Salesforce declines after light guidance
- Salesforce's guidance for the full fiscal year was softer than what analysts had expected.
- The company announced the departure of co-CEO Keith Block in the quarter.
Salesforce shares fell as much as 3% after the company reported fiscal first-quarter earnings on Thursday.
Here's how the company did:
- Earnings: 70 cents per share, adjusted
- Revenue: $4.87 billion
The company's revenue grew 30% from the year-ago quarter, according to a statement. Analysts polled by Refinitiv had expected 69 cents in adjusted earnings per share on $4.85 billion in revenue. Comparing results with estimates is not straightforward given the coronavirus pandemic shut down many businesses during the quarter. The company's fiscal first quarter ended Apr. 30.
Salesforce has given "temporary financial flexibility" to customers most impacted by the pandemic, according to the statement.
With respect to guidance, Salesforce expects 66 cents to 67 cents in adjusted earnings per share and $4.89 billion to $4.90 billion in revenue in the fiscal second quarter. Analysts polled by Refinitiv had expected 75 cents in adjusted earnings per share and $5.03 billion in revenue.
For the full fiscal year Salesforce sees $2.93 to $2.95 in adjusted earnings per share on about $20 billion billion in revenue, implying 17% revenue growth. Analysts polled by Refinitiv were looking for $3.09 in adjusted earnings per share on revenue of $20.73 billion.
During Q1, Salesforce's flagship Sales Cloud offering for tracking business with customers and prospects delivered $1.245 billion in revenue, up 16% year over year. The Service Cloud product for customer support came in just slightly higher than that at $1.252 billion in revenue, up 22.7%. Service Cloud was once much smaller than Sales Cloud but has gradually grown to match its same scale.
During the quarter Salesforce committed to not making significant layoffs for 90 days. It also acquired personalization software company Evergage for undisclosed terms and announced that co-CEO Keith Block was stepping down. On May 13 Salesforce said Gavin Patterson, president and CEO of Salesforce International and formerly CEO of BT Group, is becoming president and chief revenue officer of the entire company.
Analyst Yun Kim of Rosenblatt initiated coverage of Salesforce with a sell rating on May 4, noting that some sales executives could follow Block out the door and that, after spending about $25 billion on acquisitions in the past two years, the company could face backlash if it were to make more big deals. Additionally Kim's industry checks in January, before governments started directing people to stay home to avoid coronavirus, suggested that the pace of big companies deploying business applications could slow down this year.
"We believe that when the enterprise IT spending environment returns, the pace of large-scale business application deployments is likely to lag other initiatives with higher priority," Kim wrote. "Our most recent checks indicate that many of these SFDC initiatives have been pushed out indefinitely or have been downsized significantly."
Excluding the reaction to the earnings announcement, Salesforce stock is up 12% so far in 2020.
Executives will discuss the results with analysts on a conference call at 5 p.m. Eastern time.