Dive Brief:
- Salesforce is running into sustained customer scrutiny over tech spending and elongated sales cycles as customers shy away from large transformation efforts, the company said during an earnings call Wednesday.
- During Q1 2024, the company's professional service business "started to see less demand for multiyear transformations, and, in some cases, delayed projects as customers focused on quick wins and fast time-to-value," said Brian Millham, president and COO at Salesforce, during the call.
- Salesforce revenue for the first quarter reached $8.25 billion, up 11% year-over-year, for the period ending April 30. That growth rate, however, is the company's smallest since its 2010 fiscal year.
Dive Insight:
Salesforce, a staple of the enterprise software world known for its CRM solution, has been attributing slower customer growth to broader macro conditions.
The company is grappling with “intense customer scrutiny on every investment dollar to ensure the highest return possible,” according to CFO Amy Weaver, speaking in November during its Q3 2023 earnings call.
Salesforce's customer headwinds have persisted, Millham warned during the call Wednesday.
"Customers continue to scrutinize every deal, and we see elongated deal cycles and deal compression, particularly in our more transactional revenue streams like SMB, create and close, and self-serve," he said.
Despite cooling signals from the economy and more conscientious buyers, global IT spending is still expected to grow 5.5% this year, according to Gartner projections.
As customers pull back on larger transformation projects, Salesforce is enjoying success in its industry cloud offering, in line with the broader trend of technology providers customizing cloud solutions for use in specific sectors.
Eight of the company's offerings for industry-specific cloud grew more than 50% in annual recurring revenue, according to Millham.
