Shares in Salesforce rose Thursday on July-quarter earnings and revenue that topped estimates as cost cutting spurred by activist investors improved the company's margins. Other key metrics for CRM stock came in above expectations.
The software maker reported second-quarter earnings after the market close on Wednesday. For the quarter ended July 31, Salesforce earnings jumped 78% to $2.12 per share on an adjusted basis. San Francisco-based Salesforce also said revenue climbed 11% to $8.6 billion.
CRM stock analysts expected Salesforce to report earnings of $1.90 a share on sales of $8.53 billion. A year earlier, Salesforce reported profit of $1.19 a share on sales of $7.72 billion. Operating margins came in at 31.6% versus estimates of 28.3%.
"CRM delivered another impressive margin quarter, showing it has been able to take out cost layers without material sales disruption," TD Cowen analyst Derrick Wood said in a note to clients. "This execution to reaching 30% (operating) margins has driven strong returns, but we see a need for better top line to drive valuations from here."
Salesforce stock climbed 3% to close at 221.46 on the stock market today.
"With operating margin exceeding 30% for the first time, CRM surpassed the goal it set to achieve in fiscal Q1 2025," Goldman Sachs analyst Kash Rangan said in his note to clients. "Despite a greater level of reinvestment in generative artificial intelligence, we expect profitability to sustain 30% levels in as management extracted significant cost savings from the workforce restructuring conducted earlier this year."
Salesforce Stock: Key Metric Tops Views
A key financial metric, current remaining performance obligations, known as CRPO bookings, topped views. CRPO rose 12% to $24.1 billion versus estimates of $23.67 billion. CRPO bookings are an aggregate of deferred revenue and order backlog.
For the current quarter ending in October, Salesforce projected profit of $2.05 per share, well ahead of estimates of $1.84 per share. The company predicted revenue of $8.71 billion for CRM stock, topping estimates of $8.67 billion.
Before the Salesforce earnings release, CRM stock had advanced about 59% thus far in 2023.
Salesforce sells software under a subscription model. Its software helps businesses organize and handle sales operations and customer relationships. In addition, the company has expanded into marketing, customer services and e-commerce.
Meanwhile, CRM stock owns a Relative Strength Rating of 87 out of a best-possible 99, according to IBD Stock Checkup.
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