Salesforce
Overall, Salesforce shares are back to their August 2020 levels but remain up more than 100% from their March 2020 lows. The correction in shares is nearly 20% from its highs but this is still much better than many growth and tech stocks which have seen major selloffs as short-term rates rise with a more hawkish Fed.
Inside the Numbers
In Q3, Salesforce reported $1.27 in earnings per share which topped expectations of $0.92 per share. It was also a 27% improvement over last year. Revenue came in at $6.9 billion, beating expectations of $6.8 billion.
In terms of guidance, Salesforce sees Q4 revenue between $7.22 billion and $7.23 billion which was in line with expectations. However, shares were hit hard by its guidance of Q4 EPS between $0.72 and $0.73 which fell short of analysts' expectations of $0.81 per share.
Sales Cloud, the company's main offering, generated $1.54 billion in revenue, a 17% increase from last year. Service Cloud revenue increased by 20%, reaching $1.66 billion in revenue. The company is also benefiting from acquisitions of Tableau and Mulesoft which added more than $1 billion in revenue.
Its acquisition of Slack also seems to be working as it contributed $276 million in sales. It also saw a 44% increase in the number of customers who spent over $100,000 on the platform.
The major factor in the company's lower EPS guidance is expectations of higher costs due to increased travel, hiring, and taxes which will result in a drop in operating margin.
Some bulls see the company as "sandbagging" given the company has a tendency to issue low EPS to set up a low bar to beat. After all, the company did post very strong results in Q3 and even with its lower Q4 guidance, it would still be a meaningful improvement from last year, while the stock price is substantially lower.
