CRM - Salesforce Q1 Earnings Preview: Watch For Acceleration In The Data Cloud

2024-05-27 20:32:20 ET

Summary

• Salesforce has underperformed the S&P 500 and Nasdaq 100 YTD. The company reported its FY24 earnings where revenue and earnings grew 11% and 50% YoY respectively.
• The company is seeing strong momentum in its Data Cloud segment as it drives robust innovation by launching Einstein 1 Studio, while building new capabilities for Einstein Copilot.
• For FY25, the company expects to grow its revenues by 9% YoY, while further improving its margins by 200 basis points to 32.5%.
• I believe we need to pay attention to the management’s commentary on its cRPO growth, while assessing its progress on accelerating its Data Cloud segment in its Q1 earnings call.
• Although I am impressed by the company’s innovation pipeline and financial discipline, I will rate the stock a “hold” given its risk-reward as well as uncertainty in genAI revenue timeline.

Introduction & Investment Thesis

Salesforce ( CRM ) is a customer relationship management ("CRM") technology provider that has underperformed the S&P 500 and Nasdaq 100 YTD. The company reported its Q4 FY24 earnings in February, where it grew its revenue and earnings by 11% and 50% YoY for the full year, respectively, as it continued to see strength in driving multiple cloud offerings in new deals, coupled with strong momentum from its Data Cloud Offering as businesses increasingly look to Salesforce to bring together their structured and unstructured data to leverage the power of genAI to improve productivity, customer relationships, and margins....

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