Salesforce nyse Crm Shares Skyrocket on Upbeat Q4 Profit Forecast

Salesforce (NYSE: CRM) Shares Skyrocket on Upbeat Q4 Profit Forecast

Salesforce (NYSE: CRM) shares spiked in post-market trading Wednesday following the release of an upbeat profit forecast for the current quarter. The tech giant, led by CEO Marc Benioff, showcased robust momentum in its aggressive cost-cutting campaign, driving a surge in profit margins that delighted Wall Street.

Salesforce’s full-time workforce witnessed an 11% decline, reaching 70,843 employees as of October 31. This reduction in staff was a strategic move as part of a restructuring initiative earlier in 2023. However, in a surprising turn, Salesforce announced plans to hire over 3,000 new workers, demonstrating its commitment to capitalizing on the growing interest in artificial intelligence.

In its pursuit of increased profitability, Salesforce (NYSE: CRM) has strategically focused on minimizing expenses related to sales and marketing, emphasizing self-service purchasing of its software. Last week, Salesforce announced to make its best-known products available on the marketplace of Amazon.com’s cloud-computing unit, Amazon Web Services. Analysts, including Rebecca Wettemann, the principal analyst at Valoir, applauded the move as a cost-saving and customer-expanding strategy.

The software giant forecasts earnings (excluding certain items) of around $2.26 per share for the fourth quarter, surpassing the analysts’ consensus of $2.17. The revenue outlook stands strong at $9.18 billion to $9.23 billion, above the average estimate of $9.22 billion. Current remaining performance obligations, a measure of contracted sales, are set to increase by about 10%, in line with estimates.

This optimistic outlook has propelled the shares to reach a high of $251 in extended trading after closing at $230.35 in New York. Salesforce stock has increased 74% year-to-date, with the majority of the rally occurring in the first half of 2023 amid pressure from activist investors to boost profits.

Some investors have expressed concerns that prioritizing cost-cutting has negatively impacted revenue growth, which dipped 11% over the last three quarters. Salesforce remains optimistic and believes that new AI features and a rare price increase will help counteract this downward trend.

Salesforce (NYSE: CRM) reported revenue of $8.72 billion for the fiscal third quarter, in line with estimates, and a profit of $2.11 a share, surpassing the analysts’ average estimate of $2.06. Adjusted operating margin came in at 31%.

Chief Financial Officer Amy Weaver stated,

“Over the last year we have transformed the company, enabling us to deliver another quarter of strong profitable growth.”

Salesforce is also actively working to integrate recent acquisitions, including workplace communication app Slack, data visualization tool Tableau, and MuleSoft. The revenue growth in these units accelerated in the third quarter, breaking a streak of slowdowns.

The data segment, including Tableau and MuleSoft, recorded a 22% increase in sales during the quarter. This strength helped offset continued slowdowns in the company’s core sales and service applications, as noted by Tyler Radke, the analyst at Citigroup.

While celebrating these achievements, Salesforce faced a minor setback when Slack’s CEO, Lidiane Jones, resigned to take the top job at Bumble Inc. earlier this month. However, the company swiftly appointed Denise Dresser as the new CEO, marking the third leadership change for Slack in the past year.