at 36.7%. The NVDA stock has soared 115% YTD.

The Zacks Consensus Estimate for CrowdStrike’s fiscal 2025 earnings has been revised upward by 2 cents to $3.90 per share in the past 60 days, which calls for an increase of 26.2% on a year-over-year basis. The long-term expected earnings growth rate for the stock is pegged at 22.3%. CRWD shares have risen 37.6% YTD.

The consensus mark for Palo Alto’s fiscal 2024 earnings has remained unchanged at $5.50 per share over the past 60 days, which indicates a 23.9% increase from that reported in 2023. It has a long-term earnings growth expectation of 22.1%. The PANW stock has risen 9% in the YTD period.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Digitalization Initiatives to Aid Salesforce's (CRM) Q1 Earnings

Salesforce Inc. Price and EPS Surprise

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