Salesforce (CRM) Q2 2023 results

Marc Benioff, co-founder and co-CEO of Salesforce, speaks at the TIME100 Gala on June 8, 2022 in New York City.

Kevin Mazur | Getty Images

Salesforce reported earnings and revenue that beat analysts’ estimates but delivered a disappointing forecast for fiscal 2023. The stock fell 7% in extended trading on Wednesday.

The enterprise software maker said its board approved a $10 billion share buyback program, a first for the company. But Marc Benioff, co-founder and co-CEO of Salesforce, told analysts on a conference call that the move wouldn’t stop him from making more acquisitions.

Here’s how the company did it:

  • Earnings: $1.19 per share, adjusted, versus $1.02 per share, expected by analysts, according to Refinitiv.
  • Revenue: $7.72 billion versus $7.69 billion, expected by analysts, according to Refinitiv.

Revenue increased 22% in the quarter ended July 31 from the year-ago period, according to a statement. Net income of $68 million was down from $535 million in the year-ago quarter, when the company made a large gain on its investments.

For the fiscal third quarter, Salesforce called for adjusted earnings of $1.20 to $1.21 per share on revenue of $7.82 billion to $7.83 billion. Analysts polled by Refinitiv were looking for $1.29 in adjusted earnings per share on $8.07 billion in revenue. Revenue guidance would have been $250 million higher without the currency impact, Salesforce said.

Salesforce cut its fiscal 2023 guidance for profit and revenue. It now expects earnings per share of $4.71-4.73 and revenue of $30.9-31 billion, including $800 million of negative currency impact , against an earlier forecast for earnings of $4.74 to $4.76 per share and $31.7 to $31.8 billion in revenue. . Analysts polled by Refinitiv had expected adjusted earnings per share of $4.75 and revenue of $31.73 billion.

The company has endured weaker economic cycles before, Benioff said.

“Sales cycles can stretch, deals get scrutinized by higher levels of management and all of that we started seeing in July,” Benioff said. “Nearly everyone I’ve spoken to is taking a more measured approach to their business. We expect these trends to continue in the near term, and we’ve factored this into our advice.”

However, the slowdown was not generalized.

Demand has been slower from small and medium-sized businesses, particularly in North America and Europe, and specifically in retail, consumer goods, communications and media, said Amy Weaver, Salesforce’s CFO, on the call.

“From a product perspective, trade and marketing experienced more pronounced decelerations, while sales and services remained strong,” Weaver said. Even with weak revenue, Salesforce reiterated its guidance for an adjusted operating margin of 20.4% for fiscal year 2023.

The company’s services subscription and support revenue totaled $1.83 billion in the quarter, up 14% year-over-year. Revenue in the sales category, which includes Salesforce’s longstanding Sales Cloud software for managing leads, rose nearly 15% to $1.7 billion. The company’s Platforms and Others category, which includes Slack, had revenue of $1.48 billion, up 53%.

Last quarter, Salesforce announced the availability of new marketing and commerce tools and acquired Troops.ai, a startup that has developed a Slack chatbot that salespeople can use to update relationship management software. customer. Salesforce, which completed the nearly $28 billion acquisition of Slack last year, said it would raise the price of the chat offering for the first time since the app launched in 2014. The company reiterated its expectation of $1.5 billion in revenue from Slack in the full fiscal year. .

Prior to the drop in extended trading, Salesforce shares were down about 29% year-to-date, compared to a decline of nearly 13% for the S&P 500.

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Lance B. Holton