Salesforce sees annual revenue below estimates on weak cloud demand

Salesforce logo is seen near computer motherboard in this illustration taken January 8, 2024. REUTERS/Dado Ruvic/Illustration

(Reuters) -Salesforce expanded its stock buyback program by $10 billion and announced a new dividend, but its annual revenue forecast that was below estimates pushed its shares down around 2% in after hours trading.

The company's downbeat forecast signals a likely slowdown in cloud and tech spending as clients grapple with high interest rates and rising inflation, compelling them to keep a lid on costs.

The company sees revenue between $37.7 billion to $38 billion for full-year 2025, compared with analysts' estimate of $38.62 billion, according to LSEG data.

Warnings of a slow economy prompted Salesforce to cut about 700 employees, or roughly 1% of its global workforce, last month, adding to the slew of layoffs across the tech and media industry.

"Salesforce is guiding for only 8-9% growth (for the full year), which moves it out of the high growth category. In order to make up for that, it is introducing a dividend, which is appropriate for the lower level of growth," said Gil Luria, analyst at D.A. Davidson.

Cloud data analytics Snowflake also forecast first-quarter revenue below estimates adding to the woes of cloud firms as they face uncertainty this year.

However, Salesforce beat revenue estimates for fourth-quarter revenue and profit as it benefited from higher cloud spending, joining other cloud giants like and Microsoft.

The company reported revenue of $9.29 billion for the quarter ended Jan. 31, beating analysts' estimate of $9.22 billion.

On an adjusted basis, the company earned $2.29 per share compared with estimates of $2.26 per share.

In early 2023, Salesforce had become a target for activist investors to push for changes resulting in cost cuts, increased share buybacks and a dismantled mergers and acquisition committee.

Salesforce expects adjusted profit between $9.68 to $9.76 per share for the full-year, compared with estimates of $9.57 per share.

(Reporting by Zaheer Kachwala in Bengaluru; Editing by Maju Samuel and Shailesh Kuber)

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