A recovery quarter for Salesforce (CRM).
Shares of the SaaS company rose 4% in after-hours trading on Wednesday after revenue, operating margin and earnings beat Wall Street expectations.
The reaction, and the mood surrounding this quarter’s results, is in stark contrast to just three months ago, when the company missed revenue expectations for the first time since 2006.
Salesforce co-founder and CEO Marc Benioff told Yahoo Finance that demand remains strong and the company has “aggressive ambitions” around operating margins and cash flow.
Sales increased 11 percent in Europe and 16 percent in Asia Pacific at constant exchange rates. In the company’s Americas segment, sales increased 8 percent.
“I don’t think anybody expected that recurrence. [last quarter]”The company is looking to expand its reach,” Third Bridge analyst Charlie Miner told Yahoo Finance.
Miner added, “What a lot of people are excited about right now is beating expectations on adjusted operating margin. Profitability has been a total focus for Salesforce over the last six quarters. We can’t afford to lose sight of that right now. [sales] This is only the second time in the company’s history that growth has slowed to single digits.”
The company maintained its full-year revenue guidance but raised its operating margin forecast, which may spur hopes that Salesforce’s various AI initiatives will boost profits.
To that end, Benioff teased the upcoming release of AgentForce, which will feature AI sales agents that can resolve customer inquiries beyond chatbots — details of which Benioff said will be announced at the company’s high-profile Dreamforce conference in September.
But Benioff said the service represents a higher margin opportunity and pricing will be determined through discussions. He expects 1 billion agents to be on board by the end of fiscal 2026.
He also said Microsoft “misled customers into thinking they had to do a lot of heavy lifting on the technical side.” Salesforce aims to let customers train models within its platform.
“They’re now getting real value from AI,” he says of Salesforce’s products.
“One of the biggest initiatives in this space is monetizing AI themes within Salesforce’s massive installed base. This represents a huge opportunity for Salesforce to realize significant benefits over the next few years, and based on our estimates and on-the-ground research, we believe it could drive over $4 billion in incremental overall revenue annually by 2025,” Wedbush analyst Dan Ives wrote in a client note.
Revenue Breakdown
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Sales: $9.33 billion (up 8% year-over-year) vs. $9.23 billion (guidance: $9.2 billion to $9.25 billion)
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Current remaining performance obligations: $26.5 billion vs. $26.31 billion
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Adjusted operating profit margin: 33.7% vs 31.94% Estimated
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Diluted EPS: $2.56 (up 21% YoY) vs. $2.35 expected
Another thing that caught my attention was the outlook.
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Full-year sales forecast: $37.7 billion to $38 billion (previous forecast: $37.84 billion to $38 billion)
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Full-year operating margin guidance: 32.8% vs. 32.52% expected (previous forecast: 32.5%)
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Brian Sozzi He is the editor-in-chief of Yahoo Finance. Follow Sozzi on X Brian Sozzi and LinkedInHave any tips on a deal, merger, activist situation, or anything else? Email me at brian.sozzi@yahoofinance.com.
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