Market participants had hoped that the rally from last week would be able to continue into the last trading day of May, but unfortunately, the stock market gave back some of its gains. Losses for the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) were relatively small at roughly half a percent, but it still came as somewhat of a blow to investor confidence to see a lack of follow-through from prior big gains.
| Index | Daily Percentage Change | Daily Point Change |
|---|---|---|
| Dow | (0.67%) | (223) |
| S&P 500 | (0.63%) | (26) |
| Nasdaq | (0.41%) | (50) |
Data source: Yahoo! Finance.
However, there was some good news after the closing bell. Shares of Salesforce (NYSE: CRM) rose sharply in after-hours trading, as the blue chip software-as-a-service company reported its latest financial results. After seeing so many stocks lose ground despite strong business results in their quarterly reports, investors were happy to see Salesforce climbing, even as it faces some of the same challenges as companies across the tech industry.
What Salesforce said
Salesforce's quarterly results for the period ending April 30 included a lot of good news. Revenue of $7.41 billion was up 24% year over year. Subscription and support revenue rose at the same 24% annual rate, but gains for the much smaller professional services segment of 30% helped juice up Salesforce's top line slightly. Remaining performance obligations were 20% higher than year-ago levels at about $42 billion, about half of which consists of current obligations.
Investors were also pleased with Salesforce's bottom-line performance, even though it reflected some of the company's challenges. Adjusted net income came in at $982 million, which was down from $1.14 billion in the year-earlier quarter. However, the resulting adjusted earnings of $0.98 per share still were better than most investors had feared the customer relationship software specialist would generate.
Salesforce attributed the solid performance to a couple of things. First, the company has worked hard to build a durable business model that can handle ups and downs in the business cycle. Also, the portfolio of products that Salesforce gives its clients is broad enough to address the needs of businesses across just about every industry, and smart internal corporate decisions have also made Salesforce more efficient operationally.
Will the rest of the year look better for Salesforce?
Salesforce had generally positive things to say about how the near-term future is likely to look. In the fiscal second quarter ending in July, the CRM specialist expects sales of $7.69 billion to $7.7 billion, which would be up about 21% from year-earlier levels. Adjusted earnings should rise slightly to between $1.01 and $1.02 per share, with roughly 15% expected gains in current remaining performance obligations.
For the full year, Salesforce has similar expectations. It projected revenue of $31.7 billion to $31.8 billion, up 20% from fiscal 2022. Adjusted operating margin should top 20%, and Salesforce is hoping to see adjusted earnings of $4.74 to $4.76 per share and a 21% to 22% rise in operating cash flow.
Interestingly, Salesforce's full-year projections were changed in mixed ways. The earnings call was about $0.12 per-share higher than previously forecast. However, Salesforce reduced its sales estimate by roughly $300 million from its previous forecast of $32 billion to $32.1 billion.
Salesforce had come into its earnings report as one of the worst performers in the Dow in 2022. However, it now appears some investors see it as a good candidate for a bounce. If it can maintain its upward momentum, Salesforce has a lot of things going for it.
