Categories Analysis, Technology

Earnings Preview: Salesforce (CRM) likely to report higher Q4 revenues and profit

In 2023, the company's stock performed much better than the S&P 500 and the value nearly doubled

Customer relationship management platform Salesforce, Inc. (NYSE: CRM) will be publishing its fourth-quarter 2024 results next week, amid expectations for a year-over-year increase in revenues and earnings. Of late, the tech firm’s investments have been focused on ramping up its AI capabilities to meet the growing demand amid widespread use of AI-enabled applications.  

Salesforce’s stock has made steady gains in recent months and is currently hovering near the record highs of 2021. CRM maintained the uptrend ahead of next week’s earnings, and it looks poised to cross the $300 mark in the coming weeks and hit a new high, considering analysts’ positive estimates.  

Q4 Report Due

The company’s fourth-quarter report is expected to come on February 28, at 4:00 pm ET. Market watchers are looking for adjusted earnings of $2.09 per share for the January quarter, which represents a 24% year-over-year increase. Q4 revenues are expected to grow to $8.52 billion from $8.38 billion in the prior year quarter.

A few months ago, the Salesforce leadership had forecast Q4 earnings in the range of $2.25 per share to $2.26 per share, excluding special items. The revenue forecast is between $9.18 billion and $9.23 billion. In both cases, the midpoint of the management’s guidance is above analysts’ projections. The company has the rare distinction of beating/matching quarterly earnings estimates consistently for more than a decade.

Road Ahead

The company ended the third quarter with an impressive free cash flow of $1.37 billion, which should come in handy for investing in the business and exploring new opportunities. The company’s aggressive cost-cutting measures have started yielding the desired results, and that will drive margin growth going forward. The ongoing shift from traditional computing to accelerated computing is driving the rapid adoption of Salesforce’s Einstein platform, which is an integrated set of technologies that brings the power of AI to all of its cloud products.

From Salesforce’s Q3 2024 earnings call:

“We’ve launched Sales GPT and Slack Sales Elevate internally, and our global support team is live with Service GPT, and we’re seeing incredible results. We’ve streamlined our quoting process with automation, eliminating over 200,000 manual approvals so far this year. And, since its introduction in September, our AI-driven chatbot has autonomously resolved thousands of employee-related queries without the need for human involvement. We’re seeing great success with our products and so our customers, which is clearly reflected in the high-level engagement and participation we’re seeing in our events.”

Q3 Results

In the third quarter, adjusted net income increased to $2.11 per share from $1.40 per share in the prior year period. On an unadjusted basis, the company reported a profit of $1.22 billion or $1.25 per share for Q3, compared to $210 million or $0.21 per share in the corresponding period of 2023. Revenues grew 11% year-over-year to $8.72 billion in the October quarter when all key operating segments registered growth. The numbers also topped expectations.

CRM traded slightly lower on Friday afternoon, after opening the session higher. The stock has gained about 15% so far this year and stayed above the 12-month average.

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