💃 Salesforce 2024Q1 (FY2025Q1) Earnings Call 🕺

Good morning, Salesforce Nerds! Salesforce stock plummeted 16% in afterhours trading upon earnings numbers being published.

Shortly after, Marc and company had the pleasure of speaking on it in the quarterly earnings call.

All of your Salesforce 2024Q1 (FY2025Q1) Earnings Call highlights wrapped into a 4 minute burrito 🌯.

THE NUMBERS

Salesforce FY2025Q1 Earnings

Revenue | $9.13 billion actual vs $9.17 billion expected, and an 11% YoY increase. This miss on revenue expectations is what triggered the stock plummet.

Earnings | $2.44 per share vs $2.38 expected

Furthermore, Salesforce adjusted guidance for the current quarter (FY2025Q2) to $2.35 EPS and $9.2 billion revenue; down from $2.40 and $9.37 billion.

🙁

Operating Margin increased to 32.5% and shows continued progress in cleaning up operational expenses.

And finally, apparently, Salesforce also has 250 petabytes of their customers front office data. You know this because Marc said it like six times on the call 😅.

THE BAD

Yikes!

Just like Cheronybl is a great place to get some radiation exposure, Twitter is a great place to get bad news. So here you go 👇

😳 that’s a stark visual 📉

This dude straw mans!

This is an interesting perspective. There are certainly complex, integrated solutions where Salesforce plays a big role.

But there is also a thriving market for drag & drop, clicks-not-code, and other technical-lite integration solutions like Zapier, Make, and even “enterprise-level” solutions like Boomi.

These integration-tools-for-dummies have had more positive impact for Salesforce, than negative. They lower the barrier for entry for non-technical business owners to have a nicely integrated stack.

Not sure where this poster got 7-8% growth as Salesforce did 11% growth YoY.

For reference, most of FAANG did had higher growth than Salesforce. Meta had 27% growth and even the old dinosaur Microsoft had 17% growth.

None of Salesforce’s abundant AI talk has produced a compelling AI success story.

Not tracking with this argument - Nvidia produces hardware that makes AI applications possible for enterprises. Salesforce develops enterprise software that utilizes AI and passes costs on to the customer. 🤷🏻

THE GOOD

Tell Me Something Good

From an earnings call perspective, there wasn’t much good.

That being said, it’s notable how in-control Marc was on the call.

For comparison, when the doubters were forced to give him his flowers, he laid it on thicc.

And when he’s been called out for going against his self-declared Ohana culture, he can be quite defensive.

But he was measured on this call. Succinct (for Marc, anyway). And was consistent in his message that Data Cloud + AI is the near-future for the customers he serves and the prospects he wants to sell to.

But you are all still waiting on that compelling AI story that validates his message.

IT IS WHAT IT IS

Stepping Back

The earnings call good news was nominally good. Like, you drove home and didn’t get a flat tire, yay!

The bad news sent the Twitter traders into a tizzy.

But is it really that bad? One missed quarter in 18 years? 😼

For the answer, look no further than just 1 year ago when Marc was put on his heels climbing out of a post-pandemic economy (hindsight is 20/20) and then delivered hugely to his shareholders and, overnight, went from pariah to messiah 🙌.

Earnings calls are 100% what have you done for me lately, ie the last 3 months. Not what have you done the last year, three years, or decade.

Salesforce has already forecasted that they’ll miss Q2 expectations. So two down quarters in…..does math…..72 quarters total.

70 quarters of increasing shareholder value, and then the mob comes for you after 6 months.

Here’s 3 reasons not to worry -

1) “Thin Miss”

Salesforce is getting fried for missing their Q1 target of $9.15 billion. They came in at $9.13 billion. That’s a 0.2% miss, aka a 99.8% make.

What if the government delivered on 99.8% of what they said they’d deliver on……..?

2) Reaganomics

Reaganomics was designed to produce a trickle down. Guess what? It didn’t work. Bad for the lower and middle class. Great for businesses.

Businesses are sitting on mountains of cash. They’re sitting tight. But when they decide to spend and invest, guess where it’s going - front office tech, to drive more growth and increase their company’s value.

It happened less in Q1, and will carry over into Q2. But it won’t last forever. Just like Salesforce’s epic 70 quarter run ended, this one quarter, and counting, run will also end.

3) Positioning

Salesforce is still well positioned. Here’s what we mean-

First, Marc doesn’t get enough credit for playing long-term games in this hostile short-term environment.

Marc knows AI will have an impact in enterprise business. Whether it’s in the current gen-AI form, or something we haven’t seen yet, Marc will have Salesforce positioned to ride the wave. Not to be pummeled by it. Not to miss it.

Secondly, Marc has already expertly positioned Salesforce to thrive for a long time. One attribute of enterprise software is entrenchment. Said another way, the switching cost of leaving Salesforce is a burden too big to bear.

Despite its 2000’s admin console vibes and questionable acquisitions, Salesforce has a 90% customer retention rate and their AEs are aggressively adding new logos every day.

Salesforce isn’t going anywhere.

SOUL FOOD

Today’s Principle

and now....Your Salesforce Memes