Salesforce falls as revenue forecast misses analysts’ estimates

(Bloomberg) — Salesforce Inc. gave a quarterly revenue forecast that fell short of analysts’ estimates, suggesting that a shaky economy may cause some customers to slow spending on business software. Shares fell in extended trading.

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Sales will reach $7.83 billion in the period ending in October, the San Francisco-based company said Wednesday in a statement. Analysts, on average, had forecast $8.05 billion, according to data compiled by Bloomberg. For the full year, the company slightly lowered its revenue forecast to $31 billion from $31.8 billion.

The lowered guidance reflects a change in customer tone as the quarter progressed, which hit particularly hard in July, Mike Spencer, newly appointed head of investor relations, said in an interview.

Co-Chief Executive Officer Bret Taylor said the company was facing a “more measured buying environment”.

Salesforce, the leader in cloud-based customer management software, has a wide variety of customers across various industries. It has maintained high revenue growth through the pandemic and expanded its business productivity products with its $27.7 billion purchase of messaging platform Slack, which is set to close in July 2021. This year, however, it has sought to cut some costs, including slowing its rate of recruitment and reduction of travel. Earlier this month, the company appointed Brian Millham as CEO, filling a position that has been vacant since Taylor was promoted to co-CEO about nine months ago.

Many software companies such as ServiceNow Inc. have seen customers extend their buying cycles as the economy has weakened in recent months, and it’s likely that Salesforce has experienced the same momentum, BMO Capital analyst Keith Bachman wrote in a note. profits.

Spencer said the company is seeing “bigger deal cycles” from its customers. “We’re seeing additional approvers being brought into deals — CFOs are being included in deals much more frequently than in the past,” he said.

Shares fell about 5.5 percent in extended trading after closing at $180.01 in New York. The stock has fallen 29% this year amid a widespread technology disaster that has hit software vendors particularly hard.

The company also announced a $10 billion share buyback program.

The buyback could mean management is signaling to investors that they are mindful of the company’s share price, said Anurag Rana, an analyst at Bloomberg Intelligence. “The stock has been under pressure for the last year and a half — that may have triggered it,” he said in an interview with Bloomberg Television.

In the fiscal second quarter, revenue rose 22% to $7.72 billion, beating analysts’ forecasts. The current remaining performance obligation — or contractual sales not yet closed, which is a measure of short-term demand — rose 15% to $21.5 billion. Earnings, excluding certain items, were $1.19 per share, compared with analysts’ average estimate of $1.03.

Currency fluctuations, particularly the strength of the U.S. dollar, caused about $50 million more headwinds than expected in the quarter, Chief Financial Officer Amy Weaver said on a conference call. For the full year, currency fluctuations are now expected to cost about $800 million in revenue, an increase of $200 million from last quarter’s estimate.

Subscription revenue generated by its platform unit, which includes Slack, gained 34% to $1.48 billion in the period ended July 31 — the biggest increase of any segment. Marketing and commerce software gained 12% to $1.12 billion, which was the smallest jump of any unit. Many analysts had expected a slowdown in this segment due to a broader pullback in marketing spending.

(Updates with CFO’s comments on currency in paragraph 12.)

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