Salesforce, leading cloud-based software company, reported a significant stock plunge. This drop came on the heels of it announcing that guidance for third-quarter revenue was indicating a Disco-like decline. The company’s shares tanked more than 4% the next day after they projected a revenue range of $10.24 billion and $10.29 billion. This projection came in just under LSEG’s consensus prediction of $10.29 billion. This discouraging guidance has spooked investors, triggering an over 7% share price decline for Salesforce in premarket trading.
So even with all the money wiped off Salesforce’s stock value, the company announced better-than-expected second quarter financial results. With revenue of $1.28 billion the company topped estimates on earnings of 45 cents per share. Salesforce posted blowout adjusted earnings of $2.91 per share on record revenue of $10.24 billion. This performance beat the consensus earnings per share estimate of $2.78 and revenue estimate of $10.14 billion.
The combination of a stellar second-quarter beat with some poor-looking third-quarter guidance has investors spooked. The company’s last few quarters have blown expectations out of the water. Perhaps more worrisome to market analysts was the revenue guidance for the next quarter.
Salesforce’s recent stock performance has amplified the dramatic mood swings occurring in the technology sector. It further highlights how important it is to exceed investor expectations.
“The decline in Salesforce shares reflects investor disappointment over the third-quarter revenue guidance,” said a market analyst who wished to remain anonymous. “While the company has demonstrated strong earnings in the past, any uncertainty regarding future performance can trigger panic selling.”
Investors are now closely monitoring Salesforce’s actions and upcoming announcements, particularly those regarding potential adjustments to its guidance or strategy that could impact future quarters. How the company maneuvers through this uncertainty will surely be key in determining if investor confidence is restored.