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Salesforce (CRM) Q1 Earnings & Sales Beat Estimates, Up Y/Y

Salesforce CRM reported better-than-expected financial results for the first quarter of fiscal 2024. The enterprise cloud computing solution provider’s first-quarter fiscal 2024 non-GAAP earnings increased 71.4% to $1.69 per share from 98 cents reported in the year-ago quarter. The figure surpassed the Zacks Consensus Estimate of $1.61.

The quarterly non-GAAP earnings were adversely impacted by a loss of 11 cents per share from mark-to-mark accounting of CRM’s strategic investments at a non-GAAP tax rate of 23.5%. However, the company’s ongoing restructuring initiative, which includes trimming the workforce, benefited first-quarter non-GAAP earnings by 72 cents per share.

Salesforce’s quarterly revenues of $8.25 billion climbed 11% year over year, surpassing the Zacks Consensus Estimate of $8.17 billion. The top line also improved 13% in constant currency.

The company has been benefiting from the robust demand environment as customers are undergoing a major digital transformation. Thus, the rapid adoption of its cloud-based solutions resulted in the better-than-anticipated performance in the fiscal first quarter.

Salesforce Inc. Price, Consensus and EPS Surprise

Salesforce Inc. price-consensus-eps-surprise-chart | Salesforce Inc. Quote

Quarterly Details

Coming to CRM’s business segments, revenues from Subscription and Support (93% of the total revenues) increased 11.5% from the year-earlier period to $7.64 billion. Professional Services and Other (7% of total sales) revenues climbed 9% to $605 million.

Under the Subscription and Support segment, Sales Cloud revenues grew 10.9% year over year to $1.81 billion. Revenues from Service Cloud, one of the company’s largest and fastest-growing businesses, also improved 11.5% to $1.96 billion.

Marketing & Commerce Cloud revenues jumped 7.4% to $1.17 billion. Salesforce Platform and Other revenues were up 10.4% to $1.57 billion. Also, revenues from Data increased 18.4% year over year to $1.13 billion.

Geographically, Salesforce registered revenue growth of 10.3% in America (66.5% of the total revenues), 16% in the Asia Pacific (9.9%) and 12.3% in the EMEA (23.7%) on a year-over-year basis.

Salesforce’s gross profit came in at $6.12 billion, up 14.1% from the prior-year period. Moreover, the gross margin improved 200 basis points (bps) to 74%.

Salesforce recorded a non-GAAP operating income of $2.27 billion, indicating an increase of 73.9% from the year-ago quarter’s level of $1.31 billion. Moreover, the non-GAAP operating margin expanded 1,000 bps to 27.6% from 17.6% in the year-ago quarter due to lower operating expenses as a percentage of total sales. Operating expenses as a percentage of revenues declined to 69% from 72% in the year-ago quarter.

Balance Sheet & Other Details

Salesforce exited the fiscal first quarter with cash, cash equivalents and marketable securities of $14 billion, up from the $12.5 billion recorded at the end of the previous quarter.

CRM generated operating cash flow of $4.49 billion and free cash flow of $4.25 billion in the first quarter.

As of Apr 30, 2023, the current remaining performance obligation reflecting revenues under contract for the next 12 months was $24.1 billion, up 12% on a year-over-year basis. In the fiscal first quarter, the company bought back shares worth $2.1 billion. With this buyback of shares, the company has now $9.9 billion remaining under its current authorization limit of $20 billion.

Strong Guidance for Q2 and FY24

Salesforce provided strong guidance for the second quarter and fiscal 2024. For the fiscal second quarter, Salesforce projects total sales between $8.51 billion and $8.53 billion (midpoint $8.52 billion), indicating 10% year-over-year growth.

The company expects no impact on second-quarter revenues from foreign currency exchange rates. Furthermore, CRM anticipates non-GAAP earnings per share in the band of $1.89-$1.90 for the current quarter.

For fiscal 2024, Salesforce forecasts revenues in the range of $34.5-$34.7 billion. The company expects no impact from foreign currency exchange rates.

The company projects fiscal 2024 non-GAAP earnings between $7.41 and $7.43 per share. Salesforce estimates a non-GAAP operating margin of approximately 28% for fiscal 2024 and expects a year-over-year increase in operating cash flow in the 16-17% range.

Zacks Rank & Stocks to Consider

Salesforce currently has a Zacks Rank #3 (Hold). Shares of CRM have gained 26.8% over the past year.

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The Zacks Consensus Estimate for Meta Platforms' second-quarter 2023 earnings has been revised 17.6% upward to $2.87 per share over the past 30 days. For 2023, earnings estimates have moved north by 14.8% to $12.04 in the past 30 days.

META’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, missing twice, the average surprise being 15.5%. Shares of the company have climbed 40.3% in the past year.

The Zacks Consensus Estimate for Momo’s first-quarter 2023 earnings has been revised southward from 36 cents to 32 cents per share over the past 60 days. For 2023, earnings estimates have moved down by 3 cents to $1.55 in the past 60 days.

MOMO's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 31.9%. Shares of the company have jumped 31.8% in the past year.

The Zacks Consensus Estimate for ServiceNow’s second-quarter 2023 earnings has been revised northward by a penny to $2.05 per share over the past 30 days. For 2023, earnings estimates have moved up by 5 cents to $9.59 in the past 30 days.

NOW's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 10.4%. Shares of the company have inched up 14.6% in the past year.

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