Salesforce (CRM) shares leaped higher Wednesday after the enterprise software group posted stronger-than-expected first quarter earnings and boosted its near-term profit forecast.
Salesforce said its sees full-year profits in the region of $4.75 per share, around 12 cents ahead of its prior estimate, following non-GAAP profits of 98 cents per share over the three months ending in April, topping the Street consensus forecast of 94 cents, as demand for its work-flow solutions, particularly from companies looking to incorporate hybrid work, continues to grow.
Group revenues were up 24% to $7.41 billion, the company said, but noted that foreign exchange headwinds, thanks to the strongest U.S. dollar in two decades, would likely keep second quarter revenues in the region of $7.69 billion to $7.7 billion, and full-year revenues muted at between $31.7 billion and $31.8 billion.
Operating margins improved 260 basis points from the previous quarter, to 17.6%, but were down from 20.2% compared to last year thanks in part to higher wage costs. Still, Salesforce said the overall tally would improve to 20.4% for the current fiscal year.
"While there is uncertainty in the macroenvironment, our customers are continuing to come to Salesforce to transform their businesses," said CFO Amy Weaver. "The demand we are seeing from our customers is a testament to the strength of these strategic relationships and the relevance of our product portfolio."
"This gives us confidence in the durability of our business model, and we're excited to help our customers navigate in this changing economy," she added.
Salesforce shares were marked 12.6% higher in early Wednesday trading to change hands at $180.40 each, a move that would still leave the stock down 28% for the year.
JMP Securities analyst Patrick Walravens, who carries a 'market perform' rating with a $250 price target on the stock, called the quarter "perfectly respectable", given the currency headwinds, adding that he sees potential merger targets for Salesforce that include Zoom Video Communications (ZM), DocuSign (DOCU) and Okta (OKTA).
"Overall, we continue to like Salesforce for several reasons, including: a clear long-term goal to be the number one enterprise applications company with $50 billion in revenue by 2026 and a strong product vision and leadership in the form of founder and co-CEO Marc Benioff and co-CEO Bret Taylor," he said, adding to that list a "large market opportunity estimated to reach $248 billion by C2025; and improving operational efficiency including some recent spending controls that drive operating margin improvements."
