Will This Silicon Valley Darling Topple The Market?

Silicon Valley darling, Salesforce, saw its stock fall 16% following last night’s fiscal Q1 2025 earnings report. Growth moderated to an 11% year-over-year increase, which was the lower end of the guidance and that was enough to spook investors.

Yet the woes continued when full-year revenue guidance of $37.7 billion to $38 billion was reported because it reflected a growth projection of just 8% to 9%.

Adding to the downbeat projections was news of elongated deal cycles, deal compression and high levels of budget scrutiny among customers. Put all those ingredients into the mix and concerns were raised about future growth prospects.

So will it affect the market more generally?

Key Points

• Salesforce’s 11% revenue increase met the lower end of expectations, and their full-year guidance projected only 8% to 9% growth, causing investor concern.
• Elongated deal cycles, deal compression, and high levels of budget scrutiny impacted Q1 bookings and raised worries about future growth.
• Weakness across geographies and sectors, along with internal changes and foreign exchange headwinds, suggest potential challenges for the broader market and other SaaS companies.

Salesforce Seeing Weakness More Broadly

Where the market is likely to be jittery following Salesforce’s earnings announcement is the fact that weakness was reported in the Europe, Middle East, Africa and Asia regions, as well as parts of the Americas.

Sectors such as high tech, retail, and consumer goods were more constrained compared to others like public sector and financial services, which performed better.

There is a more general concern that professional services and license revenues are facing ongoing pressures and that customers are seeking shorter duration projections, which in turn will result in top line sales headwinds.

If Salesforce is suffering from customers focused on short-term projects and experiencing broad geographic weakness, the odds are other major firms are facing uphill sledding too.

Are Salesforce Woes Company Specific?

Certainly there were aspects of the report that were specific to Salesforce, such as the company’s change to its go-to-market organization to drive long-term productivity and improve customer experiences. This pivot negatively impacted their Q1 bookings performance. The reorganization was intended to align with their strategy better, but it caused short-term disruptions that contributed to the lower-than-expected results.

And the company also suffered from a foreign exchange headwind to the tune of $200 million. So too did company-specific M&A activities create uncertainty among shareholders and analysts.

The net effect was slower growth, moderated guidance and ongoing economic pressures. For investors, there were enough aspects of the report to cause concern that the business environment more generally is slowing and that the share price plunge could ripple through to affect other SaaS companies at the very least and, quite possibly, the market more generally.

Perhaps that’s why some of the leading traders in the world today trimmed their positions, even in market leader Nvidia. It’s quite possible they see the market has being stretched now and simply needing a catalyst to selloff.