Shares in Salesforce surged on October-quarter earnings that topped estimates as cost cutting improved profit margins while revenue met views. Guidance for CRM stock came in above expectations amid the software maker's big gains in 2023.
The software maker reported third-quarter earnings after the market close on Wednesday. For the quarter ended Oct. 31, Salesforce earnings jumped 51% to $2.11 per share on an adjusted basis. San Francisco-based Salesforce also said revenue climbed 11% to $8.72 billion.
"On the top line, constant-currency revenue growth of 10% was about in line with expectations," said William Blair analyst Arjun Bhatia in a report. "However, the company noted that it is starting to see some green shoots surface in terms of customer interest in generative AI, pipeline trends and relatively healthy top-of-funnel activity."
CRM stock analysts expected Salesforce to report earnings of $2.05 a share on sales of $8.715 billion.
On the stock market today, Salesforce stock climbed 9.4% to close at 251.90.
Salesforce Stock: Key Metric Tops Views
A key financial metric, current remaining performance obligations, known as CRPO bookings, topped views. In Q3, CRPO rose 14% to $23.9 billion vs. estimates of $23.22 billion. CRPO bookings are an aggregate of deferred revenue and order backlog.
"Management attributed the outperformance to strong early renewals as well as a large deal booked in Q3, which we think was Amazon.com," said TD Cowen analyst Derrick Wood in a report.
For the current quarter ending in October, Salesforce projected revenue in the range of $91.18 billion to $9.23 billion vs. estimates of $9.22 billion.
Activist investors pressured management to improve margins by cutting costs.
"Over the last year we have transformed the company, enabling us to deliver another quarter of strong profitable growth with GAAP operating margin of 17.2% and non-GAAP operating margin of 31.2%," Chief Financial Officer Amy Weaver said in a statement.
Before the Salesforce earnings release, CRM stock was up about 70% thus far in 2023.
Salesforce offers access to business software applications based on 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 91 out of a best-possible 99, according to IBD Stock Checkup.
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