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Salesforce Earnings: Firm Declares a Dividend

We’ve raised our fair value estimate of Salesforce stock.

Salesforce logo on building.

Key Morningstar Metrics for Salesforce

What We Thought of Salesforce’s Earnings

Salesforce CRM continues to perform well in a tight demand environment, with upside versus our expectations on both the top and bottom lines for its fiscal fourth quarter. Guidance was mixed, with revenue slightly worse than we expected, while earnings per share was slightly better.

The biggest news is the evolution of Salesforce’s capital allocation strategy, with its buyback program expanded by another $10 billion and the establishment of a $0.40 quarterly dividend. Management was enthusiastic in its discussion of everything artificial intelligence, which we think will be an area of strength for the firm, with its Einstein 1 Platform already generating revenue. Based on the continued quarterly upside and new guidance, we are raising our midterm profitability estimates and lifting our fair value estimate to $300 per share from $265. We see the stock as fairly valued.

Fourth-quarter revenue grew 11% year over year (10% in constant currency) to $9.29 billion, versus the high end of guidance of $9.23 billion. Like in the last several quarters, strength was driven by MuleSoft, data cloud, and solid execution. The remaining performance obligation grew 13% year over year in constant currency, outpacing revenue growth for the second consecutive quarter. Professional services remain pressured and declined 9% year over year (based on difficult comparisons and customers taking on smaller projects), missing our estimates. Multi-cloud deals were strong, with eight of the top 10 deals and more than half of the 100 largest ones involving six or more clouds.

While profitability remains a bright spot, we continue to see a path for margins to expand even as the firm invests in near-term AI innovation. Its non-GAAP operating margin was 31.4% versus 29.2% a year ago. Major restructuring actions from January 2023 continue to boost margins, but the internal cultural shift remains apparent. We expect operational efficiencies and pricing to serve as tailwinds to margins over the next couple of years.

Salesforce Stock Price

Data as of Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Dan Romanoff

Senior Equity Analyst
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Dan Romanoff, CPA, is a senior equity research analyst on the technology, media, and telecommunications team for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers software.

Before Joining Morningstar in 2019, Romanoff spent 12 years in buy-side equity research covering the technology and telecommunications sectors, most recently at Holland Capital Management. Prior to that, he spent five years in sell-side equity research as an associate analyst at UBS and a senior analyst at Credit Suisse covering various areas within technology, including hardware, software, and semiconductors. Romanoff also has worked as an auditor and in valuation services for major public accounting firms.

Romanoff holds a bachelor’s degree in accountancy and a Master of Business Administration in finance, both from the University of Illinois at Urbana-Champaign. He also holds the Certified Public Accountant and Accredited in Business Valuation designations.

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