Wide-moat Salesforce (CRM) reported solid fiscal fourth-quarter results, including upside to both revenue and non-GAAP EPS expectations. The company’s first-quarter revenue guidance was solid and we’re pleased to see the firm raise its full-year revenue target. We think Salesforce’s results are generally consistent with software peers who are experiencing robust demand arising from the need to accelerate the broad digital transformation efforts that were already underway. Deal sizes continue to grow larger as conversations are increasingly about digital transformation of a customer’s entire organization rather than just a specific area. Customers remain focused on the post-pandemic operating environment and want flexibility, which reinforces the rationale for the Slack acquisition.
We are raising our fair value estimate to $265 per share, from $253, based on rolling our forecast and the solid near-term results and guidance. With the recent pullback, we think shares are undervalued.
Revenue grew 20% year over year to $5.817 billion, which blew through both our above-consensus estimate and guidance. Both sales and service clouds were in line with our model, while both platform and other, along with marketing and commerce cloud, were nicely ahead. Demand remains strong on all fronts and attrition remains better than management anticipated. Billings grew 22% year over year, while current remaining performance obligation, or CRPO, grew 20% year over year, both of which were in line with or better than revenue growth, which is an improvement from last quarter and a positive indicator for revenue growth.
Non-GAAP operating margin was strong at 17.5%, compared with 15.4% a year ago and our slightly below-consensus model at 16.5%. Revenue strength and slightly lower operating expenses drove better than expected margins. We view results as consistent with long-term margin expansion by at least 100 basis points annually.
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