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Salesforce released its Q4 earnings guidance, on the heels of its Q3 fiscal earnings report, which was short of Wall Street’s projections.
Shares of Salesforce (NYSE: CRM), a cloud-based software company, slid by more than 6% in extended trading after its earnings guidance for the fourth quarter came up short of expectations. The company’s earnings-per-share forecast for the December quarter will be between 72 and 73 cents, lower Refinitv’s 81 cents estimate.
Furthermore, Salesforce projected sales of between $7.22 billion to $7.23 billion for the fiscal fourth quarter. Again, this was below the mark set by analysts who had it at $7.24 billion for the same period.
Salesforce chief financial officer Amy Weaver explained the relatively lower fiscal fourth quarter guidance. According to Weaver, in a conference call on Tuesday, Salesforce’s merger activity was the primary reason for this. The company expects a rise in expenses within the fiscal period, a profit cut, and altered adjusted earnings. As Weaver put it:
“Our guidance continues to incorporate expense seasonality that is weighted to Q4, including investments in both our workforce and growth opportunities, and [travel and expense] expectations.”
Before this, Salesforce surpassed Wall Street expectations on both earnings and sales according to its fiscal Q3 report. The October 31st-ended period had earnings per share at $1.27 compared to the 92 cents per share consensus – a 27% increase YoY. In addition, revenue generated by the enterprise cloud computing company was $6.86 billion, versus the $6.80 billion expected by Wall Street.
Amid Fourth Quarter Guidance, Salesforce Also Effects Some Executive Shakeups
Separately, Salesforce also promoted current president and chief operating officer Bret Taylor to the role of co-CEO. Taylor will share this new designation with the company’s current CEO Marc Benioff. In a statement, Benioff welcomed the decision to lead with Taylor who has been president and COO since 2019. Furthermore, he also stated that Taylor would help lead Salesforce through “the next chapter.”
Taylor, who was also heavily involved in Salesforce’s acquisition of Slack, expressed gratitude at his new promotion. He said:
“I’m grateful that Marc and our board have put their faith in me to help lead Salesforce through our next chapter.”
In addition to all the aforementioned executive designations, Taylor would also serve as Vice Chair of the Salesforce board.
While the Slack deal cost more than $27 billion, the app has already contributed $276 million in sales to Salesforce’s Platform unit. In addition, the number of customers on Slack who spent more than $100K is up by 44% YoY. However, Slack still faces stiff competition from the Teams program of Microsoft Corp (NASDAQ: MSFT). Also, with catering to users during the lockdown, Slack ranked behind other video conferencing platforms like Zoom.
Altogether, shares of Salesforce have gained 28.4% so far this year, compared to the 23.9% of the S&P 500 index.