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Here's what Salesforce told worried investors after its stock crashed on Wednesday

marc benioff
marc benioff

(Salesforce CEO Marc Benioff.Robert Galbraith/Reuters)

Salesforce shares dropped as much as 8% in after-hours trading on Wednesday following a soft guidance and billings growth in the company's earnings report.

Its third-quarter revenue guidance was slightly lower than analyst forecasts of $2.13 billion, while deferred revenue, an important metric that shows future revenue growth, came in at the low-end of the 26% to 28% expectation.

Salesforce CEO Marc Benioff admitted that "softness" at the end of the quarter, particularly in the US market, was attributed to the lower than expected results, although he pointed out that it's temporary and part of the normal enterprise-software sales cycle.

He said:

"Nobody likes to see softness in any particular region, but this did seem quite isolated in my opinion to the US ... It's something that you learn to not only ... manage through, but you use it to make your company stronger and stronger and stronger, which is exactly what we did the last time we saw it."

Benioff is probably referring to the fact that Salesforce went through a similar weak cycle in 2012, but was able to bounce back in the second half of that year.

Keith Block, Salesforce's president and COO, added that the company followed up with a thorough review process of its US business and came back confident that it'll turn it around in the second half of the year. He also highlighted that it signed another huge enterprise deal worth over $100 million in the quarter, the third-straight quarter when it's signed a nine-figure deal.

Block continued:

"At the end of the day, what I would boil this down to is it's just a bit of blocking and tackling, and we've taken a look at it, we've made the adjustments, we looked at our playbooks, we've tightened up on a few things. I feel very positive about our second half. Our pipeline is strong, our win rates were very strong in the quarter, our level of engagement has never been stronger."

In fact, despite unfavorable foreign-exchange-rate changes that affected its overall business, Salesforce was still able to raise its full-year guidance for the third time this year to the range of $8.275 billion to $8.325 billion. That's on top of an earnings beat that gave the company it's first $2 billion-plus revenue quarter — a 25% increase year-over-year.

Given that enterprise software typically closes a lot more deals in the second half of the year, Salesforce's numbers could improve as management indicated. Rather, it could be a case of the market just having grown used to seeing Salesforce hit record numbers quarter after quarter, as its stock price has jumped 30% over the past two years.

"Clearly, the Street is accustomed to Salesforce performing better than expected, but it seems quite clear that currency had a notable impact on calculated bookings," market research firm Stifel's Tom Roderick told Business Insider.

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