What happened
Shares of Salesforce (CRM -0.57%) were down 1.4% today as of market close, well below the 0.5% gain for the S&P 500 and the 0.4% gain for the Dow Jones Industrial Average (of which Salesforce is a part).
The whole week wasn't great for the cloud-based enterprise software leader (shares fell 3.5% the last five trading days), and its peer Adobe (ADBE -1.73%) is a likely scapegoat.
Image source: Getty Images.
So what
Adobe released its Q1 fiscal 2022 earnings report this past week (for the three-month period ended March 4, 2022), and revenue and adjusted earnings were in line with expectations. Sales were up 17% year over year when excluding the extra week during the same period in 2021, and adjusted earnings per share were up 7%. However, for Q2, Adobe said revenue will be up only 13% year over year, and adjusted earnings per share up only about 9%. The company attributed the slowdown to its halting sales to Russia.
But what's that to Salesforce? Adobe and Salesforce are both digital transformation companies, helping enterprises update their operations for a new era of computing dominated by the cloud. If Adobe is facing a cool off in its growth trajectory, a similar story might be brewing for Salesforce as well. Thus the stock trading in sympathy with the lackluster Adobe outlook this week.
Now what
It is worth noting, however, that Salesforce raised its own growth expectations during the last earnings call at the beginning of March -- a couple of weeks after Russia started its invasion of Ukraine. Salesforce expects current year revenue to be up about 21%.
Salesforce stock remains over 30% off of all-time highs and currently trades for 39 times trailing-12-month free cash flow. With revenue growth staying above 20% and profit margins on the rise, long-term shareholders have little to worry about after a ho-hum week.
