Salesforce surges on Q3 earnings beat amid 'green shoots' of cloud demand rebound

Salesforce  (CRM) - Get Free Report shares surged in early Thursday trading after it posted better-than-expected third quarter earnings, as well as a full-year profit boost, amid what it described as improving demand for its cloud-focused client software offerings.  

Salesforce said earnings for the three months ending in October, its fiscal third quarter rose 51% from last year to $2.11 per share, just ahead of Street forecasts of $2.06 per share, with revenues rising 11.2% to $8.72 billion, just ahead of analysts' estimates of an $8.715 billion top line.

Looking into the final months of its fiscal year, Salesforce said it sees revenues in the region of $34.75 billion and $34.8 billion, an 11% improvement from last year's levels that was largely in-line with its prior forecasts. Current quarter revenues were forecast between $9.18 billion to $9.23 billion.

Full-year profits, Salesforce said, will likely improve to between $8.18 and $8.19 per share, up 13 cents at the higher end of its prior forecast, with adjusted operating margins expanding to between 30% and 33%. 

"We don't want to, in any way, give you indications that we see this environment going behind us. That said, we see a lot of green shoots. There's just a lot of opportunities," Salesforce CEO Marc Benioff told investors on a conference call late Wednesday. 

"I don't think we're willing to say 'hey, we've turned the corner', we want to but we're not sure because for a lot of customers (are still) somewhat measured in their buying environments," he added. "But I would say people are a lot less measured than they were is one way to put it. There's definitely a reduction in the measured environment." 

Salesforce shares, a Dow component, were marked 9.2% higher in pre-market trading to indicate an opening bell price of $251.12, extending its year-to-date advance to just under 90%.

"We continue to see long-term drivers for Salesforce as the market share leader in front office digital transformation with opportunity to benefit from AI given the scope of the Company's application portfolio and customer data," said KeyBanc Capital Markets analyst Michael Turits, who carries an 'overweight' rating with an improved $290 price target on Salesforce stock.

"Management said it was not calling a turn in the environment but said it saw "green shoots" at the top of the funnel and in growth in large deal sizes," he added. "Management did indicate ongoing headwinds in professional services (consistent with weaker service revs from partners this quarter), self-service, and in-period revenues."

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