Marc Benioff, CEO of Salesforce.
Adam Jeffery | CNBC
Salesforce shares rose 5% in extended trading on Thursday after the cloud software maker issued earnings and guidance that surpassed analysts’ expectations.
Here’s how the company did:
- Earnings: $1.21 per share, adjusted, vs. 88 cents per share as expected by analysts, according to Refinitiv.
- Revenue: $5.96 billion, vs. $5.89 billion as expected by analysts, according to Refinitiv.
Revenue grew 23% year over year in the fiscal first quarter, which ended April 30, the company said in a statement. In the previous quarter revenue increased by 20%.
The company will hold its major Dreamforce conference in person in San Francisco, as well as in New York, Paris and London, CEO Marc Benioff said on a conference call with analysts. All attendees will have to be fully vaccinated, Benioff said. Salesforce held Dreamforce virtually in 2020 to reduce spread of the coronavirus.
The Platform and Other segment that includes the MuleSoft and Tableau products, currently Salesforce’s top segment for subscription and support revenue, contributed $1.75 billion in revenue, up 28%.
Salesforce’s core Sales Cloud product that salespeople use to track business opportunities delivered $1.39 billion in revenue, up 11%.
While different parts of the world have reopened their economies to varying degrees, there wasn’t a single area that was slower than others in the quarter, said Gavin Patterson, Salesforce’s chief revenue officer.
With respect to guidance, Salesforce said it sees 91 cents to 92 cents in adjusted fiscal second-quarter earnings per share on $6.22 billion to $6.23 billion in revenue. Analysts polled by Refinitiv had been looking for 86 cents in adjusted earnings per share and $6.15 billion in revenue.
Salesforce called for $3.79 to $3.81 in adjusted earnings per share in the full 2022 fiscal year, with $25.9 billion to $26.0 billion in revenue, or 22% growth. Consensus among analysts polled by Refinitiv was $3.43 in adjusted earnings per share and $25.76 billion in revenue.
The expected full-year adjusted operating margin widened to 18% from 17.7% as revenue guidance increased by $250 million at the middle of the range. “Our decision to raise fiscal 2022 revenue is reflective of our Q1 performance and our confidence in our ability to execute for the rest of the year,” said Amy Weaver, the company’s finance chief.
The guidance takes into account the assumption that some travel will return, but not anywhere near pre-pandemic levels, Weaver said.
“We’ve simply learned how to work effectively and how to serve our customers effectively without being on a plane every day,” she said.
The full-year guidance includes a contribution of $500 million in revenue from team communication software app Slack, a $27.7 billion acquisition expected to close right at the conclusion of the quarter that ends on July 31. That expected contribution is $100 million lower than Salesforce had predicted in February, because the company has updated its forecast on when the deal will close. The guidance also includes $190 million in revenue from Acumen Solutions, a professional-services company Salesforce acquired in the fiscal first quarter.
Notwithstanding the after-hours move, Salesforce stock is up less than 2% since the start of the year, while the S&P 500 index has risen almost 12% over the same period.
Morgan Stanley analysts upgraded their rating on Salesforce stock to the equivalent of buy from the equivalent of hold earlier this month. “While concerns on M&A appetite and durable margin expansion may linger, leading franchises do not stay cheap for long, particularly amidst the strong demand backdrop we foresee over the next several years,” they wrote.
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