Market Insider

Salesforce drops more than 4% after disappointing 3Q guidance

Salesforce CEO Marc Benioff
Robert Galbraith | Reuters

Shares of Salesforce.com dropped more than 4 percent Thursday after the company reported disappointing guidance for its current quarter.

Late Wednesday, the cloud tech company gave third-quarter earnings guidance in a range of 20 cents to 21 cents a share, compared to analysts' expectations of 24 cents per share, according to FactSet.

Salesforce also said it expects third-quarter revenue to come in around $2.11 billion to $2.12 billion. Analysts were expecting $2.12 billion, according to FactSet.

Marc Benioff told CNBC that foreign exchange fluctuations and poor internal execution were to blame for its warning about third-quarter revenue.

"Not only did we have Brexit, but we have this precipitous fall of the great British pound, which is how we roll up our European currencies," Benioff said. "That dramatically affected our revenue in the quarter. In fact, we've lost $150 million in revenue for the year through this foreign exchange change.

The weakened guidance "implies further billings deceleration" for the third quarter, wrote Joel P. Fishbein, Jr. of BTIG in an analyst note published Thursday.

Despite the guidance letdown, BTIG maintained its "buy" rating and a $100 price target, implying a 25.9 percent upside from the stock's Wednesday close of $79.42.

"We still think greater than 20 percent billings growth is achievable for the full year, but we may see near-term volatility in the stock as investors debate the issue," wrote Fishbein.

Salesforce's adjusted second-quarter earnings beat estimates by 2 cents, at 24 cents per share. Revenue of $2.04 billion was slightly above forecasts.

-CNBC's Matthew J. Belvedere contributed to this report.