What to expect from Salesforce earnings❓

Salesforce (CRM.US) is scheduled to report fiscal-Q4 2024 earnings report (calendar November 2023 - January 2024) today after close of the Wall Street session. Stock jumped over 50% off the late-October 2023 low and around 14% year-to-date higher. Options pricing implies an over-10% post-earnings share price move.

What analysts expect from Salesforce earnings?

Fiscal-Q4 2024

• Total revenue: $9.22 billion (+10% YoY)
  • Subscription and support revenue: $8.62 billion (+10.7% YoY)
    • Sales: $1.97 billion (+10.2% YoY)
    • Services revenue: $2.14 billion (+11.3% YoY)
    • Platform & other revenue: $1.73 billion (+11% YoY)
    • Marketing & commerce revenue: $1.28 billion (+8.8% YoY)
    • Data revenue: $1.5 billion (+11.6% YoY)
  • Professional services and other revenue: $604.2 million (+1.6% YoY)
• Total billings: $15.83 billion (+7.8% YoY)
• Unearned revenue (end of period): $18.95 billion (+9% YoY)
• Adjusted gross profit: $7.33 billion (+10.1% YoY)
  • Adjusted gross margin: 79.2% vs 79.45% a year ago
• Adjusted operating income: $2.9 billion (+18.8% YoY)
  • Adjusted operating margin: 31.4% vs 29.2% a year ago
• Adjusted net income: $2.23 billion (+34.4% YoY)
  • Adjusted net margin: 24.2% vs 22.3% a year ago
• Adjusted EPS: $2.27 vs $1.68 a year ago
• Remaining performance obligations: $54.01 billion (+11.1% YoY)
  • Current remaining performance obligation: $27.1 billion (+10.1% YoY)
  • Non-current remaining performance obligation: $26.7 billion (+21.4% YoY)
• Free cash flow: $2.29 billion (-10.9% YoY)

Fiscal-Q1 2025 forecast

• Revenue: $9.16 billion
• Adjusted EPS: $2.19

Full fiscal-2025 forecast

• Revenue: $38.62 billion
• Adjusted EPS: $9.63

Financial dashboard for Salesforce. Source: Bloomberg Finance LP, XTB Research

What to focus on?

There are few things to focus on in Salesforce's fiscal-Q4 2024. Of course, result for the fourth quarter will play a role in market's reaction. However, more attention may be paid to what has driven those results and what the company expects for the future. Given we are in the midst of AI revolution, there will be a lot of attention on this technology. Salesforce unveiled its conversational generative AI tool this week. While it is unlikely that generative AI will have a meaningful impact on results now, any guidance on impact on future growth will be closely watched. 

Salesforce has embarked on a quest to adjust its cost structure in order to improve its profitability. While it has managed to greatly improve in the first three quarters of fiscal-2024, investors are eager to know whether this improvement will continue into fiscal-2025.

A look at the chart

Salesforce (CRM.US) broke above the $300 mark earlier this week for the first time since late-2021. However, stock has erased part of the gains amid pre-earnings uncertainty. Options market pricing is suggesting that investors are expecting a massive volatility spike. Currently, options imply a 10.4% post-earnings share price move. This means that there is a high likelihood that sales will reached fresh all-time highs if earnings release is seen as a positive. Stock trades less than 4% below all-time highs reached near $311.50 mark back in early-November 2021.

Salesforce (CRM.US) at W1 interval. Source: xStation5