Salesforce.com Inc. shares rose in extended trading Tuesday after the software company said it would focus on last year’s acquisition of Slack Technologies Inc. instead of considering more purchases after topping $7 billion in quarterly revenue for the first time.
Salesforce
CRM,
-0.78%
shares gained 4% after hours, following a 0.8% decline in the regular session to close at $208.89.
On the call with analysts, Marc Benioff, Salesforce chairman and co-chief executive, remarked how acquisitions like Slack and Tableau Software, its largest acquisition until Slack, have transformed the company.
“Recently, I was actually in the White House with a Fortune 100 CEO who turned to me and said, ‘I start every day with Slack,’” Benioff told analysts on the call. “And this is not a customer that we have even a big Salesforce footprint. And I said to myself, these acquisitions, they have just opened so many doors for us and transformed who we are and the conversation that we can have.”
A little over a year ago, analysts were questioning whether buying Slack was a good move for the company. Salesforce said that $592 million of its $14.19 billion in revenue from the third and fourth quarters was from Slack. The company’s $27.7 billion acquisition of Slack closed on July 21.
On the call, Co-Chief Executive Bret Taylor said Slack was the company’s focus, and that “material” M&A was not, at least in the near term.
“Slack continues to exceed our expectations in every way,” Taylor said. “It’s in the middle of it for every single one of our customer conversations.”
“It’s one of the most exciting acquisitions we’ve ever done,” Taylor told analysts. “It’s critical that we did that at that time, setting up for the future work.”
That sort of optimism helps as the company’s operating margin took a big hit in the fourth quarter, dropping to 15% from 19.8% on a sequential basis. Back in May, analysts debated whether Salesforce’s operating margins could be better after the company had forecast operating margins of 18% for the year.
For the year, margins were 18.7%. Salesforce forecast operating margins of about 20%. On the call, Chief Financial Officer Amy Weaver said M&A is expected to contribute a 100- to 125-basis-point headwind to margins.
Salesforce expects adjusted first-quarter earnings of 93 cents to 94 cents a share on revenue of $7.37 billion to $7.38 billion, while analysts surveyed by FactSet had forecast $1 a share on revenue of $7.27 billion.
For fiscal 2023, Salesforce forecasts adjusted earnings of $4.62 to $4.64 a share on revenue of $32 billion to $32.1 billion, with analysts expecting $4.76 a share on revenue of $31.78 billion.
The company reported a fiscal fourth-quarter loss of $28 million, or 3 cents a share, versus income of $267 million, or 28 cents a share, in the year-ago period. Adjusted earnings were 84 cents a share, compared with $1.04 a share in the year-ago period.
Revenue rose to $7.33 billion from $5.82 billion in the year-ago quarter.
Analysts surveyed by FactSet had estimated earnings of 75 cents a share on revenue of $7.24 billion, based Salesforce’s forecast of 72 cents to 73 cents a share on revenue of $7.22 billion to $7.23 billion.
Over the past 12 months, Salesforce shares have declined 4%, while the iShares Expanded Tech-Software Sector ETF
IGV,
-0.86%
has declined 8%, the S&P 500 index
SPX,
-1.55%
has gained 10%, the tech-heavy Nasdaq Composite Index
COMP,
-1.59%
has slid 0.4%, and the Dow Jones Industrial Average
DJIA,
-1.76%
— which counts Salesforce as a component — has gained 6%.
