By Adam Levine

When Salesforce reports its first-quarter earnings on Wednesday afternoon, it will be another marker in the dual transitions the company is undergoing. Wall Street analysts expect adjusted earnings-per-share of $2.55, up 4% from last year, on revenue of $9.75 billion, up 7%.

From fiscal 2006 to 2022, Salesforce's annual revenue growth exceeded 24%. Sales expansion has slowed, a natural path for a mature software company. But it also means growing cash flow and cash return to shareholders. The last three years of buybacks have reduced the diluted share count by 2.7%, and the company initiated a dividend last year.

But Microsoft was able to keep growing by adding other products and services, most notably its Azure cloud unit. Oracle is following the same playbook. Salesforce's play to renew growth is to augment existing software with AI services, Agentforce. Agents are software that uses AI language models to automate a series of complex tasks from a simple prompt, bringing a new level of automation to Salesforce's customer relations management software.

Sales may not be going well here -- Salesforce has broken with its subscription-based revenue model, and recently began allowing customers to pay as they go for Agentforce.

To support Agentforce, on Tuesday Salesforce announced that it intends to acquire Informatica for $8 billion, pending regulatory approval. The Salesforce agents require customer data to do their jobs, and Informatica software cleans and integrates the data, creating a "single source of truth" for the agents.

There will likely be pointed questions during the earnings call about this merger. Informatica grows in the mid-single digits, so it won't help Salesforce's growth profile. Informatica software has no integration with Salesforce like its competitor SnapLogic does, so that will have to be built from scratch.

Analyst Howard Ma of Guggenheim Partners points to another risk. "Salesforce has a long history of taking many years to integrate acquired companies (e.g., ExactTarget, DemandWare, MuleSoft, Tableau, Slack), some of which have never been fully integrated from a technology perspective," he wrote in a Tuesday note to clients.

Salesforce says the merger will add to profits beginning in the second year after the deal closes.

Write to Adam Levine at adam.levine@barrons.com

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May 28, 2025 00:01 ET (04:01 GMT)

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