Salesforce Q1 2026: Revenue Surpasses Expectations, EPS Falls Short
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Salesforce Q1 2026: Revenue Surpasses Expectations, EPS Falls Short

Author

Arcan Askin

Salesforce's Q1 2026: Revenue Soars Past Expectations, But EPS Falls Short

Salesforce's latest quarterly results reveal a mixed bag for investors. While the company exceeded revenue forecasts, the earnings per share (EPS) left some room for improvement. Investors and analysts are now closely watching Salesforce's cash flow and margins to gauge its long-term stability.

Stellar Revenue Performance

In the first quarter of 2026, Salesforce reported a robust revenue of $177.8 billion, significantly outpacing the analyst expectation of $11.06 billion. This represents a 7.3% increase from the previous year, with net revenues reaching $175.7 billion, plus an additional $2.1 billion from memberships and other revenues.

EPS Misses the Mark

However, Salesforce's earnings per share fell short. The company reported an adjusted EPS of $0.66, missing the $3.12 forecasted by analysts by $2.46. Although this marked an 8.2% year-over-year increase, it wasn't enough to meet expectations. According to Generally Accepted Accounting Principles (GAAP), the EPS was slightly higher at $0.67, and net profit stood at $5.5 billion.

Highlighted Segments: Walmart U.S. Drives Growth

At the segment level, Walmart U.S. was a standout performer, generating $117.2 billion in revenue, dramatically surpassing the expected $11.06 billion. This segment's annual growth hit 4.5%, contributing an additional $5 billion in net revenue, thanks in part to a 4.1% comparable sales increase and a notable eCommerce contribution.

Similarly, Walmart International posted strong results, with net revenues surging by 18.0% to $35.1 billion, again above the expected $11.06 billion. Excluding currency effects, the growth would have been 10.1%. Furthermore, Sam's Club USA added $23.4 billion in revenue, marking a 6.1% year-over-year increase.

Focus on Cash Flow and Margins

For Salesforce, the critical concern extends beyond revenue figures to the quality of its cash flow. The operating cash flow declined by 12.4% to $4.7 billion, while the free cash flow plummeted by 558%, landing at negative $1.9 billion. This dip was driven by $6.7 billion in investments, increased inventory levels, and rising costs in distribution and fulfillment.

The company's gross margin reached 24.3% with a gross profit of $42.6 billion. Operating expenses totaled $37.2 billion, resulting in an operating income of $7.5 billion, yielding an operating margin of 4.3%. On the brighter side, Salesforce holds $10.7 billion in cash and has repurchased $2.1 billion in stock. However, its total debt remains a potential concern at $58.1 billion.

Looking Forward

Looking ahead, Salesforce reaffirmed its outlook and projects a foreign exchange-neutral revenue growth of 4% to 5% for the second quarter of fiscal 2027. It anticipates a 7% to 10% increase in adjusted operating income, alongside an anticipated EPS between $0.72 and $0.74.

Key growth drivers include global eCommerce, with a 26% rise — Walmart U.S. at 26%, International at 27%, and Sam's Club at 23%. The advertising business also showed promise, with a global rise of 37%. As Salesforce eyes stabilizing its margins and returning its free cash flow to positive territory, these areas will continue to be critical for investors monitoring the tech behemoth's progress.

Author

Arcan Askin

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