Salesforce Tops Earnings Estimates but Falls Short on Guidance

By Mariliana Fotopoulou Friday, February 26, 2021

Salesforce headquarters in San Francisco, California.

Salesforce, a cloud-based software company, reported Q4 earnings that beat analysts’ expectations but issued worse-than-expected full-year earnings guidance.

Conservative Full-Year Outlook

Salesforce reported adjusted earnings of $1.04 per share, versus the estimated $0.75 cents per share. The business posted revenue of $5.82 billion, compared to $5.68 billion expected by analysts.

The San Francisco-based software company reported revenue growth of 20% year-on-year (YOY) in the Q4 ending January 31. While Salesforce’s revenue outlook for the full 2022 fiscal year beat estimates, the earnings outlook shared by the tech business was worse-than-anticipated.

As a result, shares of Salesforce dropped 4% in extended trading Thursday.

In the full-year guidance, which takes into account the acquisition of business communication platform Slack, Salesforce estimated $3.39 to $3.41 in adjusted earnings per share on $25.65 billion to $25.75 billion in revenue, including a $600 million in revenue from Slack.

On the other hand, analysts expected $3.49 in adjusted earnings per share on a $25.42 billion revenue.

“We had a record quarter and year by innovating more and faster than ever, enabling our customers to be successful from anywhere, and becoming more relevant and strategic than ever. And we continued to serve all of our stakeholders in a time when they needed it most,” said Chair and CEO of Salesforce Marc Benioff.

The business made $1.36 billion in Q4 in subscription and support revenue which came from its main product Sales Clouds that is used for monitoring sales leads. This figure represents about 11% of year-over-year growth, versus 12% in the previous quarter.

The software company’s takeovers have helped it grow over recent years, with acquisitions such as Tableau significantly contributing to the company’s $1.81 billion in subscription and support revenue from “Platform and other products” business segment.

In December, the software company agreed to buy Slack in a $27.7 billion deal, which is expected to close in the quarter that ends on July 31. The tech business introduced Vaccine Cloud, a solution that governments and companies use to manage the deployment of COVID-19 vaccines.

The company also reported $184 million in expenses in the quarter due to terminations of certain real estate leases, compared to $80-$100 million the tech business expected.

“During the quarter, we identified further opportunities to consolidate and sublease across our global portfolio including in some of our hub locations,” Weaver said.

Summary

The US software company Salesforce reported better-than-expected earnings but published softer earnings guidance for the full-fiscal 2022.

About the Author


Headshot of Mariliana Fotopoulou

Mariliana has an MSC in Consumer Analytics and Business Strategy. She has a special interest in fast-moving industries and Big Data.

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