Summary
Salesforce closed FY2024 Q1 with $8.25 billion in revenue, up 11% year over year and 13% in constant currency. Gross margin was 74.2%, up 1.8 percentage points from the prior-year quarter. Operating margin was 5.0%, up 4.7 percentage points. GAAP operating income was $412 million, up from the prior-year quarter. The margin expansion landed alongside the restructuring plan announced in January 2023, which cut the workforce by roughly 10%. Restructuring charges of $711 million hit the quarter, split between about $344 million for employee transition, severance and benefits and $367 million for office space reductions. Management said restructuring lowered GAAP operating margin by 860 basis points and GAAP diluted EPS by 72 cents.
GAAP diluted EPS was $0.20, up from the prior-year quarter, and net income was $199 million, also up. Losses on strategic investments cut GAAP diluted EPS by $0.11 and non-GAAP diluted EPS by the same amount. Non-GAAP operating margin was 27.6% and non-GAAP diluted EPS was $1.69. Cash kept moving in the right direction. Operating cash flow was $4.49 billion, up 22% year over year, and free cash flow was $4.25 billion, up 21%. Capital expenditures rose 35.8% to $243 million. The company also returned $2.1 billion to stockholders, repurchasing about 11 million shares at an average price of $188.17.
Backlog and billings metrics held firm. Remaining performance obligation was $46.7 billion, up 11% year over year. Current remaining performance obligation was $24.1 billion, up 12% and 12% in constant currency. Deferred revenue tied to the current portion was $15.12 billion, up 10.9%. Headcount, though, told the cost story. Full-time equivalent employees totaled 72,970 as of April 30, 2023, down from 79,390 at the end of the prior fiscal year. Attrition, excluding Slack, sat near 8.0%. Foreign currency trimmed revenue by roughly two percent. Management pointed to elongated sales cycles, additional deal approval layers and deal compression, and warned that slower growth in new and renewal business could weigh on remaining performance obligation, revenue and the ability to meet guidance.
Guidance points to steady but slower near-term growth. For the second quarter of FY2024, the company initiated revenue guidance at 10% year-over-year growth with no foreign currency impact, and guided current remaining performance obligation growth to 10% as well. Non-GAAP diluted EPS guidance for the quarter is $1.89 to $1.90. For the full fiscal year FY2024, Salesforce reiterated its revenue guidance, also at 10% year-over-year growth, and raised its GAAP and non-GAAP operating margin guidance, with the non-GAAP target at 28.0%. Full-year FY24 non-GAAP diluted EPS guidance is $7.41 to $7.43. Operating cash flow growth is guided to 16% to 17%, a figure that carries an estimated 14% to 16% headwind from restructuring charges.
The remaining risks are mostly execution and cost. The company expects $150 million to $400 million in additional restructuring charges and $900 million to $1.4 billion in future cash expenditures tied to the plan. It also flagged volatility in its strategic investment portfolio, foreign currency swings, rising interest rates and a new 15 percent corporate alternative minimum tax. On the product side, Salesforce is pushing generative AI across the portfolio through Einstein GPT, Slack GPT and Tableau GPT, plus a Salesforce GPT Trust Layer meant to protect customer data. Those efforts are long term. Near term, the pitch rests on margin discipline and cash generation rather than headcount growth.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2024 | Q4 FY2023 | QoQ | Q1 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $8.25B | $8.38B | -1.6% | $7.41B | +11.3% |
| Gross profit | $6.12B | $6.28B | -2.6% | $5.37B | +14.1% |
| Gross margin | 74.2% | 75.0% | -0.7 pp | 72.4% | +1.8 pp |
| Research & development | $1.21B | $1.13B | +7.0% | $1.32B | -8.4% |
| Sales & marketing | $3.15B | $3.38B | -6.8% | $3.37B | -6.5% |
| General & administrative | $638.0M | $586.0M | +8.9% | $656.0M | -2.7% |
| Total operating expenses | $5.71B | $5.93B | -3.7% | $5.35B | +6.8% |
| Operating income (loss) | $412.0M | $357.0M | +15.4% | $20.0M | +1960.0% |
| Operating margin | 5.0% | 4.3% | +0.7 pp | 0.3% | +4.7 pp |
| Net income (loss) | $199.0M | -$98.0M | +303.1% | $28.0M | +610.7% |
| Net margin | 2.4% | -1.2% | +3.6 pp | 0.4% | +2.0 pp |
| Diluted EPS | $0.20 | -$0.10 | +$0.30 | $0.03 | +$0.17 |
Risks
MD&A states continued macroeconomic factors and measured customer buying behavior caused elongated sales cycles, additional deal approval layers, and deal compression in the first quarter of fiscal 2024. Slower growth in new and renewal business, if sustained, impacts remaining performance obligation, revenues, and ability to meet financial guidance and long-term targets.
Risk factors expanded AI risk, noting Salesforce is increasingly building AI into offerings including generative AI and Einstein GPT. This introduces risks around accuracy, bias, toxicity, privacy, security, data provenance, computing costs, ethical concerns, and emerging regulation such as the EU Digital Services Act.
The Restructuring Plan reduced workforce by approximately 10 percent and involved sales organization changes; MD&A recorded $711 million of restructuring costs in the three months ended April 30, 2023 and expects $150 million to $400 million in additional charges. Risk factors state this could negatively impact ability to attract, integrate, retain, and motivate key employees and maintain corporate culture.
As Salesforce targets larger enterprise and government customers, sales cycles become more time-consuming and expensive, with pricing pressure, greater implementation and configuration demands, and potential delays in revenue recognition. MD&A confirms these enterprise sales dynamics and deal compression in the first quarter of fiscal 2024.
Privacy and data-transfer regulation remains a material risk, including GDPR, CCPA/CPRA, new U.S. state privacy laws, cross-border transfer restrictions, and uncertainty after the EU-US Privacy Shield invalidation. Compliance costs, customer warranties, and potential fines or litigation could reduce demand and slow sales.
Customers have no obligation to renew subscriptions, and may renew for fewer subscriptions, shorter contract lengths, or lower-cost offerings, especially in economic uncertainty. MD&A reported attrition rate excluding Slack of approximately 8.0 percent as of April 30, 2023 and began including MuleSoft and Tableau in the attrition calculation.
Salesforce holds a portfolio of private and public strategic investments subject to volatility and impairment. In the three months ended April 30, 2023, gains (losses) on strategic investments, net were a loss of $141 million, reflecting $177 million of impairments on privately held equity and debt securities partially offset by $38 million of unrealized gains.
Foreign currency fluctuations negatively impacted revenues by approximately two percent in the three months ended April 30, 2023 and positively impacted current remaining performance obligation by less than one percent as of April 30, 2023 compared to constant currency rates. Exposure is concentrated in the Euro, British Pound Sterling, Japanese Yen, Canadian Dollar, Australian Dollar, Brazilian Real, and Israeli Shekel.
Risk factors discuss malicious cyberattack attempts and prior incidents, including the April 2022 Heroku unauthorized access incident and the December 2021 Apache Log4j vulnerability. Although identified events have not been material to date, a future breach could harm reputation, reduce sales, and increase legal, regulatory, and insurance costs.
As of April 30, 2023, Salesforce had substantial debt, including $9.4 billion carrying value of senior unsecured notes and $181 million of 50 Fremont secured notes repaid in May 2023. Lease commitments and other contractual obligations, including approximately $4.7 billion of future non-cancelable minimum lease payments, may affect financial condition and cash flows.
Salesforce periodically acquires businesses and technologies, including Slack, MuleSoft, Tableau, and Traction on Demand, which involve integration, security, revenue recognition, retention, and regulatory antitrust risks. Failure to realize expected benefits could disrupt operations, dilute stockholders, and adversely affect operating results.
The enterprise applications and platform services market is intensely competitive, with competitors that may have greater resources, broader suites, larger customer bases, and more flexible pricing. Salesforce also faces smaller, agile competitors and must keep pace with AI and technological developments to avoid losing sales.
Global tax developments, including the OECD Pillar Two global minimum tax and Inflation Reduction Act provisions such as the 15 percent corporate alternative minimum tax, could materially affect cash flows and financial results. As Salesforce utilizes remaining tax credits and net operating loss carryforwards, it expects an increase in cash taxes.
MD&A states that in the first quarter of fiscal 2024 Salesforce began seeing less demand for larger, multi-year transformation engagements and, in some cases, delayed projects, trends that may continue near term. Risk factors note that cost of professional services may exceed revenues from professional services in future periods.
Subscription and support revenues accounted for approximately 93 percent of total revenues for the three months ended April 30, 2023, and Salesforce derives a significant portion of revenue from CRM enterprise cloud computing application services. A decline in demand for these core offerings could materially reduce revenue and harm operating results.
Salesforce relies on third-party data center hosting facilities, cloud computing platform providers, and hardware and software vendors, and has experienced service interruptions. Supply chain disruptions due to geopolitical developments in Europe and capacity planning failures could impair service delivery and harm reputation.
Salesforce faces litigation and claims, including securities litigation involving Slack brought before acquisition, a Dutch privacy proceeding, and claims that it should be liable for third-party use of its products. Legal proceedings can be lengthy, expensive, and disruptive, and outcomes are uncertain.
Salesforce has publicly announced ESG goals, including racial and gender equality and greenhouse gas emissions reductions, that are aspirational and may not be achieved or accurately reported. Failure to meet evolving investor or regulatory standards could harm reputation, talent attraction, and stakeholder relationships.
Salesforce repurchased approximately 11 million shares for approximately $2.1 billion during the three months ended April 30, 2023 and had $13.9 billion remaining authorization as of April 30, 2023. The Inflation Reduction Act's one percent excise tax on certain stock repurchases may impact future financing cash flows.
SaaS KPIs
All quarters →Free cash flow
Non-GAAP operating margin
Billings and other
Current remaining performance obligation (cRPO)
Remaining performance obligation (RPO)
Summary, forecast, risks and KPIs are extracted from Salesforce, Inc.'s SEC filings for Q1 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.