Salesforce Inc. delivered first quarter results today that came in above expectations. It followed that by lifting its full year profit guidance, sending its stock higher in after-hours trading.
The company reported earnings before certain costs such as stock compensation of 98 cents per share, with revenue coming to $7.41 billion, up 24% year-over-year.
The results were better than expected, with Wall Street looking for earnings of just 94 cents per share on revenue of $7.38 billion. That, combined with the revised guidance, was enough to send Salesforce’s stock up more than 7% in extended trading, erasing a loss of almost 3% earlier in the day.
Salesforce reported a net profit of $28 million, down 94% from the year ago period. The company said this was due to lower gains on its investments in the quarter, plus mounting sales and marketing expenses. Even so, Salesforce co-Chief Executive Marc Benioff (pictured) told investors that the company delivered another great quarter.
“There is no greater measure of our resilience and the momentum in our business than the $42 billion we have in our remaining performance obligation, representing all future revenue under contract,” he said in a statement. “While delivering incredible growth at scale, we’re committed to consistent margin expansion and cash flow growth as part of our long-term plan to drive both top and bottom line performance.”
The company reported that Service Cloud, which handles customer service inquiries, generated $1.76 billion in revenue, up 17% from a year ago. Sales Cloud, which is used by enterprises to manage business opportunities, contributed $1.63 billion in sales, up 18%.
In a call with analysts, Salesforce Chief Financial Officer Amy Weaver said the company is well aware of the macroeconomic uncertainty facing many companies at this time, including the volatility of foreign exchange rates. However, Benioff told analysts that Salesforce was “not seeing material impact on the broader economic world that all of you are in.”
Benioff explained that this was due to the company’s experience during the dot-com bubble era, when Salesforce came close to going out of business. “In 2001 I think it really impacted us, we almost lost our business… so we made a lot of changes then, and it really strengthened our business and made us more durable,” he said.
Salesforce certainly needs to be durable, for the company has taken a hit in Russia, where it has begun ending relationships with customers. Still, the company said it has more than $13.6 billion in unearned revenue to look forward to, mainly from subscription billings.
Looking to the next quarter, Salesforce said it sees earnings in a narrow range of $1.01 to $1.02 per share and revenue of between $7.69 billion and $7.7 billion. That’s actually some way below Wall Street’s consensus of $1.14 per share in earnings and $7.77 billion in profit.
What boosted Salesforce though was its updated fiscal 2023 guidance. The company said it now sees full year earnings of between $4.74 and $4.76 per share, up from an earlier range of $4.62 to $4.64 per share, and above the analyst forecast of $4.65 per share. Revenue is predicted to fall between $31.7 billion and $31.8 billion, below the consensus estimate of $32.06 billion.
Weaver explained that the higher earnings forecast is “driven by continued focus on disciplined decision-making across the organization” rather than any single change the company has made.
“We’ve asked each leader to step up, to really look across their business and to strategically prioritize their investment,” she said. “And this is only to make sure that we’re getting the highest-return for every dollar that we invest.”
During the quarter, Salesforce announced new Slack integrations for Sales Cloud, Service Cloud and Marketing Cloud. It also launched a new business called Safety Cloud aimed at businesses wanting to organize in-person events. Finally, the company announced that its legal name has changed from Salesforce.com Inc. to Salesforce Inc.