Earnings to show that Salesforce growth is likely to slow By Investing.com

According to analysts at Citi, while Salesforce’s (NYSE: ) future earnings results may meet expectations, there are signs that growth is likely to slow in the second half of the fiscal year.

Citi maintains a “relatively balanced view” on Salesforce’s future results, acknowledging that while Q2 estimates look achievable, the second half of the year could present challenges.

“Partner inputs remain cautious and we see the risk of a slowdown in 2H,” analysts noted, suggesting Salesforce could struggle with tougher comparisons and less robust demand in some areas.

Specifically, Citi points out that Salesforce’s current remaining performance obligation (cRPO) estimates for Q3 and FY25 could be at risk due to “hard compositions” from last year’s significant Amazon Web Services (AWS) business and the impact of ramp-ups previous prices.

Citi’s own cRPO estimate is about a point below consensus for Q3, reflecting these concerns.

Analysts also noted that recent checks with Salesforce partners revealed a “still warm and prolonged demand environment,” with companies prioritizing budget optimization.

While demand remains strong in the public sector and for certain Salesforce products such as Sales Cloud and Service Cloud, interest in newer offerings such as Data Cloud and generative AI (GenAI) products has been disappointing.

“Data Cloud is said to be a lower priority with low interest and complex pricing,” Citi noted.

Despite those concerns, Citi raised its price target on Salesforce to $290 from $260, based on an updated valuation framework that takes into account the sector’s revaluation.

However, they caution that the way forward could involve weaker execution, particularly in the second half of the fiscal year.

While Salesforce’s Q2 results may be solid, Citi suggests investors should be prepared for a potential slowdown in growth as the company faces challenges ahead.