Salesforce raises full-year profit outlook

Specialist in customer relationship management Salesforce (CRM -2.01%) reported its fiscal 2025 Q2 financial results on Wednesday, which showed solid growth in several metrics. Second-quarter revenue of $9.33 billion rose 8% year-over-year and beat internal guidance. Earnings per share (EPS) of $1.47 also beat management expectations.

Overall, Salesforce’s quarter (which ended July 31, 2024) saw notable year-over-year growth. Management also noted that CFO Amy Weaver plans to resign from her position. Weaver will remain CFO until a successor is appointed and will remain an advisor.

Source: Salesforce. Note: Guidance is based on management guidance provided on 29 May 2024. cRPO = current remaining performance obligations. YOY = Year Over Year.

Understanding Salesforce

Founded in 1999, Salesforce is widely recognized for its Customer 360 platform, which unifies various business functions under a single source of customer information. The company focuses heavily on integrating artificial intelligence (AI) into its software, offering advanced features such as AI-based analytics and predictive insights.

Recently, Salesforce has increased its focus on innovating its core platform, primarily with the release of the Agentforce AI platform. This new AI-centric platform aims to reimagine enterprise software, making it more efficient and productive.

Quarterly highlights

Revenue growth and margin expansion: Total revenues of $9.3 billion were distributed across the Americas ($6.2 billion, up 8%), Europe ($2.2 billion, up 11%) and Asia Pacific ($940 million, up up 16%), highlighting diversified geographic growth, particularly in the Asia Pacific Region. The consistent revenue contributions from the regions highlight the effectiveness of Salesforce’s expansion strategies.

GAAP operating margin improved to 19.1% from 17.2% in the second quarter of fiscal 2024. Non-GAAP operating margin also improved, now standing at 33.7% from 31.6% a year earlier . Increased operational efficiency and cost management have been major contributors to this expansion.

AI and the Customer 360 platform: Salesforce continues to advance its AI capabilities, exemplified by the release of the Agentforce AI platform. This new feature aims to simplify and automate customer interactions by integrating AI into various enterprise software components. CEO Marc Benioff said, “With our new Agentforce AI platform, we’re reimagining enterprise software for a new world where people with autonomous agents drive customer success together.”

Key values ​​and guidelines: Salesforce’s current remaining performance obligation (cRPO) grew 10% year-over-year to $26.5 billion. Operating cash flow increased to $0.89 billion from $0.81 billion in fiscal 2024.

Revenue forecasts for fiscal 2025 remain between $37.7 billion and $38.0 billion, representing growth of 8% to 9%. Management adjusted GAAP operating margin guidance to 19.7%, down from 19.9%, and increased non-GAAP operating margin to 32.8%, up from 32.5%. GAAP diluted EPS guidance was slightly adjusted to $6.05-$6.13 from $6.04-$6.12, and non-GAAP diluted EPS was raised to $10.03-$10.11 , from $9.86-$9.94. The adjustments indicate that Salesforce is focusing on more effective cost management and operational efficiency.

Dividend and share buyback programs: Salesforce repurchased $2.13 billion in shares and paid dividends totaling $0.40 per share, reflecting its commitment to return capital to shareholders. Amy Weaver, outgoing CFO, noted, “Our capital return program remains a priority and we now expect to more than fully offset our share-based compensation dilution in FY25.”

Looking ahead

Salesforce’s revenue guidance for the third quarter of fiscal 2025 is between $9.31 billion and $9.36 billion, indicating 7% year-over-year growth at midpoint. This suggests a slight deceleration compared to the 8% growth achieved in Q2, but maintains steady growth momentum. The company continues to emphasize the integration of AI and Customer 360 as key growth drivers.

Management remains optimistic about Salesforce’s strategic positioning and future growth. Going forward, investors should closely monitor Salesforce AI’s progress and its ability to sustain revenue growth amid competitive pressures.