Customer relationship management software maker Salesforce (NYSE: CRM) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 7.6% year on year to $9.83 billion. Guidance for next quarter’s revenue was better than expected at $10.14 billion at the midpoint, 1.2% above analysts’ estimates. Its non-GAAP profit of $2.58 per share was 1.3% above analysts’ consensus estimates.
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Salesforce (CRM) Q1 CY2025 Highlights:
- Revenue: $9.83 billion vs analyst estimates of $9.75 billion (7.6% year-on-year growth, 0.8% beat)
- Adjusted EPS: $2.58 vs analyst estimates of $2.55 (1.3% beat)
- Adjusted Operating Income: $3.17 billion vs analyst estimates of $3.16 billion (32.3% margin, in line)
- The company lifted its revenue guidance for the full year to $41.15 billion at the midpoint from $40.7 billion, a 1.1% increase
- Management raised its full-year Adjusted EPS guidance to $11.30 at the midpoint, a 1.5% increase
- Operating Margin: 19.8%, up from 18.7% in the same quarter last year
- Free Cash Flow Margin: 64.1%, up from 38.2% in the previous quarter
- Billings: $6.89 billion at quarter end, up 11.2% year on year
- Market Capitalization: $266 billion
Company Overview
Launched in 1999 from a rented one-bedroom apartment in San Francisco by Marc Benioff and his three co-founders, Salesforce (NYSE: CRM) is a software-as-a-service platform that helps companies access, manage, and share sales information such as leads.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Salesforce grew its sales at a 11.4% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.
This quarter, Salesforce reported year-on-year revenue growth of 7.6%, and its $9.83 billion of revenue exceeded Wall Street’s estimates by 0.8%. Company management is currently guiding for a 8.7% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 8% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and indicates its products and services will face some demand challenges.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Salesforce’s billings punched in at $6.89 billion in Q1, and over the last four quarters, its growth slightly outpaced the sector as it averaged 10% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Salesforce is very efficient at acquiring new customers, and its CAC payback period checked in at 27.8 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation due to its scale. These dynamics give Salesforce more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments.
Key Takeaways from Salesforce’s Q1 Results
This was a beat and raise quarter, although the beats were fairly modest. Specifically, we enjoyed seeing Salesforce beat analysts’ billings expectations this quarter. We were also glad its full-year EPS guidance was raised and slightly exceeded Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 5% to $290.16 immediately after reporting.
Salesforce may have had a good quarter, but does that mean you should invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
