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Salesforce, Inc.’s (CRM - Free Report) second-quarter fiscal 2025 non-GAAP earnings per share (EPS) increased 21% to $2.56 from $2.12 in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of $2.35. The robust year-over-year growth was driven by higher sales and the benefits of ongoing cost-restructuring initiatives, which include the trimming of the workforce and a reduction in office spaces.
This enterprise cloud computing solution provider’s quarterly revenues of $9.33 billion increased 8% year over year and surpassed the consensus mark of $9.23 billion. The top line also improved 9% at constant currency. CRM has been benefiting from resilient demand for its cloud and business software offerings in an uncertain macroeconomic environment.
The second-quarter top-line performance also reflected the benefits of its go-to-market strategy and sustained focus on customer success. The initiatives to integrate artificial intelligence into its offerings, like Slack and the launch of a generative AI-enabled Einstein GPT product, also boosted demand for Salesforce’s solutions during the reported quarter.
Salesforce raised its EPS guidance for fiscal 2025 based on the strong second-quarter results and go-to-market momentum.
Salesforce’s shares have declined 1.7% year to date compared to the Zacks Computer – Software industry’s rise of 9.3%. We expect strong second-quarter results and the raised profit guidance to help Salesforce shares recover in the near term.
Coming to CRM’s business segments, revenues from Subscription and Support (94% of total revenues) increased 9.5% year over year to $8.76 billion. However, Professional Services and Other (6% of total sales) revenues decreased 6% to $561 million. Our estimates for Subscription and Support, and Professional Services and Other segments’ revenues were pegged at $8.64 billion and $585.8 million, respectively.
Under the Subscription and Support segment, Sales Cloud revenues grew 9.3% year over year to $2.07 billion. Revenues from Service Cloud also improved 10.1% to $2.26 billion. Marketing & Commerce Cloud revenues increased 5.7% to $1.31 billion. Platform & Other revenues were up 9% to $1.79 billion. The company has renamed the Data sub-segment to the Integration and Analytics division. Revenues from the Integration and Analytics division increased 13.2% year over year to $1.34 billion.
Our estimates for Sales, Service, Market & Commerce, Platform & Other and Integration & Analytics services revenues were pegged at $2 billion, $2.21 billion, $1.29 billion, $1.75 billion and $1.39 billion, respectively.
Revenues from America (66% of total revenues) grew 7.5% year over year to $6.2 billion. Sales in the EMEA (23%) increased 10.6% to $2.18 billion, while the Asia Pacific (11%) region’s revenues rose 9.3% to $940 million.
Salesforce’s non-GAAP gross profit came in at $7.53 billion, up 9.9% year over year. Moreover, the gross margin improved 110 basis points (bps) to 80.7%. Non-GAAP operating income of $3.14 billion was up 15.5% from the year-ago quarter’s $2.72 billion. Moreover, the non-GAAP operating margin expanded 210 bps to 33.7% due to an improvement in the gross margin and benefits from cost restructuring initiatives, including the trimming of the workforce and a reduction in office spaces.
Salesforce’s Balance Sheet & Other Details
Salesforce exited the fiscal second quarter with cash, cash equivalents and marketable securities of $12.64 billion, down from $17.7 billion at the end of the first quarter. CRM generated an operating cash flow of $892 million and a free cash flow of $755 million in the second quarter. In the first half of fiscal 2025, it generated operating cash flow and free cash flow of $7.14 billion and $6.84 billion, respectively.
As of July 31, the current remaining performance obligation reflecting revenues under contract for the next 12 months was $26.5 billion, up 10% on a year-over-year basis. The company bought back shares worth $4.34 billion and paid $384 million in dividends during the second quarter. In the first half of fiscal 2025, it bought back shares worth $6.47 billion and paid $772 million in dividend payments.
Guidance Update
Salesforce provided guidance for the third quarter of fiscal 2025. It projects total sales between $9.31 billion and $9.36 billion for the aforementioned quarter, which indicates 7% growth from the year-ago level. The Zacks Consensus Estimate for revenues is currently pegged at $9.41 billion.
The company expects no impact on third-quarter revenues from foreign currency exchange rates. Furthermore, CRM anticipates non-GAAP earnings per share in the band of $2.42-$2.44 for the current quarter. The consensus mark for third-quarter earnings is currently pegged at $2.42.
For fiscal 2025, Salesforce still expects revenues in the range of $37.7-$38 billion. The consensus mark for fiscal 2025 revenues is pegged at $37.82 billion.
It continues to anticipate foreign currency exchange rates to negatively impact its fiscal 2025 revenues by $100 million. It still anticipates Subscription and Support revenues to increase slightly below 10% on a year-over-year basis and approximately 10% on a constant currency basis.
Salesforce raised the fiscal 2025 non-GAAP earnings guidance range to $10.03-$10.11 per share from $9.86-$9.94 per share projected previously. The consensus mark for the bottom line currently stands at $9.90. Non-GAAP operating margin is now projected to be approximately 32.8%, up from the previous guidance of 32.5%. CRM also raised the operating cash flow growth rate guidance to 23-25% from 21-24% projected earlier.
Zacks Rank & Stocks to Consider
Salesforce currently carries a Zacks Rank #4 (Sell).
The consensus mark for Aspen’s 2025 earnings has been revised upward by 70 cents to $7.43 per share over the past 30 days, indicating a 12.8% year-over-year increase. AZPN has a long-term earnings growth expectation of 13.1%. The stock has lost 0.3% year to date.
The Zacks Consensus Estimate for Celestica’s 2024 earnings has been revised upward by 33 cents to $3.65 per share in the past 60 days, suggesting year-over-year growth of 50.2%. Shares of CLS have surged 70.7% year to date.
The Zacks Consensus Estimate for Arista’s 2024 earnings has been revised upward by 30 cents to $8.24 per share in the past 30 days, indicating an increase of 18.73% on a year-over-year basis. Shares of ANET have jumped 44.8% year to date. It has a long-term earnings growth expectation of 17.2%.
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Salesforce's Q2 Earnings Beat: Can Upbeat Profit View Lift CRM Stock?
Salesforce, Inc.’s (CRM - Free Report) second-quarter fiscal 2025 non-GAAP earnings per share (EPS) increased 21% to $2.56 from $2.12 in the year-ago quarter. The figure also surpassed the Zacks Consensus Estimate of $2.35. The robust year-over-year growth was driven by higher sales and the benefits of ongoing cost-restructuring initiatives, which include the trimming of the workforce and a reduction in office spaces.
This enterprise cloud computing solution provider’s quarterly revenues of $9.33 billion increased 8% year over year and surpassed the consensus mark of $9.23 billion. The top line also improved 9% at constant currency. CRM has been benefiting from resilient demand for its cloud and business software offerings in an uncertain macroeconomic environment.
The second-quarter top-line performance also reflected the benefits of its go-to-market strategy and sustained focus on customer success. The initiatives to integrate artificial intelligence into its offerings, like Slack and the launch of a generative AI-enabled Einstein GPT product, also boosted demand for Salesforce’s solutions during the reported quarter.
Salesforce raised its EPS guidance for fiscal 2025 based on the strong second-quarter results and go-to-market momentum.
Salesforce’s shares have declined 1.7% year to date compared to the Zacks Computer – Software industry’s rise of 9.3%. We expect strong second-quarter results and the raised profit guidance to help Salesforce shares recover in the near term.
Salesforce Inc. Price, Consensus and EPS Surprise
Salesforce Inc. price-consensus-eps-surprise-chart | Salesforce Inc. Quote
Salesforce’s Second-Quarter Details
Coming to CRM’s business segments, revenues from Subscription and Support (94% of total revenues) increased 9.5% year over year to $8.76 billion. However, Professional Services and Other (6% of total sales) revenues decreased 6% to $561 million. Our estimates for Subscription and Support, and Professional Services and Other segments’ revenues were pegged at $8.64 billion and $585.8 million, respectively.
Under the Subscription and Support segment, Sales Cloud revenues grew 9.3% year over year to $2.07 billion. Revenues from Service Cloud also improved 10.1% to $2.26 billion. Marketing & Commerce Cloud revenues increased 5.7% to $1.31 billion. Platform & Other revenues were up 9% to $1.79 billion. The company has renamed the Data sub-segment to the Integration and Analytics division. Revenues from the Integration and Analytics division increased 13.2% year over year to $1.34 billion.
Our estimates for Sales, Service, Market & Commerce, Platform & Other and Integration & Analytics services revenues were pegged at $2 billion, $2.21 billion, $1.29 billion, $1.75 billion and $1.39 billion, respectively.
Revenues from America (66% of total revenues) grew 7.5% year over year to $6.2 billion. Sales in the EMEA (23%) increased 10.6% to $2.18 billion, while the Asia Pacific (11%) region’s revenues rose 9.3% to $940 million.
Salesforce’s non-GAAP gross profit came in at $7.53 billion, up 9.9% year over year. Moreover, the gross margin improved 110 basis points (bps) to 80.7%. Non-GAAP operating income of $3.14 billion was up 15.5% from the year-ago quarter’s $2.72 billion. Moreover, the non-GAAP operating margin expanded 210 bps to 33.7% due to an improvement in the gross margin and benefits from cost restructuring initiatives, including the trimming of the workforce and a reduction in office spaces.
Salesforce’s Balance Sheet & Other Details
Salesforce exited the fiscal second quarter with cash, cash equivalents and marketable securities of $12.64 billion, down from $17.7 billion at the end of the first quarter. CRM generated an operating cash flow of $892 million and a free cash flow of $755 million in the second quarter. In the first half of fiscal 2025, it generated operating cash flow and free cash flow of $7.14 billion and $6.84 billion, respectively.
As of July 31, the current remaining performance obligation reflecting revenues under contract for the next 12 months was $26.5 billion, up 10% on a year-over-year basis. The company bought back shares worth $4.34 billion and paid $384 million in dividends during the second quarter. In the first half of fiscal 2025, it bought back shares worth $6.47 billion and paid $772 million in dividend payments.
Guidance Update
Salesforce provided guidance for the third quarter of fiscal 2025. It projects total sales between $9.31 billion and $9.36 billion for the aforementioned quarter, which indicates 7% growth from the year-ago level. The Zacks Consensus Estimate for revenues is currently pegged at $9.41 billion.
The company expects no impact on third-quarter revenues from foreign currency exchange rates. Furthermore, CRM anticipates non-GAAP earnings per share in the band of $2.42-$2.44 for the current quarter. The consensus mark for third-quarter earnings is currently pegged at $2.42.
For fiscal 2025, Salesforce still expects revenues in the range of $37.7-$38 billion. The consensus mark for fiscal 2025 revenues is pegged at $37.82 billion.
It continues to anticipate foreign currency exchange rates to negatively impact its fiscal 2025 revenues by $100 million. It still anticipates Subscription and Support revenues to increase slightly below 10% on a year-over-year basis and approximately 10% on a constant currency basis.
Salesforce raised the fiscal 2025 non-GAAP earnings guidance range to $10.03-$10.11 per share from $9.86-$9.94 per share projected previously. The consensus mark for the bottom line currently stands at $9.90. Non-GAAP operating margin is now projected to be approximately 32.8%, up from the previous guidance of 32.5%. CRM also raised the operating cash flow growth rate guidance to 23-25% from 21-24% projected earlier.
Zacks Rank & Stocks to Consider
Salesforce currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Aspen Technology (AZPN - Free Report) , Celestica (CLS - Free Report) and Arista Networks (ANET - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The consensus mark for Aspen’s 2025 earnings has been revised upward by 70 cents to $7.43 per share over the past 30 days, indicating a 12.8% year-over-year increase. AZPN has a long-term earnings growth expectation of 13.1%. The stock has lost 0.3% year to date.
The Zacks Consensus Estimate for Celestica’s 2024 earnings has been revised upward by 33 cents to $3.65 per share in the past 60 days, suggesting year-over-year growth of 50.2%. Shares of CLS have surged 70.7% year to date.
The Zacks Consensus Estimate for Arista’s 2024 earnings has been revised upward by 30 cents to $8.24 per share in the past 30 days, indicating an increase of 18.73% on a year-over-year basis. Shares of ANET have jumped 44.8% year to date. It has a long-term earnings growth expectation of 17.2%.