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Salesforce Raises Revenue Forecast on Slack, Product Expansion

·3 min read

(Bloomberg) -- Salesforce.com Inc. gave a forecast for quarterly and annual revenue that exceeded analysts’ estimates, as the leader in customer relations software further integrates Slack and expands its product line.

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Revenue will be as much as $7.38 billion in the period ending in April, San Francisco-based Salesforce said Tuesday in a statement. Analysts, on average, projected $7.26 billion, according to data compiled by Bloomberg. For the full year, sales will be as much as $32.1 billion, compared with the average estimate of $31.8 billion.

“With our customers’ success driving our financial success, we’re generating disciplined, profitable growth at scale quarter after quarter,” co-Chief Executive Officer Bret Taylor said in the statement.

Salesforce has been working to integrate Slack after its $27.7 billion purchase of the instant messaging platform, as well as adding products in a bid to sell more tools to existing customers. Even without that expansion, analysts see a lot of room to increase sales of the company’s flagship software that lets businesses manage and interact with customers, known as CRM.

However, Salesforce also faces competition from large companies such as Microsoft Corp. and up-and-comers like Freshworks Inc. Relative upstarts such as ZoomInfo Technologies Inc. also are finding success by offering tools that can be deployed on top of data stored in a CRM system to help improve sales activity, capabilities that Salesforce has been working to add through its artificial intelligence-backed Einstein product.

“We believe the sales software market can grow double digits over the next several years,” BMO Capital Market analysts wrote in a note published before earnings. “We think that Salesforce is well-positioned to capture the highest growth areas of the market such as revenue management and planning.”

The shares increased about 4% in extended trading after closing at $208.89 in New York. Like other software vendors, Salesforce’s stock has been on a downhill ride the past several months, falling more than 30% from its November record high through Tuesday’s close.

In the fiscal fourth quarter, Salesforce reported revenue increased 26% to $7.33 billion, topping Wall Street’s average projection of $7.23 billion. Profit, excluding some items, was 84 cents a share, compared with analysts’ estimate of 74 cents.

In December, the company alarmed investors when it reported a slowdown in sales in its MuleSoft division, which helps customers connect their software across the internet. Former employees attributed the dip to an exodus of top talent and difficulty in hiring as a result of an early decision to fold MuleSoft’s recruitment team into Salesforce’s human resources department. However, MuleSoft’s revenue has begun to bounce back, gaining 24% to $467 million in the quarter. While not yet returning to the almost 50% growth reported last May, the results indicate the company is quickly addressing the issues that led to the decline in sales.

“We didn’t think this would be fixed in one quarter,” Chief Revenue Officer Gavin Patterson said in an interview. It will “probably take until the back of FY23 to fully work through all the transformation that we need to put in place” to fix MuleSoft, he said.

Patterson said the global sanctions against Russia arising out of the war with Ukraine will have “minimal impact” on Salesforce’s business and haven’t forced the company to take any actions yet.

“As sanctions are put in place, then we reflect that in who we do business with,” he said.

(Updates with MuleSoft revenue in the eighth paragraph.)

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