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Salesforce Reports Weak Guidance – Here Are the Numbers

August 25th, 2022 -

About 3 Mins
Dotted Circle
Dotted Circle Alt2x

Ticker Symbol: CRM

Salesforce shares are down 6% in morning trading after the company lowered its annual profit and revenue guidance in its second quarter earnings release. Salesforce is the largest cloud-based provider of customer management software, and co-Chief Executive Officer Marc Benioff said that the demand environment for the company’s products has tempered from earlier in the year. Shares are off by more than 30% on a year-to-date basis.

The company expects adjusted full-year earnings to be between $4.71 to $4.73 per share, lower than the Wall Street estimate of $4.75 per share. Management previously saw an adjusted EPS of $4.74 to $4.76 per share. Revenue for the year should be around $31 billon lower than the previous guidance of $31.7 billion. Analysts were expecting revenue to come in at around $31.75 billion. The company provided commentary that the lowered revenue forecast was due purely because of the foreign exchange issues arising from weaker demand, and a stronger U.S. dollar.

For the fiscal second quarter, the company reported an adjusted earnings per share of $1.19 versus the average analyst estimate of $1.03. Revenue was up 22% year over year, to $7.72 billion, against the $7.68 billion expected. Subscription and support sales, the main revenue driver at the company, came in a bit weak at $7.14 billion, up 21% year over year, versus analysts view of $7.19 billion. Subscription revenue specifically, came in at $1.48 billion, growing at a rapid 34% rate thanks in part to Salesforce’s acquisition of Slack.

Professional services beat handily, posting revenue of $577 million against an estimate of $541 million. The company said that on a constant currency basis, sales were up 26%, higher than the 22% foreign exchange adjusted figure and the 24% expected by analysts. Remaining performance obligations, also considered the revenue pipeline for the company, totaled $41.6 billion, missing the estimate of $41.9 billion. A lower RPO is generally viewed as an indicator of slower growth ahead.

Operating margin of 19.9% was well ahead of the consensus 18.6% as the company was more measured and deliberate in hiring practices. The firm also announced a $10 billion share buyback program. Chief Financial Officer Amy Weaver said she expects margins to remain strong throughout the course of the year. Operating margin for the first quarter was 17.6%. She expects full-year operating cash flow margin of between 16% to 17%. Lastly, the company said that Slack, its blockbuster acquisition from last year, continues to outperform internal expectations.

This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.

This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.
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