Customer relationship management software maker Salesforce (NYSE: CRM) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 7.6% year on year to $9.83 billion. Its non-GAAP EPS of $2.58 per share was 1.3% above analysts’ consensus estimates.
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Salesforce (CRM) Q1 CY2025 Highlights:
- Revenue: $9.83 billion (7.6% year-on-year growth)
- Adjusted EPS: $2.58 vs analyst estimates of $2.55 (1.3% beat)
- Adjusted Operating Income: $3.17 billion vs analyst estimates of $3.16 billion (32.3% margin, in line)
- Revenue Guidance for Q2 CY2025 is $10.14 billion at the midpoint, above analyst estimates of $10.02 billion
- Management raised its full-year Adjusted EPS guidance to $11.30 at the midpoint, a 1.5% increase
- Operating Margin: 19.8%, up from 18.7% in the same quarter last year
- Billings: $6.89 billion at quarter end, up 11.2% year on year
- Market Capitalization: $264.8 billion
StockStory’s Take
Salesforce’s first quarter results reflected ongoing adoption of its unified platform, particularly among small and mid-sized businesses. Management highlighted that both segments saw double-digit new bookings growth, with CEO Marc Benioff emphasizing the “velocity” of deals tied to AgentForce and Data Cloud. The company noted that nearly 60% of its top 100 deals included investments in both areas, suggesting that customers are increasingly leveraging Salesforce’s new AI-driven offerings. Robin Washington, Chief Operating and Finance Officer, pointed to strong renewal performance and the role of pricing and packaging changes in driving expansion. While revenue growth was partially constrained in retail, consumer goods, and the public sector, markets like the UK, France, Canada, and South Asia outperformed, helping offset these headwinds.
Looking ahead, Salesforce is focused on expanding the reach of AgentForce and Data Cloud, betting that AI-driven automation will drive future growth. Management raised annual adjusted EPS guidance and cited a ramp-up in sales capacity as a key enabler, with Benioff stating that the company will "supercharge" investments in high-growth segments and geographies. The upcoming Informatica acquisition is viewed as critical for harmonizing enterprise data, a necessary foundation for successful AI implementations. Washington noted that while AgentForce and Data Cloud are still emerging as revenue drivers, their integration into Salesforce’s core applications is expected to accelerate customer adoption. However, management cautioned that execution risks remain, particularly around the pace of enterprise AI transformation and integration of acquired assets.
Key Insights from Management’s Remarks
Management attributed first quarter performance to rapid growth in AI-powered products, successful expansion into new customer segments, and a disciplined approach to acquisitions.
- AI adoption gaining traction: AgentForce, Salesforce’s digital labor platform, saw rapid early uptake, with over 4,000 paid customers and eight thousand total deals across industries. Management described this as the fastest ramp for any product in company history.
- Data Cloud driving expansion: Data Cloud surpassed 22 trillion records, up 175% year over year. Nearly 60% of top 100 deals included both Data Cloud and AI investments, indicating that large enterprises are prioritizing unified data strategies alongside automation.
- Small and mid-market strength: Small and medium business segments delivered robust double-digit new bookings growth, prompting management to reallocate sales capacity to these areas. This was identified as a surprise growth driver for the quarter.
- Informatica acquisition announced: Salesforce announced an agreement to acquire Informatica for $8 billion, aiming to combine its own AI CRM platform with Informatica’s data management capabilities. Management expects the deal to be accretive to non-GAAP operating margin, EPS, and free cash flow by year two post-close.
- Pricing and packaging changes: The introduction of flex credits, a consumption-based pricing model, was implemented in response to customer feedback to support easier adoption and expansion of AI-driven services.
Drivers of Future Performance
Salesforce’s forward outlook is anchored by continued investment in AI, expanded sales capacity, and integration of strategic acquisitions like Informatica.
- AI product expansion: Management expects AgentForce and Data Cloud to become more significant revenue contributors as customers increasingly deploy AI agents and unified data platforms. The success of early adopters and rapid iteration of new features are anticipated to drive broader adoption.
- Salesforce ecosystem leverage: The company is hiring up to two thousand additional salespeople, focusing on high-growth geographies and segments such as small and mid-market businesses. This expanded capacity is intended to accelerate revenue growth while maintaining operating margin discipline.
- Integration risks and market headwinds: Management acknowledged that successful integration of Informatica and sustained demand for AI solutions are critical. Uncertainties remain regarding the pace of enterprise AI adoption, and slower growth in certain traditional markets could offset gains from new products.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the pace of AgentForce and Data Cloud adoption across industries, (2) early signals of Informatica integration and its impact on Salesforce’s data strategy, and (3) the effectiveness of expanded sales capacity in driving new bookings. The evolution of pricing models and the company’s ability to maintain margin discipline amid these investments will also be key areas of focus.
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