(Bloomberg) — Salesforce Inc. gave a lackluster annual sales forecast, but investors are pleased with the company’s continued profitability, first-ever dividend and increased share buybacks.
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Revenue will rise about 9% to as much as $38 billion in the year ending January 2025, the San Francisco-based company said in a statement on Wednesday. Profit, excluding some items, will be $9.68 to $9.76 per share. Analysts on average had estimated earnings of $9.63 per share on revenue of $38.6 billion, according to data compiled by Bloomberg.
Adjusted operating margin will be 32.5% in the fiscal year, the company said. That’s better than the 31.4% margin expected by Wall Street. The expansion of the metric is possible even as the company spends on artificial intelligence due to “continued cost discipline,” wrote Tyler Radke, an analyst at Citigroup Inc., ahead of the results. Last month, Salesforce laid off about 700 workers as part of its continued focus on cutting costs.
Now that Salesforce has cut costs and improved profitability over the past year, investors have turned their attention to the company’s revenue growth, which has slowed as many corporations cut back on their software spending. Salesforce, like many tech companies, is investing in new AI-based features to boost sales of its customer relationship management software. On Tuesday, it launched a copilot feature that uses generative artificial intelligence to answer questions and create new content.
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Salesforce presented the outlook for subscription and support revenue — which is expected to grow more than 10% in fiscal 2025 — to say that most of its business is still growing in the double digits, said Mike Spencer, executive vice president of investor relations. . “It’s even before artificial intelligence,” Spencer said, noting that the takeoff from new features will take longer to show up in results.
Shares initially fell about 5% in extended trading, but clawed back most of the decline and were down 1% at 6:50 p.m. in New York. The stock closed at $299.77 and has jumped 83% over the past 12 months.
Salesforce announced its first quarterly dividend of 40 cents per share payable on April 11 to shareholders since March 14. The company also increased its share buyback program by $10 billion to a total of $30 billion.
“We recognize that the sustainability of growth remains a key discussion for investors, but we should not overlook the significant shareholder actions” that Salesforce has taken over the past two years, Brian Peterson, an analyst at Raymond James, wrote after the results were released.
The company is also adjusting sales methods and pricing. This week it replaced some online product bundles with more expensive options, according to archived copies of its website hosted by the Wayback Machine. Price increases — like the one announced in July 2023 — could help buffet growth in 2024, BMO Capital Markets analyst Keith Bachman wrote.
In the fiscal fourth quarter, which ended Jan. 31, revenue rose 11% to $9.29 billion. Profit, excluding some items, was $2.29 per share. Analysts on average had estimated earnings of $2.27 per share on revenue of $9.22 billion. Salesforce reported an adjusted operating margin of 31.4%, in line with estimates.
The integration and analytics unit, which includes data cloud, Tableau and MuleSoft products, had sales of $1.63 billion, compared with the $1.5 billion expected by analysts. CEO Marc Benioff said the data cloud is the fastest-growing organic product in the company’s history.
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