CRM Giant Beats Growth Forecasts, Drives Strongly, Announces More Shareholder Returns
would be an understatement To say that Salesforce has been going through a rough patch of late, from activist pressure to executive departures to layoffs, it sounds like it was all piling up on a company that was already struggling as profits dwindled.
He needed a strong quarter, and everything indicated that they would not get it. Against all odds, however, the CRM leader challenged the street with a strong report.
Today after the bell, Salesforce reported its fiscal fourth quarter earningsincluding revenue that beat expectations and guidance that came in ahead of street estimates.
The street expected Salesforce to report revenue of $7.99 billion in its most recent quarter; reported a top line of $8.38 billion, up 14% compared to the same period a year earlier, and three points better in constant currency terms.
Looking ahead, investors had forecast Salesforce to generate revenue of $8.05 billion in its current quarter (Q1F24) and $34.03 billion for its new fiscal year; instead, Salesforce expects revenue between $8.16 billion and $8.18 billion in its current quarter, and revenue of $34.5 billion to $34.7 billion for the full fiscal year.
TechCrunch noted earlier this week that the way for Salesforce to get out of its predicament would be to beat growth estimates and improve profitability. The company certainly handled the former. The company also forecasts higher earnings. Salesforce reported GAAP and non-GAAP operating margins of 3.3% and 22.5%, respectively. In its just-beginning fiscal year, the company expects GAAP and non-GAAP operating margins of around 10.8% and 27.0%, respectively.
Salesforce squashed expectations and doubts about its recent growth, forecasting better-than-expected growth for the year and telling investors to expect a stronger overall operating profit result for its new fiscal year.
This could take some of the wind out of the sails of Salesforce critics. The company’s many detractors of late were lining up to find fault with its spending, especially compared to others in the industry, and these particular operating numbers could help Salesforce executives as they continue to do business with a legion of firms. activists.
It’s worth noting that this morning, Elliott Management, one of five activists working inside Salesforce right now, announced a list of board candidates, a move that usually means it wants to push its agenda on a company. A bad report would have made that job a lot easier.
The company’s investor critics might also have wanted to see, for example, a higher level of anticipated return to shareholders. That can come in a number of forms, including dividends, share buybacks, and other endeavors. Salesforce has historically opted for share buybacks, given its strong cash generation. After noting in its report that it returned 57.5% of the $4 billion it spent on buybacks last fiscal year in its final quarter, the company also announced that it will increase the size of its buyback to $20 billion. total.
Naturally, one could argue that Salesforce is increasing its share buybacks to dampen outside criticism and appease activists seeking better performance; true, but even if it is, it has a similar effect. You will buy back the shares and you have the cash flow to do so. It’s hard to argue about intent when the expected outcome is probably in line with what outside investors wanted.
Salesforce will remain critical of its cost structure and the fact that its expected growth in its current fiscal year is only 10%. But compared to the state the company was in earlier this week, its earnings report has proven quite a few of its critics wrong, and perhaps bought it more time to show that it really knows what it’s doing. doing.
