Salesforce reported earnings and revenue that exceeded analysts’ expectations, but provided a disappointing outlook for fiscal 2023. In extended trading on Wednesday, the stock fell 7per cent .
The enterprise software maker announced that its board of directors has approved a $10 billion stock buyback program, a first for the company. However, Salesforce co-founder and CEO Marc Benioff told analysts on a conference call that the move will not prevent the company from making more acquisitions.
According to a statement, revenue increased 22per cent year on year in the quarter ended July 31. Net income of $68 million was down from $535 million in the previous quarter, when the company recorded a large gain on investments.
Salesforce forecasted adjusted earnings per share of $1.20 to $1.21 per share on revenue of $7.82 billion to $7.83 billion for the fiscal third quarter. Refinitiv polled analysts expected $1.29 in adjusted earnings per share on $8.07 billion in revenue. Salesforce stated that if not for the impact of exchange rates, revenue guidance would have been $250 million higher.
Salesforce cut its earnings and revenue forecasts for fiscal 2023. It now expects earnings per share of $4.71 to $4.73 and revenue of $30.9 billion to $31 billion, including a $800 million negative foreign-exchange impact, compared to a previous forecast of earnings per share of $4.74 to $4.76 and revenue of $31.7 billion to 31.8 billion. Refinitiv polled analysts expected adjusted earnings per share of $4.75 and revenue of $31.73 billion.
Benioff stated that the company has previously experienced weaker economic cycles.
“Sales cycles can get stretched, deals are inspected by higher levels of management and all of this we began to start to see in July,” Benioff said. “Nearly everyone I’ve talked to is taking a more measured approach to their business. We expect these trends to continue in the near term, and we’ve reflected this in our guidance.”
However, the slowdown was not uniform.
Demand from small and medium-sized businesses was slower, particularly in North America and Europe, and particularly in retail, consumer goods, communications, and media, according to Amy Weaver, Salesforce’s finance chief, during the call.
“From a product perspective, commerce and marketing saw more pronounced decelerations, while sales and service remained strong,” Weaver said. Even with weakness in revenue, Salesforce reiterated its guidance for an adjusted operating margin of 20.4per cent for the 2023 fiscal year.
In the third quarter, the company’s service subscription and support revenue totalled $1.83 billion, up 14 per cent year on year. Sales revenue increased by nearly 15per cent to $1.7 billion, including Salesforce’s long-standing Sales Cloud software for managing business opportunities. Platform and Other, which includes Slack, generated $1.48 billion in revenue, a 53 per cent increase.
Salesforce announced the availability of new marketing and commerce tools in the most recent quarter, and it acquired Troops.ai, a startup that developed a Slack chatbot that salespeople can use to update customer-relationship management software. Salesforce, which paid nearly $28 billion for Slack last year, announced that it would raise the price of the chat offering for the first time since the app launched in 2014. The company reiterated its forecast for Slack revenue of $1.5 billion for the full fiscal year.
Salesforce shares were down about 29 per cent year to date before the decline in extended trading, compared to a nearly 13 per cent decline for the S&P 500.
(Adapted from BusinessInsider.com)