Salesforce Inc. raised its annual profit forecast, signaling that demand for business software is holding up in the face of macroeconomic instability. The shares rose about 6% in extended trading.
Fiscal-year earnings, excluding some items, will be $4.74 to $4.76 a share, an increase of 12 cents a share from the company’s previous forecast. Revenue will be as much as $31.8 billion, San Francisco-based Salesforce said Tuesday in a statement. Analysts, on average, estimated annual profit of $4.68 a share, according to data compiled by Bloomberg.
Salesforce, the leader in cloud-based customer management software, maintained hiring and high revenue growth through the pandemic, and expanded its products for business productivity with the $27.7 billion purchase of the messaging platform Slack. Last month, however, the company joined tech sector peers in slowing down hiring and travel to control expenses, according to a report from Insider.
In the fiscal first quarter, revenue increased 24% to $7.41 billion, beating analysts’ projections. Current remaining performance obligation -- or, contracted sales which have yet to close, which is watched by analysts as a metric of near-term demand -- grew 21% to $21.5 billion. Profit, excluding some items, was 98 cents a share, compared with analysts’ average estimate of 95 cents.
“Our financial results once again demonstrate the strength and durability of our business model,” co-Chief Executive Officer Bret Taylor said in the statement. “Salesforce has become even more strategic and relevant to our customers as we are providing them with the agility and resilience they need to drive growth and efficiency in these uncertain economic times.”
The shares climbed as high as $170.89 in extended trading after closing at $160.24 in New York. The stock has declined 37% this year amid a broad technology rout that has particularly hit software vendors. This downturn left the company undervalued, wrote Mark Murphy, an analyst at JPMorgan, in a research note ahead of earnings.
Salesforce’s 24% constant currency growth in its current remaining performance obligation is a positive development because it remained high even in the face of rising interest rates and inflation, said Anurag Rana, an analyst at Bloomberg Intelligence. “This is the power of Salesforce, where you have a very well diversified revenue stream,” Rana said in an interview.
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