Salesforce falls over 16% premarket, with significant drops in earnings and growth expectations.

Salesforce's stock fell over 16% in pre-market trading as the company's quarterly guidance came in below analysts' expectations.

The optimistic plans of the California company were hit as inflation-affected customers reduced their spending on its enterprise-facing products and services. Nevertheless, CEO Marc Benioff expressed optimism about generative AI, calling it a "tremendous opportunity" for customers to connect with their clients in entirely new ways.

Salesforce expects its adjusted earnings per share for the second quarter to be between $1.31 and $1.33, with revenue ranging from $9.2 billion to $9.25 billion. Wall Street's forecasts were $1.47 per share and $9.34 billion in revenue.

The company also lowered its annual subscription and support revenue growth expectations to just below 10%, having previously projected a 10% increase in February.

Chief Operating Officer Brian Millham said during the earnings call, "We continue to see cautious purchasing behavior similar to the past two years, except that the momentum we saw in stronger bookings in the fourth quarter has softened in the first quarter."

Millham added that the business was also affected by "extended deal cycles, deal compression, and high levels of budget scrutiny."

Analysts at Evercore ISI stated in a report to clients, "At this point, the overall spending outlook in the software sector and Salesforce's updated guidance indeed present a genuine question of risk."