Salesforce is currently the market leader in the customer relationship management (CRM) space. Their upcoming earnings report, scheduled for release at 4:00 pm New York time on Wednesday, 29 November, is anticipated to offer crucial insights into both the company's performance and the overall direction of the CRM software-as-a-service technology sector.
What to expect?
According to Bloomberg, Salesforce’s third-quarter revenue is expected to rise to 8.71 billion USD from 8.6 billion USD last quarter, while earnings per share (EPS) is expected to fall from 2.12 USD in the last quarter to 2.07 USD.
This year, Salesforce has committed to optimising its operational efficiency through cost-cutting measures aimed at enhancing profit margins. This initiative involved a 10% decrease in its workforce, impacting over 7,000 employees, coupled with a reduction in office space. Investors will be closely monitoring the ongoing effectiveness of this restructuring plan on the company’s operating margins.
Simultaneously, as artificial intelligence gains prominence in the technology sector, investors are keenly assessing the impact of Salesforce's AI integrations on performance and profits while eagerly anticipating any forward guidance provided.
Second quarter results
In the second quarter of this year, Salesforce announced results and guidance that surpassed Wall Street’s expectations. Earnings came in at 2.12 USD per share, beating the anticipated 1.90 USD by Bloomberg, while revenue was reported at 8.60 USD billion, which exceeded Bloomberg’s 8.53 USD billion expectation.
Following the Q2 report, CEO Marc Benioff highlighted the company's position as the leading AI CRM, integrating industry-leading clouds such as Einstein, Data Cloud, MuleSoft, Slack, and Tableau on a “trusted, unified platform”.
Shares jumped 6% in extended trading after the release.
Share price dynamics
Despite Salesforce's impressive 62% year-to-date stock growth, the shares, currently trading around 224 USD at the time of writing (Monday, 27 Nov), have been constrained within a 50 USD range over the last six months. This is significantly lower than their November 2021 high of over 309 USD.
However, with a relatively high price-to-earnings ratio of 67.67, coupled with the absence of shareholder dividend payments and heightened competition in the CRM industry from major players like Microsoft, Oracle, SAP, and Zendesk, investors are urged to carefully consider the various factors influencing the stock's performance.
Salesforce’s third-quarter earnings report will likely offer insights into the company’s trajectory and the broader CRM sector. Traders should keep an eye on key indicators including whether Salesforce exceeds market expectations in EPS and revenue and the guidance provided for future growth, particularly in the AI space.
Trading is risky. Past performance is not indicative of future results. It is recommended to do your own research prior to making any trading decisions.
The information contained in this blog article is for educational purposes only and is not intended as financial or investment advice.
This information is considered accurate and correct at the date of publication. Changes in circumstances after the time of publication may impact the accuracy of the information.
