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Salesforce beats on earnings, plans to slow hiring

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Yahoo Finance Live anchors discuss first-quarter earnings for Salesforce.

Video Transcript

BRAD SMITH: Everyone, switching gears here, we got to talk some earnings that have come out. Salesforce shares, they are jumping, jumping, as Destiny's Child would say, in pre-market today after the company beat on earnings and raised its earnings forecasts. The company also announced that it is being more, quote unquote, "measured" with its hiring after a report this month that the company is slowing hiring. OK, we're going to come back to hiring in a second there because, historically, even in good quarters, we've seen Salesforce come out in the past and say, we're going to kind of damper down or dampen on some of our hiring ambitions and even announce job cuts in those instances.

But if there's anything that kind sticks out to me in this most recent quarter, it is how the acquisitions that they've made have paid off. If you think about the broader CRM landscape and even the B2B kind of enterprise resource planning landscape, it's an acquire to grow type of strategy that all of these companies have rolled out in the past, whether it's Salesforce, whether it's Oracle, whether it's SAP.

And that was the case here with Salesforce for certain in this quarter. Slack and Tableau most notably come to mind within this matter here. And that's exactly where you saw some of the first quarter revenue, that 24% growth year over year really be accounted for because of those acquisitions that they've made strategically, and that also contributing to some of their margins.

BRIAN SOZZI: Yeah, a couple of good points. Jumping, jumping-- I like that. That was very good. But I'll point this out. First, I like the Slack numbers. They mentioned on the conference call last night that despite this return to offices, $100,000 plus deals for Slack-- good. That fits nicely with everything Slack's co-founder, Stewart Butterfield, told me last week on-- at the World Economic Forum, so I like that.

Also, number two, when you look at a Salesforce results, in this environment, you want to get any-- want to try to get any sense about a recession. I saw absolutely none of that in these results. The key metric here-- committed remaining performance obligations for Salesforce up 21% in the most recent quarter. If we were heading for a sharp economic slowdown, I would argue that growth rate would be below 10%.

Now, we did have Marc Benioff on the earnings call last night really shoot back on this notion that we are headed for a sharp economic slowdown. You can see some of his comments there right there, saying, we're carefully watching the economic data. I know all of you are doing that as well. And so far, we're just not seeing any material impact on the broader economic role that you all are a part in. So that is a good thing from Benioff.

And last but not least here, I was talking with some Salesforce insiders last week at the WEF conference, and there was a big focus inside the company on profit margin expansion. This company has acquired a lot of companies over the past few years-- MuleSoft, Slack, Tableau. And it finally seems like they're trying to bring margins up and consolidate some of the expenses on these businesses, which is good. And you can see that chart here. Finally, it looks to be-- this chart comes compliments of Jefferies-- margins are starting to trend higher from sales from Salesforce. They raised their full year operating margin outlook. That is a good thing to see if you are a Salesforce [INAUDIBLE].

BRAD SMITH: Even from some of the highs last year, and as we're talking about, what Salesforce may see in the economy, let's talk about what they see in the equity market, especially on their own ticker, CRM, down 45%, at least to this level, from the most recent highs that we had seen in November. And so, one of the pandemic darlings that had been able to make strategic acquisitions prior to the pandemic, as we've been discussing, and then even amid the pandemic with the Slack one actually coming through at that, what, $27 billion price tag. At the end of the day, it's still going to come to where investors are really seeing that shareholder value be returned over an extended period of time and tracking particularly the organic growth because of those acquisitions as well.

BRIAN SOZZI: No, absolutely, and before we go here, look, I'll just mention a Salesforce quarter like this, strong across the board. Outlook, earnings numbers, you want to see if that dovetails or that lifts like-minded companies, the Microsofts of the world, out there. How does the market react to a quarter like this, I think is very important in this environment.