Salesforce Stock Rises on Earnings and Higher Earnings Forecast

Salesforce Inc. today reported better-than-expected fiscal first-quarter results and continued to raise its full-year earnings forecast, sending its stock higher in after-hours trading.

The company reported earnings before certain costs such as stock compensation of 98 cents per share on a 24% increase in revenue from a year ago to $7.41 billion.

Results were better than expected, with Wall Street looking for earnings of 94 cents per share on revenue of $7.38 billion. That, combined with the revised guidance, was enough to send Salesforce shares up more than 7% in extended trading, erasing a nearly 3% loss earlier in the day.

Salesforce reported net income of $28 million, down 94% from the prior year period. The company said this was the result of lower earnings on its investments during the quarter, as well as increased sales and marketing expenses. Even so, Salesforce co-CEO Marc Benioff (pictured) told investors the company had another strong quarter.

“There is no better measure of our resilience and the momentum of our business than the $42 billion we have in our remaining performance obligation, representing all future contracted revenue,” he said. said in a statement. “While delivering incredible growth at scale, we are committed to consistent margin expansion and cash flow growth as part of our long-term plan to drive both top line performance and net income.”

The company said Service Cloud, which handles customer service requests, generated $1.76 billion in revenue, up 17% from a year ago. Sales Cloud, which is used by companies to manage sales opportunities, generated $1.63 billion in sales, up 18%.

In a call with analysts, Salesforce chief financial officer Amy Weaver said the company is well aware of the macroeconomic uncertainty facing many businesses at this time, including exchange rate volatility. . However, Benioff told analysts that Salesforce “didn’t see a significant impact on the broader economic world that you all find yourself in.”

Benioff said it was thanks to the company’s experience during the dot-com era, when Salesforce nearly went bankrupt. “In 2001, I think it really hit us, we almost lost our business… so we made a lot of changes at that time, and it really strengthened our business and made us more sustainable,” did he declare.

Salesforce must certainly be sustainable, as the company has taken a hit in Russia, where it has begun to terminate customer relationships. Still, the company said it has more than $13.6 billion in unearned revenue to expect, mostly from subscription billings.

While Salesforce isn’t entirely immune to economic turmoil, it’s far more resilient than others, said Charles King of Pund-IT Inc. , reducing Salesforce engagements rarely tops their to-do lists,” he pointed out. “So the company is in a good position, even when economic uncertainty hits other businesses.”

Constellation Research Inc.’s Holger Mueller said Salesforce delivered strong quarterly results, but was concerned about weakness on the cost management side.

“It’s no surprise to see Salesforce’s platform business leading with 55% of its revenue, as Salesforce has been a platform company for a few years now,” the analyst said. . “The only weakness was cost management, which meant Salesforce profits dipped to almost nothing in the quarter. Benioff will have to pay attention to that, even if he doesn’t see any economic headwinds yet.

Looking to the current quarter, Salesforce said it expects earnings in the narrow range of $1.01 to $1.02 per share and revenue between $7.69 billion and $7.7 billion. That’s actually well below the Wall Street consensus of $1.14 per share in earnings and $7.77 billion in profit.

What has boosted Salesforce, however, is its updated guidance for fiscal year 2023. The company said it now expects full-year earnings of $4.74 to $4.76 per share, up from a prior range of $4.62 to $4.64 per share, and above analysts’ average forecast of $4.65 per share. Revenue is expected to be between $31.7 billion and $31.8 billion, below the consensus estimate of $32.06 billion.

Weaver explained that the higher earnings forecast is “driven by a continued focus on disciplined decision-making across the organization” rather than a single change made by the company.

“We asked every leader to step in, to really look through their business and strategically prioritize their investments,” she said. “And that’s just to make sure we’re getting the highest return for every dollar we invest.”

During the quarter, Salesforce announced new Slack integrations for Sales Cloud, Service Cloud, and Marketing Cloud. He also launched a new company called Safety Cloud aimed at businesses looking to host in-person events. Finally, the company announced that its legal name had changed from Salesforce.com Inc. to Salesforce Inc.

Photo: FORTUNE Global Forum/Flickr

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