Salesforce Sets $41.3 Billion Revenue Goal for 2026, Boosting AI and Fueling Growth with Informatica Acquisition

Posted by The News Pulse May 28, 2025 Post a Comment

Insights from the Earnings Call: Salesforce (CRM) First Quarter 2026 Results

Management View

Marc Benioff, Chairman, CEO, and Co-founder, declared the final agreement to purchase Informatica for an amount of $8 billion, characterizing it as "a transformative move" that merges Salesforce’s top-tier AI-powered Customer Relationship Management system with Informatica’s expertise in data management and extraction, transformation, and loading processes. Benioff highlighted, “In this pivotal time, Informatica has become even more crucial to our clients due to the current developments in artificial intelligence."
Robin Washington, who serves as the Chief Operating and Financial Officer, gave more information about the acquisition, saying, "In two years after closing, we anticipate increasing our non-GAAP operating margin, non-GAAP earnings per share, and free cash flow without causing any reduction in shares outstanding. The deal isn’t anticipated to interfere with our plans for returning capital."
Benioff announced that the company’s first-quarter revenues reached $9.83 billion, marking an 8% rise compared to last year, attributing this strength primarily to robust expansion within the small and medium-sized enterprise sector along with notable achievements through Agentforce and Data Cloud initiatives. During his statement, he mentioned, "Our Recurring Personnel Outsourcing (RPO) stands at $60.9 billion, which represents a 13% jump from the previous year, and we witnessed outstanding progress with our Contingent Recruitment Process Outsourcing (CRPO), increasing consistently even when adjusted for currency fluctuations. Consequently, we’re elevating our financial forecast for fiscal year '26 upwards by $400 million, setting the upper limit of our expected range at $41.3 billion."
Benioff highlighted the swift uptake of Agentforce, mentioning "over 4,000 paying Agentforce clients... with an Annual Recurring Revenue (ARR) from Agentforce reaching $100 million." He also announced the introduction of Flex Credits, a novel pricing approach based on consumption.
Washington pointed out that "30% of the new bookings in Q1 for Agentforce were from expansion deals involving current Agentforce clients," and the Data Cloud exceeded 22 trillion records, marking a 175% increase compared to the previous year.

Outlook

The firm increased its fiscal year 2026 revenue forecast to between $41 billion and $41.3 billion, with an upward adjustment of $400 million at the upper limit, indicating a yearly increase of 8% to 9%. The projection for subscription and support revenue remained unchanged at roughly 9% annual growth when adjusted for exchange rate fluctuations. Washington commented, "This guidance suggests steady demand conditions persisting and anticipates these patterns continuing."
The second-quarter revenues are anticipated to range from $10.1 billion to $10.2 billion, marking an increase of 8% to 9% compared to the same period last year. The company anticipates a Year-Over-Year (YOY) growth in Cloud Revenue Pipeline Outstanding (CRPO) of around 10%, when measured at face value, with this figure benefiting additionally by approximately $300 million due to favorable foreign exchange effects.
The firm upholds its non-GAAP operating margin forecast at 34%, along with a GAAP margin projection of 21.6% for the year. The anticipated increase in operating cash flow remains steady at 10% to 11%, and the projected rise in free cash flow stays consistent at 9% to 10%.

Financial Results

The income for Q1 reached $9.83 billion, marking an 8% increase from the previous year. The earnings from subscriptions and support saw a rise of 9% when adjusted for currency exchange rates.
The non-GAAP operating margin for the first quarter stood at 32.3%, and the operating cash flow reached $6.5 billion, marking a 4% increase compared to the previous year.
At the close of the quarter, the remaining performance obligation (RPO) stood at $60.9 billion, marking a 13% increase from the previous year. The current portion of these obligations (CRPO) also saw growth, reaching $29.6 billion—a rise of 12% compared to the same period last year.
In the first quarter, the firm distributed over $3 billion through both stock buybacks and dividends, marking a 4% rise in dividend payments.

Q&A

Keith Weiss from Morgan Stanley inquired about the timeline for Agentforce and Data Cloud to significantly boost overall growth. Benioff replied, focusing on maintaining discipline regarding margins and cash flows, and added, "There’s another major shift happening right now, which is being propelled by this agent-driven AI revolution. This marks a significant phase of growth." Miguel Milano, who serves as both the President and Chief Revenue Officer, mentioned, "Our target is an overall capacity increase of 22%. Our expansion efforts will primarily focus on the lower end of the market, specifically targeting small to medium-sized businesses and the middle market segment."
Brent Thill from Jefferies questioned customer actions and uncertainties within the pipeline. Washington responded, "Our portfolio remains well-balanced overall... Additionally, we're experiencing robust momentum, which aligns with what we’ve discussed regarding our advancements in data and artificial intelligence."
Raimo Lenschow from Barclays inquired about how Tableau and Informatica affect their agent and data strategies. In response, Srini Tallapragada, who serves as the President & Chief Engineering Officer, explained that integrating Tableau, Data Cloud, MuleSoft, and Informatica forms "a very reliable data platform essential for realizing the potential of our agents."
Brad Sills from Bank of America raised doubts about the significant markers indicating the lifecycle impact of Agentforce. Benioff responded quickly, mentioning, "In all my years in business… I haven’t witnessed anything like having 8,000 clients today, with half being active payers and numerous ones scaling up swiftly within just a few months."
Kash Rangan from Goldman Sachs inquired about speeding up the adoption of Agentforce and integrating Informatica. Benioff responded, "Many things couldn’t occur... due to their entire corporate dataset lacking full harmony; this makes Informatica even more essential today." Washington added, "The expectation is for closure at the start of our 2027 fiscal year... We prefer to make conservative promises but exceed them whenever possible."
Mark Murphy from JPMorgan expressed worries regarding AI's effect on white-collar positions. Benioff commented, "There's immense potential available to us. Right now, my challenge is finding enough talent... but we haven’t reached a stage where countless white-collar roles are vanishing since everyone understands that although AI excels at certain tasks within enterprises, it isn't capable of doing everything."

Sentiment Analysis

Analysts sought clearer insights into the turning point of growth, the speed at which Agentforce is being adopted, and how macroeconomic uncertainties might affect things. The overall tone remained neutral to mildly optimistic, showing hopefulness alongside a desire for more detailed information.
In their pre-prepared statements, management adopted a positive and optimistic stance, often employing expressions like "we have only just begun." However, they showed prudence and restraint concerning integration, expansion pace, and implementation during the question-and-answer session. Benioff commented, "While we are dedicated to these aspects, my primary commitment remains focused on fostering growth."
In contrast to the previous quarter, where management celebrated achievements, they now emphasized transformative growth and execution. Analysts continued to express a cautiously optimistic outlook.

Quarter-over-Quarter Comparison

In the present quarter, the introduction of the $8 billion Informatica acquisition was made as a strategic step to bolster Salesforce’s AI and data platforms, whereas no significant acquisitions were noted in the previous quarter.
The revenue forecast for fiscal year 2026 has been increased to $41.3 billion at the upper limit, reflecting an uplift of $400 million from the prior estimates. Previously, the projection ranged from $40.5 billion to $40.9 billion.
The management emphasized unexpected robust expansion within the small and medium-sized businesses sectors along with Agentforce achieving an Annual Recurring Revenue (ARR) exceeding $100 million. Last quarter, the emphasis lay on the preliminary success of Agentforce as well as its first successes with customers.
The leadership group brought in Robin Washington as both COO and CFO, taking over from the departing officials.
In both periods, they talked about careful management of capital and concentrating on profit margins. However, this quarter put more emphasis on boosting growth and significantly expanding their sales force.

Risks and Concerns

The management highlighted possible integration hazards associated with Informatica along with the necessity of obtaining regulatory approvals, stating, "Our target closure date is early fiscal year 2027."
Expansion in certain EMEA areas and industries such as retail, consumer goods, and public sector stayed "more restrained."
Washington warned, "Our guidance indicates steady demand levels and presumes these patterns persist. However, should circumstances shift, our outcomes could be affected."
Experts brought up concerns regarding economic unpredictability and the schedule for Agentforce and Data Cloud to become major contributors to growth.

Final Takeaway

The Salesforce leaders expressed confidence based on improved revenue forecasts, strong performance in the small and medium-sized business sectors, and the strategic $8 billion purchase of Informatica to boost their AI and data initiatives. They stressed maintaining financial discipline alongside growth, pointing out quick uptake of products like Agentforce and Data Cloud, as they prepare for future expansions driven by artificial intelligence technologies. Leadership anticipates that the Informatica transaction will contribute positively to earnings within two years after completion and reaffirmed their dedication to improving margins, generating cash flow, and returning capital to shareholders.

Review the complete earnings call transcript.

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