MW Salesforce earnings were 'not bad.' So why is the stock having its worst day in a year?

By Emily Bary

Salesforce's results weren't enough to shed lingering growth fears

Even a Salesforce Inc. bear acknowledged that the company's latest earnings were "not bad." So why is the stock swinging meaningfully lower on Thursday?

Admittedly, there was more to Bernstein analyst Mark Moerdler's assessment. He titled his note to clients: "Not bad, not wonderful, just in-line."

Still, Salesforce shares $(CRM)$ are off 6.2% in morning action Thursday, enough to pace Dow Jones Industrial Average laggards and shave about 110 points off the index. Though the stock initially climbed a bit in Wednesday's extended session following the report, it's now headed for its worst one-day percentage decline since May 30, 2024, when it plunged nearly 20%, according to Dow Jones Market Data.

The stock is down 23% this year and has been dogged by growth fears.

Moerdler unpacked things more in his report. The quarter was "boring," in his view. That can actually be a good thing. "With concerns about macro and the potential of a recession it is nice yet again to see a company deliver an in-line quarter with no visible macro effect."

But there are also questions about what to expect from Salesforce going forward - and that's what keeps Moerdler in the bear camp.

"We have been concerned that Salesforce was a mature business in a mature market and that expectations were running too high in general and especially as it relates to Agentforce," Moerdler wrote. After earnings, he thinks there will be concerns that "growth is not going to accelerate and the company is increasing head count investments and M&A."

He stuck with his underperform rating, as he boosted his price target to $255 from $243.

Read: Why Salesforce plans to buy Informatica in an $8 billion AI deal

The topic of a potential growth acceleration was top of mind on the earnings call. As Guggenheim analyst John DiFucci put it, "management talked about accelerating 'growth' so much on the call that it felt like we were in the middle of a game of "Where's Waldo?" since improving growth was left to metrics that may or may not drive the important subscription growth, and subscription growth continues to decelerate."

DiFucci gets the need for a company to "seed" a market, but he's waiting to see constant-currency subscription revenue growth accelerate. For now, "just saying 'growth' a lot doesn't mean much," he added, as he maintained a neutral rating on the stock.

Monness, Crespi, Hardt & Co. analyst Brian White mentioned growth issues as well.

"We believe Salesforce is well positioned to participate in the [generative AI] trend with a strong cloud portfolio and innovations such as Agentforce," he wrote, while keeping his neutral stance. At the same time, "growth is uninspiring, the competitive landscape dynamic, software in transition, and the macro environment treacherous," he added.

Evercore ISI's Kirk Materne was more optimistic. "While we get that investors could remain in 'wait and see' mode near-term, we believe the table is still set for a potential re-rate in [second half of the year] if the business can even modestly reaccelerate," he wrote, referring to the idea that investors could ascribe a higher valuation multiple to the stock.

He added that the company's constant-currency outlook for subscription revenue growth of about 9% this fiscal year "continues to assume a slight level of reacceleration, and we continue to believe that a 10% subscription revenue run rate exiting FY26 remains in play as Agentforce momentum continues to build."

Materne has an outperform rating on the stock, and he lifted his price target to $350 from $360.

Judging by the stock move, though, it seems like Salesforce needs to prove itself more to Wall Street.

Mizuho desk-based analyst Jordan Klein noted that Salesforce "firmly remains outside of the buy-side 'circle of trust' in software." Hedge funds will need to see proof that the company can deliver upside to results and also boost its outlook, and he said that might take a few quarters to happen. For now, bears are pinning the company's boost to its full-year revenue guidance on the weakening of the U.S. dollar, according to Klein.

-Emily Bary

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May 29, 2025 11:17 ET (15:17 GMT)

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