Salesforce (CRM) Q1 2024 Earnings Report

Selling power reported an earnings and revenue overrun and raised its full-year earnings forecast, but the stock fell as much as 7% in extended trading as capital costs were higher than predicted by analysts.

Here’s how the company did it:

  • Earnings: $1.69 per share, adjusted, versus $1.61 per share as expected by analysts, according to Refinitiv.
  • Income: $8.25 billion, versus $8.18 billion as forecast by analysts, according to Refinitiv.

Capital spending for the quarter totaled $243 million, up about 36% and above the consensus of $205 million among analysts polled by StreetAccount.

Cost concerns overshadowed the company’s 11% revenue increase for the quarter that ended April 30. Net income totaled $199 million, or 20 cents per share, compared with $28 million, or 3 cents per share, in the prior quarter.

For the second fiscal quarter, Salesforce expects earnings of $1.89 to $1.90 per share on an adjusted basis and revenue of $8.51 billion to $8.53 billion . Analysts polled by Refinitiv had expected $1.70 in adjusted earnings per share and $8.49 billion in revenue.

Salesforce raised its profit forecast for fiscal 2024 but left its revenue forecast intact. It is now asking for $7.41 to $7.43 in adjusted earnings per share on $34.5 to $34.7 billion in revenue. In March, Salesforce forecast adjusted earnings of $7.12 to $7.14 per share. Analysts polled by Refinitiv were looking for adjusted earnings of $7.14 per share and revenue of $34.65 billion for the year.

CEO Marc Benioff said in the statement that the company “significantly exceeded” its operating margin target for the quarter. Salesforce now expects an adjusted operating margin of 28% for fiscal year 2024, up 1 percentage point from the 27% forecast it gave in March.

But there are challenges that Salesforce faces. Clients are still carefully reviewing deals, which are taking longer to close than before, chief operating officer Brian Millham said in a conference call with analysts. Now the company is looking to automate the sales process on the lower end of the market and make its salespeople more productive, he said.

During the quarter, “our professional services business began to see less demand for multi-year transformations and, in some cases, delayed projects as clients focus on quick wins and rapid ROI,” said said Millham.

The company expects these issues to persist, said Amy Weaver, chief financial officer of Salesforce.

“One of the things we’re seeing right now is not just professional services as a whole coming under pressure, but more and more clients are choosing to contract on a time and materials basis,” a- she declared.

During the quarter, Salesforce announced Einstein GPT generative artificial intelligence technology designed to help salespeople, marketers, and customer service agents do their jobs more efficiently. Many other software makers have integrated generative AI into their products since OpenAI’s ChatGPT went viral after its launch in November.

Also in the quarter, Elliott Investment Management said it would not move forward with its director appointments after the activist company disclosed a stake in Salesforce.

Prior to the after-hours decline, Salesforce shares had risen 67% so far this year, outperforming the S&P 500, which is up a modest 9% over the same period.

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