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

Core Viewpoint - Salesforce Inc reported strong first-quarter results, but its shares declined due to margin concerns despite raised full-year revenue guidance [1][2]. Financial Performance - Salesforce's total revenue for the first quarter was $9.83 billion, reflecting a year-on-year growth of 7.6%, driven by an 8.3% increase in subscription revenue [4][6]. - The company reported earnings of $2.58 per share, with subscription and support revenue growing by 9% in constant currency terms [6]. Margin Analysis - Analysts noted an "uncharacteristic" miss on operating margins, despite total revenue surpassing consensus expectations [6]. - Salesforce's margins have typically expanded in tough demand environments, and the current trend may continue due to management's focus on profitable growth [3]. Growth Metrics - Data Cloud and AI annual recurring revenue exceeded $1 billion, showing a growth of over 120% [5]. - Current remaining performance obligation (cRPO) grew by 12.1% year-on-year, reaching $29.6 billion, although the second-quarter growth guidance was slightly below market expectations [5][6]. Analyst Ratings - Goldman Sachs maintained a Buy rating and raised the price target from $340 to $385 [8]. - Needham and Bank of America Securities also maintained Buy ratings with price targets of $400 and $350, respectively [8]. - JPMorgan reiterated an Overweight rating with a price target of $380 [8].