Salesforce Posts Q1 Beat As AI Crosses $1B, But How Concerned Should Investors Be About Margins?

Shares of Salesforce Inc (NYSE:CRM) tanked in early trading on Thursday, despite the company Wednesday reporting strong first-quarter results.

Here are some key analyst takeaways.

• Goldman Sachs analyst Kash Rangan reaffirmed a Buy rating, while lifting the price target from $340 to $385.
• Needham analyst Scott Berg maintained a Buy rating and price target of $400.
• JPMorgan analyst Mark Murphy reiterated an Overweight rating and price target of $380.
• Bank of America Securities analyst Brad Sills reaffirmed a Buy rating and price target of $350.

Check out other analyst stock ratings.

Goldman Sachs: Salesforce's reported solid quarterly results and raised its full-year revenue guidance, Rangan said in a note. Shares came under pressure due to margin concerns, he added.

Salesforce's margins have typically expanded amid tough demand environments and contracted back as the macro improves, the analyst stated. While the company's margins have expanded, this trend may continue instead of reversing, given "management's strong emphasis on profitable growth at scale today," even when the macro recovery begins, he further wrote.

Needham: Salesforce reported revenues and earnings of $9.83 billion and $2.58 per share, Berg said. Total revenues grew 7.6% year-on-year, driven by 8.3% subscription revenue, with "strength in Data / AI oriented clouds and products along with pricing and packaging in sales and service," he added.

Data Cloud and AI annual recurring revenue crossed $1 billion, up more than 120%, the analyst stated. "cRPO (current remaining performance obligation), our favorite sales metric, grew 12.1% Y/Y (11% in CC) versus 10% guidance," he further wrote.

JPMorgan: Salesforce's cRPO grew 11% to $29.6 billion, flat versus the previous quarter, Murphy said. However, the second-quarter cRPO growth guidance came in around 30bps below Street expectations, he added.

The company delivered an "uncharacteristic" miss on operating margins, the analyst stated. Total revenue of $9.83 billion, up 8% in constant currency terms, surpassed consensus, "driven by 9% growth in Subscription & Support revenue," he further wrote.

BofA Securities: Salesforce's first-quarter results suggest "a stable demand environment, with continued strength in the Agentforce new product cycle," Sills wrote in a note.

Management reiterated their outlook for subscription growth of 9% in constant currency terms for fiscal 2026, which was "a welcome relief," given that channel checks suggested a guide down, the analyst stated. The timing of growth acceleration remains unclear, he added.

Price Action: Shares of Salesforcehad declined by 5.85% to $259.89 at the time of publication on Thursday.

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