Citi Analysts Cautiously Reassess Salesforce's Growth Ahead of Earnings Report

Analysts at Citi have issued insights regarding the upcoming earnings report for Salesforce (NYSE: CRM), hinting at a prospective slowdown in the company’s growth trajectory as they head into the latter half of their fiscal year. While the second-quarter earnings are anticipated to meet expectations, the sentiment surrounding future performance is turning cautious.

The analysts describe their stance as "relatively balanced," noting that while Salesforce's Q2 outlook appears solid, the challenges that lie ahead could dampen growth prospects. They indicated that "partner inputs remain cautious," hinting that Salesforce may face more formidable comparisons due to last year’s major deals, particularly with Amazon Web Services (AWS), as well as the repercussions from preceding price hikes.

In terms of actual numbers, Citi's projections for Salesforce's Q3 and Fiscal Year 2025 Current Remaining Performance Obligation (cRPO) figures are slightly lower than the market consensus. Specifically, Citi's estimate sits around one point below that of their peers, reflecting apprehensions regarding "tough comps."

A recent examination of Salesforce's partner environment revealed a "tepid and elongated demand atmosphere," with firms increasingly focused on optimizing their budgets. While the appetite for Salesforce’s public sector offerings and products like Sales Cloud and Service Cloud remains robust, newer innovations such as Data Cloud and generative AI (GenAI) haven’t sparked significant interest. According to Citi, "Data Cloud is said to be of lower priority with little interest and complex pricing," underscoring the mixed reception to these developments.

Despite these potential headwinds, Citi has opted to increase its price target for Salesforce to $290, up from the previous $260. This adjustment reflects a reevaluation of its valuation framework amid a broader sector re-rating.