Salesforce.com, Inc. (NYSE:CRM) shares added more than 4% to $223.89 Thursday after the company’s fiscal second-quarter results surpassed expectations, and prompted an upgrade to guidance.
The cloud software company posted earnings of $2.12 per share on revenue of $8.6 billion, beating Street expectations of $1.90 per share and 8.53 billion.
Specifically, Salesforce delivered growth in all five of its product categories, with Data Cloud continuing to be the company's fastest-growing organic product, according to CEO Marc Benioff. MuleSoft, an automation and integration company, also saw significant growth, the company said.
Margins were 31.6% in the quarter, beating the Street estimate of 28%, which the company attributed to cost savings from restructuring, core strength and timing.
Salesforce also issued third-quarter guidance of $2.05 to $2.06 in adjusted earnings per share on $8.7 billion to $8.72 billion in revenue. That topped analyst expectations of $1.83 per share and $8.66 billion in revenue.
For the full year, Salesforce raised its forecast to between $8.04 and $8.06 in adjusted earnings on revenue between $34.7 billion to $34.8 billion from $7.41 to $7.43 and $34.5 billion to $34.7 billion, respectively. Its new guidance would suggest 11% revenue growth.
Going forward, Salesforce plans to double down on AI investment to improve its top-line growth.
“We are very thirsty to make sure that Salesforce is the No. 1 AI CRM, and we have done a lot organically to do that in the last six months,” Benioff told analysts on the company's earnings call.
That has the potential to drive Salesforce's margins even higher, according to analysts at Jeffries. The firm issued a Buy rating and $275 price target for the stock.
"We believe that there is room to deliver more as CRM's margins of 30% are still lower than comps in the high 30s," the analysts said.
Or, as CFO Amy Weaver put it, "30% is the floor, not the ceiling."
Meanwhile, Wedbush analysts said these Salesforce results "put the bears back in the cave."
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
Follow him on Twitter @andrew_kessel