Salesforce Slips 6% Despite Beating Q3 Estimates

Global customer relationship management platform Salesforce Inc. (CRM) delivered solid third-quarter results, with both earnings and revenue exceeding estimates. However, lower-than-expected fourth-quarter earnings forecasts pushed the shares down 6.2% during the extended trading session on November 30.

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Solid Results

The company reported earnings of $1.27 per share, down 27% compared to the prior-year quarter, but 35 cents higher than analysts’ estimates of $0.92 per share.

Furthermore, revenue grew 27% year-over-year to $6.86 billion, outpacing Street estimates of $6.79 billion. The solid revenue growth was driven by a 25% year-over-year growth in Subscription and Support revenue, which is CRM’s major revenue contributor.

Against the year-ago period, CRM’s remaining performance obligations (RPO) climbed 23% to $18.8 billion.

Management Comments

Chair and CEO of Salesforce, Marc Benioff, said, “Salesforce is more relevant and strategic than ever as every company accelerates their digital transformation journey. Just as we’ve helped our customers navigate the pandemic, we’re now guiding them toward greater growth, customer success, health and safety, and trust. With the tremendous strength of our Customer 360 platform and Slack, we’re on track to reach $50 billion revenue in FY26.”

Guidance

Based on the current economic scenario and business momentum, Salesforce forecasts fourth revenue to fall in the range of $7.224 billion to $7.234 billion in line with the consensus estimate of $7.22 billion. Similarly, Q4 earnings are projected to be between $0.72 per share and $0.73 per share, lower than the consensus estimate of $0.81 per share.

Moreover, the company raised its full-year fiscal 2022 revenue guidance to be between $26.39 billion and $26.40 billion. FY22 earnings are expected to be between $4.68 per share and $4.69 per share.

Additionally, CRM initiated its Q1FY23 revenue guidance of $7.215 billion to $7.250 billion and also reiterated its full-year Fiscal 2023 revenue outlook of $31.7 billion to $31.8 billion.

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Analysts Consensus

With 27 Buys and 4 Holds, the CRM stock commands a Strong Buy consensus rating. The average Salesforce price target of $336.38 implies 18% upside potential to current levels. Shares have gained 18.1% over the past year.

Smart Score

According toTipRanks’ Smart Score rating system, Salesforce scores a “Perfect 10”, which indicates that the stock has strong potential to outperform market expectations.