Salesforce Projects Revenue Topping Estimates, Easing Fears

Salesforce Inc. gave a revenue and profit forecast for the current quarter that topped analysts’ estimates, signaling progress in its campaign to cut costs following a push by activist investors over the past year. The shares jumped about 5% in extended trading.

(Bloomberg) — Salesforce Inc. gave a revenue and profit forecast for the current quarter that topped analysts’ estimates, signaling progress in its campaign to cut costs following a push by activist investors over the past year. The shares jumped about 5% in extended trading.

Sales will be about $8.71 billion in the period ending in October, the software company said Wednesday in a statement. Analysts, on average, projected $8.66 billion, according to data compiled by Bloomberg. Current remaining performance obligations, a measure of contracted sales, will grow just more than 11%, meeting analysts’ estimates.

Salesforce, the market leader in software that helps companies manage their customer relations, has been newly focused on expanding its profit margins, a campaign that was hastened earlier this year by the emergence of multiple activist investors. Most of the activists have cut their positions in Salesforce following a steep share gain, Rishi Jaluria, an analyst at RBC Capital Markets, wrote ahead of the results. Though Wall Street was been pleased by the profit focus, slowing sales growth for a company used to gains of 20% to 30% a quarter has provided new anxiety.

The company also raised its outlook for fiscal-year sales to a high of $34.8 billion, from $34.7 billion, and its operating margin to 30% from 28%, “based on our performance and what we see in the back half of the year,” Chief Executive Officer Marc Benioff said in the statement.

“In the beginning of the year — I think we forget, there were three activists and it seemed like Marc Benioff’s job was on the line,” Pat Walravens, an analyst at JMP Securities, said in an interview with Bloomberg TV. “Now he has had two good quarters — he has good things in front of him.”

Salesforce took multiple steps in the quarter toward reigniting revenue growth. In June, it announced a suite of new artificial intelligence features that will cost roughly $7,200 per user each year, and in July followed with the first price increase in seven years. The company is also working to make Slack and Tableau relevant for more of its existing customers. Salesforce also recently promoted Chief Operating Officer Brian Millham to oversee a larger swath of the company and appointed a new chief revenue officer, Miguel Milano.

In the fiscal second quarter, which ended July 31, revenue increased 11% to $8.6 billion, compared with the $8.53 billion average projected by analysts. Profit, excluding some items, was $2.12 a share. Analysts, on average, estimated $1.90. Operating margin was 31.6%.

Shares rose to a high of $230.33 in extended trading after closing at $215.04 in New York. While the stock has jumped 62% this year through Wednesday’s close, it has dropped about 4% since Salesforce’s last earnings report on May 31, lagging behind most of its peers.

(Updates with comments from analyst in the fifth paragraph.)

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