Salesforce shares soared 16% in extended trading Wednesday after the cloud software maker beat Wall Street’s profit estimates and issued a better-than-expected forecast.
Here’s how the company did it:
- Earnings: $1.68 per share, adjusted, compared with $1.36 per share as expected by analysts, according to Refinitiv.
- Income: $8.38 billion versus $7.99 billion expected by analysts, according to Refinitiv.
Salesforce’s revenue rose 14% year-over-year in its fourth fiscal year, which ended Jan. 31, according to previous quarteraccording to a statement.
In the first quarter ended January 31, of the company net loss widened to $98 million, or 10 cents per share, compared with a loss of $28 million, or 3 cents per share, a year ago.
In January, Salesforce co-founder and CEO Marc Benioff said the company would cut 10% of its workforce, which represents over 7,000 people, and that its restructuring strategy led to $828 million in costs during the quarter.
Marc Benioff, co-founder and CEO of Salesforce, speaks at the World Economic Forum in Davos, Switzerland, on January 18, 2023.
Stefan Wermuth | Bloomberg | Getty Images
Profitability has become a higher priority at Salesforce, which in recent months has been under pressure from a influx of activist investors, including Third Point, Elliott Management and Starboard Value. The company notified the addition of ValueAct Capital CEO Mason Morfit to its board. At the end of the quarter, Bret Taylor, who ran Salesforce as co-CEO with Benioff, resigned.
The past 90 days have been “very intense,” Amy Weaver, Salesforce’s chief financial officer, said on a conference call with analysts.
The adjusted operating margin, at 29.2%, was the highest in the company’s history. At its investor day in September, Salesforce posted an operating margin target of 25% for fiscal year 2026.
“Six months ago in September at our Dreamforce Investor Day, we shared with you our comprehensive transformation plan, the new day for profitable growth,” Benioff said on the conference call. “But things have changed as we entered our fourth quarter. We realized we needed to radically accelerate the timeframe of the transformation plan. We needed to push hyperspace and move the two-year goals forward quickly and exceed them now.”
Benioff said Salesforce has disbanded its board committee on mergers and acquisitions and is working with Bain on a review of the business.
For the fiscal first quarter, the company called for adjusted earnings in the range of $1.60 to $1.61 per share and revenue of $8.16 billion to $8.18 billion. Analysts polled by Refinitiv had been looking for $1.32 in adjusted earnings per share and $8.05 billion in revenue.
Salesforce sees full-year 2024 adjusted earnings per share of $7.12 to $7.14 and revenue of $34.5 billion to $34.7 billion. Analysts polled by Refinitiv had expected $5.84 in adjusted earnings per share and $34.03 billion in revenue. It called for an adjusted operating margin of 27% in fiscal 2024 and 30% in the first quarter of 2025.
The guidance assumes there will be no improvement in the longer sales cycles, additional spending requirements and business compression that the company has observed over the past three quarters, Weaver said. In the fiscal fourth quarter, Salesforce found itself in weakness in the financial services and technology industries, said Brian Millham, chief operating officer.
Salesforce said it is expanding its share buyback program to $20 billion after announcing its first buyback commitment, with up to $10 billion earmarked for that purpose. in August.
Salesforce shares are up 26% so far this year, excluding Wednesday’s after-hours, outperforming the S&P 500, which has gained 3% over the same period.