18:26 November 30, 2023
Salesforce (CRM.US) started today’s trading with an over 7% bullish price gap. The solid performance of the company’s shares today is driven by the release of a solid earnings report for the third quarter of fiscal 2024 (August-October 2023 calendar period).
Salesforce reported better-than-expected third-quarter results. While sales were mostly in line with expectations, the company surprised positively with its profit. Adjusted operating income increased more than 50% year over year, while adjusted EPS rose from $1.40 to $2.11 (expected: $2.06). The company is struggling to grow revenue as quickly as it once did due to a recent decline in IT spending. However, the company’s strategy to weather this period of decline by increasing efficiency appears to be working – adjusted operating margin increased 8.5 percentage points compared to the same quarter last year.
Results for the third quarter of fiscal year 2024
- Revenue: $8.72 billion vs. expected $8.71 billion (+11% YoY)
- Subscription and Support Revenue: $8.14 billion vs. expected $8.09 billion (+13% YoY)
- Sales: $1.91 billion vs. expected $1.90 billion (+11% YoY)
- Services revenue: $2.07 billion vs. expected $2.08 billion (+12% YoY)
- Platform and other revenue: $1.69 billion vs. expected $1.69 billion (+11% YoY)
- Marketing and Commerce Revenue: $1.23 billion vs. expected $1.25 billion (+8.9% YoY)
- Subscription and support data revenue: $1.25 billion vs. expected $1.17 billion (+22% YoY)
- Professional Services and Other Revenue: $579 million vs. expected $621.5 million (-4.1% YoY)
- Quarter-end unrealized revenue: $12.56 billion vs. expected $12.78 billion
- Adjusted income from operations: $2.72 billion vs. expected $2.64 billion (+53% YoY)
- Adjusted operating margin: 31.2% versus expected 30.4% (22.7% last year)
- Adjusted EPS: $2.11 vs. expected $2.06 ($1.40 last year)
- Remaining performance obligations: $48.3 billion vs. expected $44.86 billion (+21% YoY)
- Current: $23.9 billion vs. expected $23.17 billion (+14% YoY)
- Not current: $24.4 billion vs. expected $21.72 billion
- Free cash flow: +$1.37 billion vs. +$0.90 billion expected
- Sales forecast for the full fiscal year 2024 was raised slightly by adjusting the lower end of the forecast range upwards. Full-year adjusted EPS and operating margin guidance was also raised. Fiscal fourth quarter revenue guidance was mostly in line with expectations, while fourth quarter adjusted EPS came in higher than expected. Note that the conservative 10% growth forecast for the current remaining performance obligations for the fiscal fourth quarter appears in light of the strong 14% growth in the fiscal fourth quarter.
Forecast for the fourth quarter of fiscal year 2024
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Revenue: $9.18-9.23 billion vs. expected $9.22 billion
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Adjusted EPS: $2.25-2.26 vs. expected $2.17
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Current remaining performance obligation: +10% forecast for the entire 2024 financial year
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Revenue: $34.75-34.80 billion, versus previous guidance of $34.7-34.8 billion
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Adjusted EPS: 8.18-8.19, vs. previous forecast of 8.04-8.06
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Adjusted operating margin: 30.5%, versus previous forecast of ‘approximately
Sources: xStation5 from XTB
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