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Salesforce, the global player in enterprise software, has announced its financial results for the first quarter of fiscal year 2025, ending on 30 April 2024. Despite a robust 11% year-over-year increase in revenue, amounting to $9.13 billion, the company fell short of analysts’ revenue expectations.
First Quarter Performance Overview
Salesforce reported a total revenue of $9.13 billion, which represents an 11% increase year-over-year, including a similar 11% increase in constant currency terms. The revenue growth was primarily driven by subscription and support revenue, which reached $8.59 billion, reflecting a 12% year-over-year rise. However, this impressive growth was not enough to meet analysts' forecasts, highlighting a gap between market expectations and Salesforce’s performance.
The company’s operating performance showed significant improvement. Salesforce achieved a GAAP operating margin of 18.7%, a notable increase of 1,370 basis points year-over-year. On a non-GAAP basis, the operating margin was 32.1%, up 450 basis points from the previous year. Operating cash flow also saw a significant boost, rising by 39% year-over-year to $6.25 billion, while free cash flow increased by 43% to $6.08 billion.
Marc Benioff, Chair and CEO of Salesforce, emphasised the company’s strong cash flow generation: "Our profitable growth trajectory continues to drive strong cash flow generation. We are at the beginning of a massive opportunity for our customers to connect with their customers in a whole new way with AI."
Guidance for Fiscal Year 2025
Looking ahead, Salesforce has set its revenue guidance for the second quarter of fiscal 2025 between $9.20 billion and $9.25 billion, which would represent a 7-8% year-over-year increase. For the full fiscal year 2025, the company maintains its revenue guidance between $37.7 billion and $38.0 billion, an 8-9% increase from the previous year. However, the company has adjusted its full-year subscription and support revenue growth guidance to slightly below 10% year-over-year in constant currency terms.
The company has also updated its operating margin guidance. For the full year, Salesforce expects a GAAP operating margin of 19.9% and a non-GAAP operating margin of 32.5%. The full-year operating cash flow growth is anticipated to be between 21% and 24%.
Amy Weaver, Salesforce's President and CFO, highlighted the company’s focus on disciplined profitable growth: "We delivered another quarter of disciplined profitable growth, with GAAP operating margin of 18.7%, up 1,370 basis points year-over-year, and Non-GAAP operating margin of 32.1%, up 450 basis points year-over-year. We’ve also made significant progress on our capital return program, returning more than $14 billion to shareholders since inception."
Financial Position and Capital Returns
Salesforce continues to demonstrate strong financial health. The company ended the quarter with $9.96 billion in cash and cash equivalents, up from $8.47 billion at the end of January 2024. Marketable securities also increased significantly to $7.71 billion from $5.72 billion over the same period.
In terms of capital returns, Salesforce repurchased $2.2 billion in shares and paid $0.4 billion in dividends during the quarter. Since the inception of its capital return program, the company has returned more than $14 billion to shareholders.
Challenges and Opportunities
Despite the positive financial metrics, the shortfall in meeting revenue expectations indicates underlying challenges. The evolving market dynamics and competitive pressures in the CRM and AI sectors could be contributing factors. Nevertheless, Salesforce’s strong emphasis on AI integration presents substantial growth opportunities. Benioff underscored this potential: "As the world’s #1 AI CRM, we’re incredibly well positioned to help companies realise the promise of AI over the next decade."
