Salesforce to slow hiring and M&A activity after posting strong Q1 results

Salesforce saw revenue rise 24% year over year to $7.41 billion, marking a strong start the financial year for the software-as-a-service giant. However, net income fell 94% from $469 million to $28 million for the quarter.

Revenue for Sales Cloud was $1.63 billion during the quarter; Service Cloud was $1.76 billion; Marketing and Commerce Cloud $1.1 billion; Data Cloud—which includes Tableau and Mulesoft—$955 million; and Platform—which now includes messaging service Slack—was $1.42 billion, including a $344 million contribution from Slack alone.

Salesforce continues to benefit financially from its $27.7 billion acquisition of Slack in 2020. This is a trend that looks set to continue, as organizations across the globe continue to have conversations about facilitating hybrid and remote work models.

“Every single one of our customers is deciding how do they succeed in this new era of flexible work, because every single, particularly office worker, isn’t coming back to the office five days a week,” co-CEO Bret Taylor told analysts after the results were announced.

Salesforce also cut its full year revenue guidance to $31.7 billion, from $31.8 billion, due to foreign exchange volatility.

Salesforce to be more disciplined in 2023

Technology stocks have been hit hard over recent months, and Salesforce is no exception, seeing its stock price drop by nearly 50% so far this year. The CRM vendor saw its stock price rebound by 8% after reporting its results.

“So far, we’re just not seeing any material impact from the broader economic world that all of you are in,” Salesforce founder Marc Benioff told analysts. “Demand is very strong, and if you look over the last 23 years, Salesforce has proven to be incredibly resilient.”

However, responding to an analyst question about hiring, Salesforce Chief Financial Officer Amy Weaver said “we’re going to continue to hire” but that it will do so at “a much more measured pace, and we’re focusing the majority of our new hires on roles that will support customer success and the execution of our top priorities.”

Weaver and Benioff both talked about introducing more discipline into the business as the financial year progresses. “This focus on discipline is being applied across our entire organization,” Weaver said.

That discipline will continue to extend to large mergers and acquisitions also, as co-CEO Taylor had said earlier this year that Salesforce doesn’t have “plans for any material M&A in the near term,” however it did make a smaller acquisition last month of Troops.ai.

“Right now, large-scale M&A is not part of our current plans. Obviously, we’re opportunistic as all strategic tech companies are, and I never say never, but that is just not something that’s on our current radar screen,” Weaver told analysts.