As the Q1 earnings season comes to a close, it’s time to take stock of this quarter's best and worst performers in the sales software industry, including Salesforce (NYSE:CRM) and its peers.
Companies need to be able to interact with and sell to their customers as efficiently as possible. This reality coupled with the ongoing migration of enterprises to the cloud drives demand for cloud-based customer relationship management (CRM) software that integrates data analytics with sales and marketing functions.
The 4 sales software stocks we track reported a weak Q1; on average, revenues beat analyst consensus estimates by 1.1%. while next quarter's revenue guidance was 1.5% below consensus. Inflation progressed towards the Fed's 2% goal at the end of 2023, leading to strong stock market performance. The start of 2024 has been a bumpier ride, as the market switches between optimism and pessimism around rate cuts due to mixed inflation data, and sales software stocks have had a rough stretch, with share prices down 19.6% on average since the previous earnings results.
Salesforce (NYSE:CRM)
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.
Salesforce reported revenues of $9.13 billion, up 10.7% year on year, in line with analysts' expectations. Overall, it was a weak quarter for the company with a miss of analysts' billings estimates and full-year revenue guidance missing analysts' expectations.
“Our profitable growth trajectory continues to drive strong cash flow generation. Q1 operating cash flow was $6.25 billion, up 39% year-over-year. Q1 free cash flow was $6.1 billion, up 43% year-over-year,” said Marc Benioff, Chair and CEO, Salesforce.
Salesforce delivered the weakest performance against analyst estimates of the whole group. The stock is down 5.5% since reporting and currently trades at $257.19.
Is now the time to buy Salesforce? Access our full analysis of the earnings results here, it's free.
Best Q1: HubSpot (NYSE:HUBS)
Started in 2006 by two MIT grad students, HubSpot (NYSE:HUBS) is a software-as-a-service platform that helps small and medium-sized businesses market themselves, sell, and get found on the internet.
HubSpot reported revenues of $617.4 million, up 23.1% year on year, outperforming analysts' expectations by 3.2%. It performed better than its peers, but it was unfortunately a mixed quarter for the company with a decent beat of analysts' ARR (annual recurring revenue) estimates but full-year revenue guidance missing analysts' expectations.
HubSpot delivered the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. The company added 11,749 customers to reach a total of 216,840. Although it had a great quarter compared its peers, the market seems unhappy with the results as the stock is down 15.9% since reporting. It currently trades at $496.01.
Is now the time to buy HubSpot? Access our full analysis of the earnings results here, it's free.
Weakest Q1: ZoomInfo (NASDAQ:ZI)
Founded in 2007 as DiscoveryOrg and renamed after a merger in 2019, ZoomInfo (NASDAQ:ZI) is a software as a service product that provides sales departments with access to a database of prospective clients.
ZoomInfo reported revenues of $310.1 million, up 3.1% year on year, in line with analysts' expectations. It was a weak quarter for the company with a miss of analysts' billings estimates and full-year revenue guidance missing analysts' expectations.
ZoomInfo posted the slowest revenue growth in the group. The company lost 60 enterprise customers paying more than $100,000 annually and ended up with a total of 1,760. As expected, the stock is down 29.5% since the results and currently trades at $11.31.
Read our full analysis of ZoomInfo's results here.
Freshworks (NASDAQ:FRSH)
Founded in Chennai, India in 2010 with the idea of creating a “fresh” helpdesk product, Freshworks (NASDAQ: FRSH) offers a broad range of software targeted at small and medium-sized businesses.
Freshworks reported revenues of $165.1 million, up 19.9% year on year, in line with analysts' expectations. Overall, it was a weak quarter for the company with underwhelming revenue guidance for the next quarter and decelerating growth in large customers.
Freshworks had the weakest full-year guidance update among its peers. The company added 288 enterprise customers paying more than $5,000 annually to reach a total of 20,549. The stock is down 27.5% since reporting and currently trades at $13.22.
Read our full, actionable report on Freshworks here, it's free.
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