Shares of Salesforce Inc. ( CRM ) took a significant hit, dropping as much as 16% in premarket trading following the company’s announcement of a slowdown in sales growth for the current quarter.

What Happened: At the time of writing, Salesforce ( CRM ) stock was trading 16.1% lower in the Thursday pre-market at $228, according to Benzinga Pro. This comes after the stock closed at $271.62 the previous day. However, it dropped by up to 17% in after-hours trading on Wednesday following the release of its first-quarter earnings report.

The cloud software giant’s reported revenue in the first quarter was $9.13 billion, missing the consensus estimate of $9.147 billion. For the current quarter, Salesforce’s revenue is projected to rise by a maximum of 8% to $9.25 billion in the quarter ending in July. This would be the first instance of single-digit sales growth for the San Francisco-based company in nearly two decades as a publicly traded entity.

Analysts had previously estimated a revenue of $9.35 billion. The company’s profit, excluding certain items, is expected to be around $2.35 per share, falling short of the average estimate of $2.40.

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Why It Matters: The earnings miss and subsequent stock plunge highlight the challenges Salesforce ( CRM ) faces in a competitive software market. Investors have expressed concerns over Salesforce’s declining sales growth over the past year as the company shifted its focus towards improving profit. Despite these concerns, Salesforce’s management remains optimistic about the potential of AI-oriented software and features to boost revenue.

CEO Marc Benioff remains positive about the company’s long-term potential, stating, “We're incredibly well positioned to help companies realize the promise of AI over the next decade.”

Additionally, a market analysis revealed that Salesforce’s competitors are also facing similar challenges, with budget scrutiny and elongated deal cycles becoming common issues in the industry. This context underscores the broader market dynamics affecting not just Salesforce ( CRM ) but its peers as well.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.