Salesforce Q3 Earnings Miss Estimates, Stock Up on Upbeat Sales View

Salesforce, Inc. CRM reported mixed third-quarter fiscal 2025 results, wherein revenues surpassed the Zacks Consensus Estimate but earnings per share (EPS) missed the same. Its non-GAAP EPS of $2.41 fell short of the consensus mark of $2.43. However, the figure increased 14% year over year, 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.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.This enterprise cloud computing solution provider’s quarterly revenues of $9.41 billion increased 8% year over year and surpassed the consensus mark of $9.34 billion. The top line also improved 9% on a constant currency basis. CRM has been benefiting from resilient demand for its cloud and business software offerings in an uncertain macroeconomic environment.The third-quarter top-line performance also reflected the benefits of its go-to-market strategy and sustained focus on customer success. The initiatives to integrate generative artificial intelligence (AI) into its offerings also boosted demand for Salesforce’s solutions during the reported quarter.Despite the mixed quarterly performance, shares of the company soared 10.6% during Tuesday’s extended trading session as it raised the sales guidance for fiscal 2025. Salesforce’s shares have gained 25.9% year to date compared with the Zacks Computer – Software industry’s growth of 18.6%.Salesforce Q3 Performance in DetailsComing to CRM’s business segments, revenues from Subscription and Support (94% of total revenues) increased 9% year over year to $8.88 billion. However, Professional Services and Other (6% of total sales) revenues decreased 2.4% to $565 million. Our estimates for Subscription and Support, and Professional Services and Other segments’ revenues were pegged at $8.79 billion and $537 million, respectively.Under the Subscription and Support segment, Sales Cloud revenues grew 11% year over year to $2.12 billion. Revenues from Service Cloud also improved 10% to $2.29 billion. Marketing & Commerce Cloud revenues increased 8% to $1.33 billion. Platform & Other revenues were up 8% to $1.83 billion. The company has renamed the Data sub-segment to the Integration and Analytics division. Revenues from the Integration and Analytics division increased 5% year over year to $1.31 billion.Salesforce Inc. Price, Consensus and EPS Surprise Salesforce Inc. price-consensus-eps-surprise-chart | Salesforce Inc. QuoteOur estimates for Sales, Service, Market & Commerce, Platform & Other and Integration & Analytics services revenues were pegged at $2.03 billion, $2.24 billion, $1.29 billion, $1.79 billion and $1.45 billion, respectively.Revenues from America (66% of total revenues) grew 6% year over year to $6.22 billion. Sales in the EMEA (24%) increased 11% to $2.23 billion, while the Asia Pacific (10%) region’s revenues rose 16% to $996 million.Salesforce’s non-GAAP gross profit came in at $7.61 billion, up 9.9% year over year. Moreover, the gross margin improved 200 basis points (bps) to 81%. Non-GAAP operating income of $3.12 billion was up 14.9% from the year-ago quarter’s $2.72 billion. Moreover, the non-GAAP operating margin expanded 190 bps to 33.1% 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 DetailsSalesforce exited the fiscal third quarter with cash, cash equivalents and marketable securities of $12.76 billion, down from $12.64 billion at the end of the second quarter. CRM generated an operating cash flow of $1.98 billion and a free cash flow of $1.78 billion in the third quarter. In the first three quarters of fiscal 2025, it generated operating cash flow and free cash flow of $9.12 billion and $8.62 billion, respectively.As of Oct. 31, the current remaining performance obligation reflecting revenues under contract for the next 12 months was $26.4 billion, up 10% on a year-over-year basis. The company bought back shares worth $1.29 billion and paid $382 million in dividends during the third quarter. In the first nine months of fiscal 2025, it bought back shares worth $7.75 billion and paid $1.15 billion in dividend payments.Salesforce’s Guidance UpdateSalesforce provided guidance for the fourth quarter of fiscal 2025. It projects total sales between $9.9 billion and $10.1 billion for the aforementioned quarter, which indicates 7-9% growth from the year-ago level. The Zacks Consensus Estimate for revenues is currently pegged at $10.06 billion.The company expects a $25 million impact on fourth-quarter revenues from foreign currency exchange rates. Furthermore, CRM anticipates non-GAAP earnings per share in the band of $2.57-$2.62 for the current quarter. The consensus mark for fourth-quarter earnings is currently pegged at $2.65.For fiscal 2025, Salesforce now expects revenues in the range of $37.8-$38 billion instead of the earlier projection of $37.7-$38 billion. The consensus mark for fiscal 2025 revenues is pegged at $37.86 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.However, Salesforce lowered the fiscal 2025 non-GAAP EPS guidance range to $9.98-$10.03 from $10.03-$10.11 projected previously. The consensus mark for the bottom line currently stands at $10.09 per share. Non-GAAP operating margin is now projected to be approximately 32.9%, up from the previous guidance of 32.8%. CRM also raised the operating cash flow growth rate guidance to 24-26% from 23-25% projected earlier.Salesforce’s Zacks Rank & Stocks to ConsiderSalesforce currently carries a Zacks Rank #4 (Sell).Some better-ranked stocks in the broader technology sector are Amphenol APH, Agilysys AGYS and AudioEye AEYE. While Amphenol sports a Zacks Rank #1 (Strong Buy), Agilysys and AudioEye carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today's Zacks #1 Rank stocks here.The Zacks Consensus Estimate for Amphenol’s 2024 earnings has been revised upward by a couple of cents to $1.84 per share over the past 30 days, indicating a 21.9% increase from the year-ago quarter’s reported figure. APH's shares have gained 47.5% year to date.The Zacks Consensus Estimate for Agilysys’ fiscal 2025 earnings has moved north 9.2% over the past 60 days to $1.31 per share, indicating a 19.1% increase from the year-ago quarter’s reported figure. AGYS' shares have surged 56.7% year to date.The Zacks Consensus Estimate for AudioEye’s full-year 2024 earnings has moved north 5 cents to 52 cents per share, indicating year-over-year growth of 372.7%. AEYE's shares have skyrocketed 377.6% year to date.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Salesforce Inc. (CRM): Free Stock Analysis Report Amphenol Corporation (APH): Free Stock Analysis Report Agilysys, Inc. (AGYS): Free Stock Analysis Report Audioeye, Inc. (AEYE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks