Salesforce shares drop on slowest revenue growth in more than 10 years

By Samrhitha A

(Reuters) – Salesforce (NYSE:) Inc fell about 7% on Thursday after reporting quarterly revenue that increased at its slowest pace since 2010, with companies cutting back spending on cloud-based software offerings.

The enterprise software maker was set to shed nearly $14 billion in market value, based on its share price of $208.40. The stock has risen nearly 69% this year, as of last close, making it the fourth-highest gainer in the .

Salesforce on Wednesday posted its smallest rise in quarterly revenue in 13 years and predicted a further slowdown ahead, blaming an uncertain U.S. economy and weaker demand from financial services and tech companies.

Belt-tightening measures by businesses dealing with elevated levels of inflation and high interest rates have impacted tech spending this year, hitting growth at major cloud services players such as Amazon.com Inc (NASDAQ:).

“Backlog is getting weaker, and while management points to macro, the subscription nature of the business means that these numbers won’t see any dramatic turnarounds,” brokerage Bernstein said.

Still, analysts were mostly positive on Salesforce, encouraged by the possible benefits from the company’s push towards AI and signs that profitability was improving at the company after a nudge from several activist investors.

Salesforce posted a net income of $199 million, compared with $28 million a year earlier, with operating margin rising to 5.0% from 0.3%.

At least 25 brokerages raised their price target on the stock to boost the median view to $240, which is 7% higher than its last closing price, according to Refinitiv data.

“Salesforce is well positioned to develop, deliver, and monetize AI given its existing data offerings (Tableau) and its ability to integrate AI into companies existing tech stacks,” D.A. Davidson analysts said.