Salesforce shares jump premarket after cloud software firm lifts annual guidance

November 29, 2023 4:26 PM EST
(Updated - November 30, 2023 7:34 AM EST) -- Shares in Salesforce (NYSE: CRM) surged in premarket U.S. trading on Thursday after the cloud software provider raised its annual guidance and posted better-than-anticipated third-quarter earnings.

The San Francisco-based company, which offers a range of apps like workplace messaging platform Slack and data visualization service Tableau, also delivered a fourth-quarter outlook that topped projections, fueling hopes that a downturn in client spending on technology may be abating.

Total revenue in the three months ended on October 31 expanded by 11% versus the corresponding period last year to $8.72 billion, narrowly beating Bloomberg consensus forecasts. Top-line growth, which normally comes in at around 20% a year, has showed signs of slowing in recent quarters as customers choose to rein in spending in response to inflationary pressures and elevated interest rates.

However, the stock has still soared by over 70% so far this year thanks in large part to a push by Salesforce to boost margins through cost cuts, including deep headcount reductions in January. The firm has also prioritized building out its artificial intelligence offerings like Einstein Copilot, a conversational AI assistant launched in September that can summarize video calls and generate sales language in emails.

Adjusted profit of $2.11 per share in the third quarter was 5 cents higher than Wall Street estimates. In a statement, Chief Executive Officer Marc Benioff said Salesforce is "executing on our profitable growth plan we set in motion last year."

The business unveiled current-quarter adjusted income projections of $2.25 to $2.26, above Wall Street forecasts of $2.17, although analysts at Goldman Sachs argued in a note that the "guide [...] looks conservative in the context of strong renewals and a large customer win."

For its 2024 fiscal year, Salesforce now expects to report adjusted earnings per share of $8.18 to $8.19, up from a prior forecast of $8.04 to $8.06. Bloomberg consensus estimates had seen the figure at $8.06. Full-year adjusted operating margin expectations were also improved to 30.5% from 30% previously.

"[G]iven management’s strong emphasis on organic growth and profitability at scale today, our expectations are for margin expansion to continue, albeit at a more moderate rate, when a macro[economic] recovery starts to form," the Goldman analysts said.

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