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Why Is Salesforce.com (CRM) Up 7.3% Since Last Earnings Report?
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It has been about a month since the last earnings report for Salesforce.com (CRM - Free Report) . Shares have added about 7.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Salesforce.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Salesforce Surpasses Q2 Earnings and Revenue Estimates
Salesforce 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’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 guided 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 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.
For fiscal 2025, Salesforce still expects revenues in the range of $37.7-$38 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. 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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Salesforce.com has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Salesforce.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Salesforce.com is part of the Zacks Computer - Software industry. Over the past month, Intuit (INTU - Free Report) , a stock from the same industry, has gained 2.3%. The company reported its results for the quarter ended July 2024 more than a month ago.
Intuit reported revenues of $3.18 billion in the last reported quarter, representing a year-over-year change of +17.4%. EPS of $1.99 for the same period compares with $1.65 a year ago.
Intuit is expected to post earnings of $2.36 per share for the current quarter, representing a year-over-year change of -4.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Intuit has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Why Is Salesforce.com (CRM) Up 7.3% Since Last Earnings Report?
It has been about a month since the last earnings report for Salesforce.com (CRM - Free Report) . Shares have added about 7.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Salesforce.com due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Salesforce Surpasses Q2 Earnings and Revenue Estimates
Salesforce 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’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 guided 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 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.
For fiscal 2025, Salesforce still expects revenues in the range of $37.7-$38 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. 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.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
Currently, Salesforce.com has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Salesforce.com has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Salesforce.com is part of the Zacks Computer - Software industry. Over the past month, Intuit (INTU - Free Report) , a stock from the same industry, has gained 2.3%. The company reported its results for the quarter ended July 2024 more than a month ago.
Intuit reported revenues of $3.18 billion in the last reported quarter, representing a year-over-year change of +17.4%. EPS of $1.99 for the same period compares with $1.65 a year ago.
Intuit is expected to post earnings of $2.36 per share for the current quarter, representing a year-over-year change of -4.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Intuit has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.