Salesforce plummets 18% as weak forecast sparks concerns of AI competition

"Weak bookings in Q1 further test investor patience as the GenAI (generative AI) innovation cycle has yet to inflect top-line results and now increasingly becomes a point of competitive concern," analysts said.

Salesforce's AI-focused contributed to 25% of the deals valued above $1 million in the first quarter, unchanged from the prior quarter. It did not disclose more financial details about the business, which was nearing $400 million in annual recurring revenue in its last .

Some brokerages warned that Salesforce's forecast also meant software demand had slowed further in April.

"It seems like the selling environment got worse from the end of March and more pronounced in April, which could explain why the off-cycle names, like Workday or Salesforce, suffered more than or ," analysts said.

Salesforce could turn to large deals to accelerate growth and the company would consider them if they were "accretive" and had "the right metrics", CEO had said on Wednesday in a post-earnings call.

Activist investors pressured Salesforce last year to prioritize profitability, after years of growing its through including the $27.7 billion of in 2021.

"I think investors wouldn't react well to most large deals at this point. Given growth is slowing down, a big acquisition would be viewed as buying growth," said RBC analyst Rishi Jaluria.

At least 10 brokerages lowered their price targets on the stock following the results. D.A. Davidson's PT of $230 was the lowest among 49 analysts covering the stock.