Salesforce Inc. executives predicted record adjusted earnings in the second quarter and increased their guidance for record profit for the full year Wednesday, but shares still declined more than 4% in after-hours trading.
Salesforce CRM has easily been the biggest gainer among Dow Jones Industrial Average DJIA components this year, increasing more than 65% amid a wave of activist-investor activity and Chief Executive Marc Benioff’s pivot from focusing on revenue growth to expanding profit margins with layoffs and other cost-cutting. The change in strategy has arrived after a pandemic revenue surge dissipated, as corporate customers look to moderate their spending on cloud software.
Executives guided for second-quarter adjusted earnings of $1.89 to $1.90 a share on revenue of $8.51 billion to $8.53 billion, and increased their full-year adjusted-earnings forecast to range of $7.41 to $7.43, after guiding for $7.12 to $7.14 three months ago. Analysts on average were expecting second quarter adjusted earnings of $1.70 a share on revenue of $8.5 billion, according to FactSet. Salesforce has never reported adjusted earnings higher than $1.
“Customers are taking a more measured approach to spending plans over the next two years compared to the last two, with nearly 90% of survey participants planning to maintain or slow the growth rate of their Salesforce relationship,” Stifel analysts wrote late last week regarding a survey of Salesforce customers, while maintaining a $240 price target and buy rating.