Salesforce set to deliver in-line Q1 revenue, conservative outlook amid macro headwinds

Jefferies analysts anticipate Salesforce's Q1 revenue will align with its $9.71-$9.76 billion guidance, but foresee limited upside due to a choppy demand environment and longer deal cycles, despite stable execution. While maintaining a 'Buy' rating and $375 price target, the firm expects conservative fiscal year 2026 guidance, even with a potential Q1 revenue beat, citing macro headwinds and concerns about prioritizing Agentforce growth over core offerings like Sales and Service Cloud.

Analysis

Salesforce (NYSE:CRM) is anticipated to report first-quarter revenue consistent with its guidance of $9.71 billion to $9.76 billion. However, Jefferies analysts express caution, citing a 'choppy' demand environment evidenced by a partner survey where 33% reported sequential pipeline deceleration, an increase from 24% in the previous quarter. Despite these headwinds and longer deal cycles, Salesforce's Q1 execution is described as stable, with deals reportedly not being canceled and fiscal 2025 expectations holding firm. Growth in current remaining performance obligations (CRPO) is a point of concern due to challenging upcoming comparisons, with analysts seeing limited potential for upside to consensus estimates of 10% for CRPO and 6.8% for total revenue. Consequently, fiscal year 2026 guidance is expected to be maintained rather than raised, even if Q1 revenue surpasses expectations, reflecting a cautious stance amid the current macroeconomic climate. On a positive note, the new Agentforce platform demonstrates promising early adoption, with one partner already having 70 customers live. The platform's credit-based pricing is viewed as a strategic move, enabling customer experimentation. Nevertheless, concerns exist that Salesforce might be prioritizing Agentforce's growth, potentially at the expense of its core Sales and Service Cloud offerings, which are experiencing decelerating growth. This deceleration positions Salesforce as one of the slower-growing names among large-cap software companies. Despite these mixed signals, Jefferies maintains a 'Buy' rating and a $375 price target, underscoring an attractive valuation and potential for margin expansion.

Key Decisions for Investors

• Investors should monitor Salesforce's upcoming Q1 earnings for confirmation of in-line revenue and closely scrutinize management's commentary on demand trends and deal cycle durations.
• Pay particular attention to current remaining performance obligation (CRPO) growth figures, as these face tougher comparisons and are a key indicator of future revenue resilience.
• Evaluate management's strategy regarding the balance between promoting new platforms like Agentforce and sustaining growth in core Sales and Service Cloud products, given concerns about potential neglect of the latter.
• Consider the dichotomy between the slower growth in core areas against the attractive valuation and margin expansion potential cited by analysts when assessing risk-reward for CRM.