Salesforce ‘very thirsty’ to be AI CRM leader, Benioff says following strong outlook, improved margins

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A previous version of this story listed an incorrect title for Chief Financial Officer Amy Weaver.

Salesforce Inc. shares were rallying nearly 6% in Thursday’s premarket trading after the customer-relations management software giant’s earnings outlook topped Wall Street expectations two weeks ahead of its annual confab.

The San Francisco-based company on Wednesday forecast third-quarter adjusted earnings of $2.05 to $2.06 a share on revenue of $8.7 billion to $8.72 billion, while analysts had expected, on average, $1.84 a share on revenue of $8.67 billion.

For the year, Salesforce
CRM,
+3.44%
expects adjusted earnings of $8.04 to $8.06 a share on revenue of $34.7 billion to $34.8 billion, while analysts had forecast, on average, earnings of $7.42 a share on revenue of $34.66 billion.

Marc Benioff, Salesforce’s chairman and chief executive, brought his trademark enthusiasm to the call, referring to tough layoffs and restructuring decisions over the past year as part of the company’s commitment to drive profitable growth. Wednesday’s report served as a run-up to the company’s annual Dreamforce conference, to be held Sept. 12-14 at San Francisco’s Moscone Center.

Don’t miss: Salesforce is hosting the biggest AI show in the U.S. in a few weeks

“We are very thirsty to make sure that Salesforce is the No. 1 AI CRM, and we have done a lot organically to do that in the last six months,” Benioff told analysts.

Amy Weaver, Salesforce’s chief financial officer, told analysts that growth was primarily driven by MuleSoft momentum, solid sales and service performance for the company’s platform.

“This is evidenced by the more than 450 customers who invest more than $10 million annually and average seven clouds, and in the last five years the number of $10 million-plus customers has tripled and their average number of clouds has nearly doubled,” Weaver said.

The COO added that restructuring drove margin improvements, allowing the company to exceed its 30% adjusted margin target three quarters early.

Addressing recently announced price hikes, Weaver told analysts the company took those into account in its outlook, as well as from any changes from opportunities around AI.

“I will say that neither has a significant influence on our guidance for this year,” Weaver said. “I think that there’s opportunities really take a while to roll through our customer base, particularly on pricing as we look to renewals.”

The company reported second-quarter net income of $1.27 billion, or $1.28 a share, compared with $68 million, or 7 cents a share, in the year-ago period. Adjusted earnings, which exclude stock-based compensation and other expenses, came in at $2.12 a share, up from $1.19 a share in the year-ago period.

Revenue rose to $8.6 billion from $7.72 billion in the year-ago period.

Wall Street analysts, on average, forecast fiscal second-quarter earnings of $1.90 a share on revenue of $8.53 billion.

Also: Salesforce CEO Marc Benioff warns upcoming Dreamforce may be last in San Francisco

Dow Jones Industrial Average
DJIA
component Salesforce closed Wednesday up 62.8% for the year, compared with a 5.3% gain this year for the 30-stock average. Meanwhile, the S&P 500 index
SPX
is up 17.6%, and the tech-heavy Nasdaq Composite
COMP
is up 34% year to date.

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