By Adam Levine
Salesforce reported mixed first-quarter results on Wednesday afternoon. Its shares were sliding in after-hours trading.
Adjusted earnings per share were $3.88, well ahead of Wall Street's consensus estimate of $3.13 and up from $2.58 last year. Revenue for the quarter reached $11.13 billion, above expectations of $11.05 billion, and up 13% on the year.
Year-over-year numbers are a bit obscured by the November $8 billion acquisition of data-management platform Informatica. Sales from Informatica were $444 million, responsible for a third of year-over-year growth.
But a closely-watched metric tied to the company's backlog fell shy of analysts expectations. The company said its current remaining performance obligations grew by 14%, to $33.6 billion.
Guidance was similarly mixed. For the second quarter, the company projected $3.26 in adjusted earnings, a penny more than analyst projections. Revenue guidance fell $40 million short of expectations.
For the full year, Salesforce nudged up its sales forecast and raised its guidance for adjusted EPS by 7% at the midpoint of its range.
Shares were down 1.4% in after-hours trading on the news.
Salesforce reported its earnings amid a prolonged rout of software stocks. The stock was down 35% in the past year, even as the S&P 500 index was up 29%. Though April and May have seen some software stocks rebound, Salesforce didn't participate in the rally.
The stock is caught up in twin narratives that caused the price to peak in 2024. Revenue grew at greater than 24% a year from 2002 to 2022 when the company began to saturate the market for its customer relationship management software. Growth has slowed -- to 10% last year -- but that's been offset by better profitability, with operating margin rising from 2% in 2022 to 21% last year.
But the narrative that has been the biggest drag on Salesforce is that artificial-intelligence agents will disrupt its user-based pricing, which carries a 75% gross margin. Agents are software programs that can use an AI model to accomplish a complex series of tasks from simple conversational prompts.
Salesforce customers could use coding agents to make their own custom versions of the software. In fact, Palantir Technologies said in its earnings call earlier this month that it had replaced its customer relationship management software with a bespoke solution.
Moreover, if predictions are correct, soon agents will outnumber people on corporate networks, and could blow a huge hole in the user-based business model.
So far, the company hasn't seen an erosion in user numbers, chief operating and financial officer Robin Washington told Barron's following the earnings report on Wednesday.
Salesforce is fighting back by selling its own agents under the Agentforce banner. Pricing remains the issue, and Salesforce has already gone through a few sales models for Agentforce. Currently, Agentforce charges according to service consumption, not by the user.
"We will adapt to a consumption model," Washington says. "I think we'll always be hybrid."
At the end of the the quarter, Salesforce had over a $1 billion in annual recurring revenue from Agentforce, up from $440 million nine months before. It's a small number for a company expected to generate roughly $46 billion in revenue this year, but sales are growing quickly.
Write to Adam Levine at adam.levine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 27, 2026 17:02 ET (21:02 GMT)
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