The News: Salesforce recently reported its Fiscal Q1 2024 earnings with the quarter ending on April 30, 2023. Revenue reached $8.25 billion, which was up 11% on a year-over-year basis and 13% in constant currency, beating consensus estimates. Read Salesforce FY Q1 2024 earnings for more information.
Salesforce Q1 FY 2024 Revenue Up 11% YoY and Improving Profitability
Analyst Take: Salesforce reported its Fiscal Q1 2024 earnings, with revenue of $8.25 billion, which was up 11% on a year-over-year basis, beating analyst estimates. Despite a challenging macroeconomic environment, the company remains in an excellent position to weather future storms since it took aggressive action early on right-sizing its cost structure along with a greater emphasis on profitability. In fact, during the quarter, the company’s gross and operating margins grew ahead of expectations, indicating its laser focus on cost containment and profitability is taking hold, pleasing shareholders.
Similar to other companies in the IT industry, Salesforce is rapidly adopting and incorporating AI into its product offerings. Recently, the company announced Einstein GPT for its Salesforce Service Cloud, offering its users more personalized and efficient customer service to its customers. The Integration of Einstein GPT in Salesforce Sales Cloud will use real-time data from its Data Cloud and Einstein GPT to help sales teams deliver a more personalized experience for their customers and prospects. The company also unveiled Slack GPT, another generative AI tool that promises to boost employee productivity by automating workflows. Our view is Salesforce is in some of the software categories that are ripe for productivity improvements via AI.
During the quarter, the company mentioned that it picked up additional customer wins across myriad vertical markets such as Siemens, Spotify, NASA, the U.S. Department of Agriculture, Paramount, and Northwell Health.
Here are the Salesforce Q1 FY 2024 results by the numbers:
- Salesforce Q1 FY 2024 revenue of $8.25 billion, up 11% YoY
- Subscription and Support revenue was $7.64 billion, up 11% YoY
- Gross profit was 74% vs. 72%, up 200 basis points YoY
- Professional services and other revenues were $0.61 billion, up 9% YoY
- Non-GAAP operating margins were 27.6%, up 1,000 basis points YoY
- Non-GAAP diluted earnings per share of $1.69, up 72% YoY
- Total remaining performance obligation was $46.7 billion, up 11% YoY
Fiscal Q2 2024 and Full-Year Guidance
For its Q2 FY 2024 guidance, the company is projecting its revenue to be in the range of $8.51 billion to $8.53 billion with an approximately 10% year-over-year growth rate. On an annual basis, the company is projecting its full-year revenue guidance is expected to be in the range of $34.5 billion and $34.7 billion or approximately a 10% year-over-year growth rate. For its Q2 FY 2024 guidance, Salesforce expects its non-GAAP EPS to be in the range of $1.89 to $1.90, while it expects its fiscal full-year non-GAAP EPS to be in the range of $7.41 to $7.43.
Fiscal Q1 2024 Sales by Region
At a regional level, for Salesforce Q1 FY 2024 revenue growth was led by the Asia Pacific region at 24% YoY growth, followed by EMEA at 17% YoY growth and the Americas at 10% YoY growth. From a revenue perspective, the Americas represented the largest region at $5.5 billion, followed by EMEA at $2.0 billion and Asia Pacific at $814 million.
Fiscal Q1 2024 Business Unit Commentary: Aye, Aye, on Weaving In AI
From a business unit perspective, all units achieved double-digit revenue growth for fiscal Q1 2024 in constant currency. Leading growth was Data at 20% YoY, followed by Sales and Service growing at 13% and Platform and Other at 12%, while Marketing and Commerce came in at 10% year-over-year growth.
Ultimately, the goal of Salesforce is to help turn its customers’ organizations into data-driven companies as AI permeates all of its offerings. Although the demand environment has been slightly impaired as customers continue to scrutinize every deal coupled with elongated deal cycles, the company continues to see growth in quick-win, fast time to value versus multi-year transformation areas within its professional service unit.
Our organizational view is technology has a deflationary effect from a variable cost perspective, and Salesforce weaving AI capabilities into its products, such as Einstein GPT (the world’s first generative AI for CRM) and Slack GPT (giving each employee their own assistant), will certainly help organizations accomplish this goal. In fact, to date, the management team noted that Salesforce Einstein will generate a staggering 1 trillion predictions for its customers.
This month, the company also launched Tableau GPT, which simplifies data analysis for all, enabling anyone to inquire about their data using Einstein GPT and obtain AI-driven insights at scale. Thus, instead of waiting for reporting and analysis groups in finance or business intelligence groups, this also will help companies more quickly gather greater intelligence about their operations versus hours or days from other groups, improving productivity and customer-centricity.
To wrap it up, it is not a surprise that Salesforce’s Q1 FY 2024 earnings beat analyst expectations. The company is laser-focused on profitability along with making its stock more attractive to investors. In fact, the company’s gross and operating margin improvement, coupled with its share repurchase program, is evidence of that strategy. Our view is despite macroeconomic headwinds, the company is in an excellent position to weather the storm, and weaving AI into its offerings will certainly help its customer organizations achieve greater customer centricity, profitability, and productivity in the future. The future looks bright for Salesforce.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed Salesforce Q1 earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
Salesforce Introduces Einstein GPT: Revolutionizing Salesforce Service Cloud
Salesforce Unveils Slack GPT, a Generative AI Tool, to Boost Employee Productivity
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
