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Salesforce is Very Eager to Become the Leader in Ai CRM, Says Benioff, Following an Improved Outlook and Margins

August 31, 2023
minute read

Salesforce Inc.'s shares demonstrated a notable surge of nearly 6% during premarket trading on Thursday, following the release of the customer-relations management software giant's earnings outlook, which exceeded Wall Street's expectations. This development transpired two weeks prior to the company's annual conference.

Based in San Francisco, the company projected its adjusted earnings for the third quarter to be in the range of $2.05 to $2.06 per share, accompanied by a revenue forecast ranging from $8.7 billion to $8.72 billion. In contrast, analysts had envisioned an average of $1.84 per share on revenue amounting to $8.67 billion.

Regarding the full fiscal year, Salesforce anticipates adjusted earnings of $8.04 to $8.06 per share, with revenue projected to be between $34.7 billion and $34.8 billion. These figures contrast with the average analyst projection of earnings amounting to $7.42 per share on revenue of $34.66 billion.

Marc Benioff, Chairman and Chief Executive of Salesforce, conveyed his customary enthusiasm during the conference call. He referred to challenging workforce reductions and strategic restructuring decisions undertaken in the past year as integral to the company's commitment towards achieving profitable growth. The recent earnings report served as a precursor to the forthcoming Dreamforce conference scheduled for September 12-14 at San Francisco's Moscone Center.

Benioff emphasized the company's dedication to becoming the foremost AI-powered CRM entity: "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," he elucidated to analysts.

Amy Weaver, Salesforce's Chief Financial Officer, highlighted the growth driven primarily by the momentum generated by MuleSoft, alongside robust sales and service performance across the platform. Weaver underlined the increasing number of customers investing over $10 million annually and employing an average of seven clouds. She noted that the number of customers surpassing the $10 million threshold had tripled over the past five years, while the average number of clouds utilized nearly doubled.

Weaver also explained that the company's margin improvements, a consequence of restructuring efforts, enabled them to exceed their 30% adjusted margin target three quarters ahead of schedule.

In relation to recently announced price hikes, Weaver informed analysts that these adjustments were considered in the company's outlook, along with potential impacts stemming from AI-related opportunities. Weaver clarified, "I will say that neither has a significant influence on our guidance for this year... opportunities really take a while to roll through our customer base, particularly on pricing as we look to renewals."

The company's financial report for the second quarter indicated a net income of $1.27 billion, or $1.28 per share, in comparison to $68 million, or 7 cents per share, during the corresponding period of the previous year. Adjusted earnings, which exclude stock-based compensation and other expenses, were reported at $2.12 per share, representing an increase from $1.19 per share during the same period last year. Revenue demonstrated growth, ascending to $8.6 billion from $7.72 billion in the year-ago quarter.

Wall Street analysts, on average, had projected fiscal second-quarter earnings of $1.90 per share, accompanied by revenue of $8.53 billion.

Salesforce, a constituent of the Dow Jones Industrial Average (DJIA), witnessed a 62.8% surge in its share value for the year, notably outperforming the 5.3% gain observed in the 30-stock average. Concurrently, the S&P 500 index rose by 17.6%, while the technology-centric Nasdaq Composite achieved a remarkable year-to-date increase of 34%.

Valentyna Semerenko
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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