Categories AlphaGraphs, Earnings, Technology

Salesforce reports Q1 earnings beat, lifts full-year outlook

Salesforce (NYSE: CRM) stock surged about 2% after the bell as the first quarter results surpassed estimates. In addition, the company also raised its full-year guidance. The company touched a new 52-week high of $167 mark post the strong fourth quarter results. However, the stock fell when the outlook came in below estimates. In 2019, the share price has increased by about 9%.

Revenue rose 24% to $3.74 billion and adjusted EPS came in at 93 cents, up 25.7% from the prior year. Thanks to strong growth across all service segments, the customer relationship management (CRM) giant continues to report double-digit growth, continuing the momentum from the last quarter. First quarter results beat estimates on both the top and bottom line.

Last quarter, the company was expecting revenue of $3.67-3.68 billion and adjusted earnings of $0.60-0.61 per share. Analysts were anticipating sales of $3.68 billion and EPS of $0.61, which was at the high-end range of the guidance provided by the firm.

Salesforce Q1 2020 earnings infographic

Q2 Outlook

Salesforce is anticipating revenue to be between $3.94-3.95 billion, up 20% from last year and adjusted earnings per share to come in the range of $0.46-0.47.

The street estimates sales of $3.94 billion and adjusted earnings of $0.66 per share. The drop in earnings outlook is mainly due to the $200 million impact, which is a one-time charge, on earnings relating to a reseller termination.

Fiscal 2020 Outlook

The company has raised the full-year outlook it had provided in the fourth quarter. Revenue is now expected in the range of $16.10-16.25 billion and adjusted EPS to be between $2.88 and $2.90. In the Q4 period, it had guided sales to come in the range of $15.95-16.05 billion and earnings of $2.74-2.76 per share.

Analysts are expecting a top line of $16.1 billion and earnings of $2.69 per share. The revenue outlook provided by the company is in line with the estimates, while earnings projections are better than street expectations.

Service Offerings Update

Thanks to strong customer adoption and demand for all service offerings, Salesforce recorded growth across the board. Sales, services and marketing services recorded double-digit growth in the quarter. But the most important service offering “salesforce platform and other” where the MuleSoft deal is part of reported strongest growth of 46%, which is a good sign for investors.

With more companies starting to glean insights from their huge repository of data stored across various platforms and formats, the data integration capability of MuleSoft is going to be a game-changer for Salesforce in the upcoming years which would further improve profitability.

The CRM firm has been augmenting its AI-based Einstein platform to help its clients make informed decisions using the platform which improves the overall customer experience.

Ambitious Targets

One important update which stood out from the management last quarter was the revenue target stats. Salesforce expects to double the revenues to $26-28 billion by the fiscal 2023 period (calendar year 2022) from $13.28 billion in 2018.

The most surprising fact to note is that the CRM pioneer is confident of achieving this target organically. This gives a strong signal to the investors that there is still enough ammunition left in its arsenal to take on the competition and improve its service offerings to its clients and stay ahead of the curve.

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