Salesforce stock jumps on Q2 earnings beat, strong FY20 guidance

Enterprise software company Salesforce (NYSE: CRM) reported a decline in second-quarter earnings, despite a 22% increase in revenues. The results, however, topped the Street view, driving the stock sharply higher during Thursday’s after-hours session. The company also revised up its full-year revenue guidance.

Revenues of the San Francisco-based cloud service provider were $4.0 billion in the second quarter, up 22% from last year and slightly above analysts’ consensus estimate. Subscription and support revenues rose 22% year-over-year, while professional services and other revenues advanced 14%. At $25.3 billion, Remaining Performance Obligation was up 20% year-over-year.

The Bottomline

Adjusted earnings dropped to $0.66 per share from $0.71 per share in the second quarter of last year, but came in above the market’s prediction. Unadjusted profit fell sharply to $91 million or $0.11 per share in the July-quarter from $299 million or $0.39 per share last year.

Also read: Cisco Q4 profit beats Street view

“Following an outstanding quarter, we’re raising our FY20 revenue guidance to $16.9 billion at the high-end of the range. With our Customer 360 vision, Einstein AI and the millions of Trailblazers innovating on our platform, Salesforce has never been better positioned for the future,” said CEO Marc Benioff.

Outlook

Encouraged by the above-consensus results, the management revised up its full-year revenue guidance to the range of $16.75 billion $16.90 billion, representing an annual growth of about 27%. The guidance for adjusted earnings is between $2.82 per share and $2.84 per share. Unadjusted profit is forecast to be in the range of $0.28 per share to $0.30 per share.

For the third quarter, the company expects adjusted earnings per share of $0.65 to $0.66. On a reported basis, it is looking for a loss in the range of $0.21 per share to $0.20 per share. October-quarter revenues are estimated to be between $4.44 billion and $4.45 billion.

Tableau Deal

The recent acquisition of Tableau Software for around $16 billion, the biggest ever by Salesforce, failed to impress the market and the stock is yet to recover from the post-buyout selloff. There are concerned that the aggressive expansion drive could negatively impact the company’s core business of cloud service.

Related: Salesforce Q1 2020 Earnings Conference Call Transcript

The shares moved up about 9% so far this year. They have been losing momentum after climbing to an all-time high a few months ago. The stock closed Thursday’s regular session slightly higher and gained further during the extended session.

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