Enterprise software company Salesforce.com saw its stock sink on Tuesday after it reported better-than-expected earnings for the third quarter of its 2018 fiscal year, which ended on Oct. 31.
Salesforce stock was about 2.1 percent lower in premarket trading Wednesday.
Salesforce forecast fourth-quarter profit slightly below market expectations, however, even as profits and revenues rose on the back of strong demand for its cloud-based sales and marketing software.
The company said it expects a fiscal fourth-quarter earnings of 32 cents to 33 cents per share, excluding certain items, on revenue of $2.80 billion to 2.81 billion. Analysts had expected the company to produce 34 cents in earnings per share, excluding items, and $2.79 billion in revenue for the quarter, according to Thomson Reuters.
As a whole, the company's revenue was up 25 percent year over year, according to the company's earnings statement. Almost all of Salesforce's revenue comes from subscriptions and support, and that business segment generated $2.49 billion in revenue; analysts had expected it to hit $2.45 billion in revenue, according to FactSet. But the company's professional services revenue for the quarter, of $193.7 million, was below the FactSet estimate of $201.4 million.
The company also promoted Bret Taylor to be its new president and chief officer. Taylor, who is a Twitter board member, was previously CEO of the start-up Quip under Salesforce following the Quip acquisition in 2016. Meanwhile, Alex Dayon will become president and chief strategy officer after being the company's president and chief product officer. During the company's Tuesday conference call with analysts, CEO Marc Benioff said both Taylor and Dayon will report to him.
Some analysts had been positive about the company in the days leading up to earnings. "Our checks indicated that its large deal pipeline remains strong while the competitors remain at bay," Mizuho analysts Abhey Lamba and Parthiv Varadarajan wrote in a Nov. 12 note.
In its fiscal second quarter, Salesforce and raised its guidance for the entire fiscal year. In its fiscal third quarter, Salesforce refreshed its Service Cloud offering and went live on public cloud provider Amazon Web Services' data center infrastructure in Canada.
Salesforce raised its guidance for its entire 2018 fiscal year, pegging it at $10.43 billion to $10.44 billion. Analysts had been expecting $10.39 billion in revenue for the full year.
Salesforce stock is up 59 percent since the beginning of the year, according to FactSet.
—Reuters contributed to this report.