Salesforce Inc. did what it needed to do with its latest earnings report, as the company boosted its margin outlook while keeping its revenue forecast intact.
The margin upside was key as Salesforce has been reorienting its narrative more around profits. Meanwhile, some analystsfeared another cut to Salesforce ’ s revenue outlook, so the company ’ s ability to maintain its full-year view for subscription and support sales came as a relief during a challenging period in the software sector.
Shares rose 5% in premarket trading Thursday following the results.
Salesforce ’ s new outlook for full-year adjusted operating margins is 32.8%, and the company now expects 23% to 25% growth in operating cash flow. Meanwhile, Salesforce continues to expect slightly less than 10% revenue growth for its subscription and support category.
"We continue to deliver disciplined, profitable growth, and this quarter, operating margins closed at record highs, with GAAP operating margin of 19.1%," Chief Financial Officer Amy Weaver said in a statement.
Salesforce noted that Weaver plans to step down from her roles as CFO and president. She ’ ll stay as CFO until a successor is appointed and work as an adviser to Salesforce after that.
Evercore ISI analyst Kirk Materne said that Salesforce delivered a "solid ‘ bounce-back ’ quarter" containing no real surprises.
"We believe leaving the [ fiscal-year ] guide unchanged and slightly lowering the bar for [ the fiscal third quarter ] was a smart move, especially when offset by a modest [ 30-basis-point ] bump to the margin outlook," he said.
Salesforce ’ s revenue view for the fiscal third quarter calls for $9.31 billion to $9.36 billion, while analysts were modeling $9.40 billion. That would mark 7% growth.
For the fiscal second quarter, Salesforce posted $9.33 billion in revenue, up 8% from a year before. Subscription and support revenue was $8.76 billion, up 9% from a year earlier. Analysts tracked by FactSet were modeling $9.21 billion and $8.68 billion, respectively.
Net income for the quarter was $1.43 billion, or $1.47 a share, compared with $1.27 billion, or $1.28 a share, in the year-earlier period. On an adjusted basis, Salesforce delivered $2.56 in earnings per share, compared with $2.12 a year prior. Analysts were expecting $2.35.
Salesforce returned $4.3 billion to shareholders in the form of stock buybacks during the latest quarter, along with about $400 million from dividends.
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