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Salesforce shares surge on earnings beat, revised outlook and $20B stock buyback program

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Shares in Salesforce Inc. surged in late trading after the cloud-based software company beat estimates in its latest earnings report, revised its forecast upwards and announced a new $20 billion stock buyback program.

For the quarter that ended Jan. 31, Salesforce reported non-generally accepted accounting principles earnings per share of $1.68, up from 84 cents in the same quarter of last year, on revenue of $8.38 billion, up 14% year-over-year. Analysts had been expecting EPS of $1.36 on revenue of $7.99 billion.

Subscription revenue in the quarter came in at $7.79 billion, up 14% year-over-year and professional services and others revenues totaled $600 million, up 19%. Non-GAAP operating margin was 29.2%, cash flow generated from operations was $2.79 billion, up 41% and remaining performance obligations at the end of the quarter sat at $48.6 billion, up 11%.

For its full fiscal year 2023, Salesforce reported non-GAAP EPS of $5.24 on revenue of $31.35 billion.

“For the full year, we delivered $31.4 billion in revenue, up 18% year-over-year, or 22% in constant currency, one of the best performances of any enterprise software company our size,” Marc Benioff, chairman and chief executive officer of Salesforce, said in a statement. “We closed FY23 with operating cash flow reaching $7.1 billion, up 19% year-over-year, the highest cash flow in our company’s history and one of the highest cash flows of any enterprise software company our size.”

Along with its earnings, Salesforce announced a new $20 billion stock repurchase program. The program was initially launched in 2022 with a $10 billion commitment but Salesforce has seemingly upped the ante amid the emergence of activist investors, most notably Elliot Management Corp.

Elliot Management was reported to have made a multi-billion investment in Salesforce in January. The firm is known for pushing for executive and company changes in any company it invests in and has previously targeted companies such as  Twitter Inc., PayPal Holdings Inc., AT&T Inc. and Pinterest Inc.

In its first move as an investor, Elliot Management is reported to have nominated a slate of directors for the Salesforce board, with Jesse Cohn, who runs the activist practice at Elliot, believed to be among them. Nominations for the Salesforce board close on March 14.

The brewing backend drama also comes after Salesforce announced in January that it was laying off around a tenth of its workforce. Benioff said in a memo at the time that the cuts were due to “customers… taking a more measured approach” to spending, which is a polite way of saying broader macroeconomic issues in the global economy.

For its first fiscal quarter of 2024, Salesforce expects non-GAAP EPS of $1.60 to $1.61 on revenue of $8.16 billion and $8.18 billion. Analysts had expected $1.32 and $8.05 billion. Salesforce also surprised with a full-year EPS outlook of $7.12 to $7.15 on revenue of $34.5 billion to $34.7 billion, higher than an expected $5.84 and $34.03 billion.

In a broader market that has seen some companies struggle over reporting season amid a slowing global economy, Salesforce stands out and investors noticed, with shares in the company up over 15% after the bell.

Photo: Salesforce

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