Salesforce.com Raises Annual Outlook... "Investment Appeal Increases"

[Asia Economy Reporter Minji Lee] Salesforce.com is expected to maintain stable growth in the second half of the year due to balanced growth across all business divisions.

On the 29th, Salesforce.com's stock price showed a 22.52% increase this month, reaching $266.53. This is attributed to the upward revision of the annual revenue forecast following strong second-quarter results for the 2022 fiscal year.

In the second quarter, Salesforce.com reported revenue of $6.34 billion and operating profit of $1.291 billion, representing increases of 23% and 24% respectively compared to the same period last year. Revenue exceeded the guidance of $6.23 billion provided in the previous quarter, continuing its high growth. Net income attributable to controlling shareholders was also recorded at $1.42 billion, a 6% increase from a year ago, significantly surpassing market expectations.

All business segments maintained balanced growth momentum, with the traditionally main division, 'Sales Software,' rebounding by approximately 15.5%. Although the market is mature and had shown growth in the low double digits, the demand in the CRM cloud market expanded due to customers' digital transformation despite COVID-19 concerns. Dongyang Kim, a researcher at NH Investment & Securities, said, “CRM is the fastest-growing area among enterprise software,” adding, “According to Gartner, a U.S. market research firm, an average annual growth rate of 12% is expected through next year.”

The rebound in data analytics and data integration performance was also evident. Among the top 10 contracts, data analytics and data integration were included in 9 and 8 contracts respectively. Jaeim Kim, a researcher at Hana Financial Investment, noted, “A notable point in the second-quarter results is the clear increase in contracts with the U.S. government,” adding, “Four out of the top 10 contracts are for the public sector, and considering the government's IT digital strategy, benefits are expected to increase further in the second half.” By region, Europe and the Middle East led growth with $1.416 billion, a 32% increase year-over-year. The backlog of service contracts also rose 23% from a year ago to $36.2 billion.

The company forecasted third-quarter revenue guidance of $6.8 billion, expecting 25% growth compared to the previous year. Adjusted EPS was projected at $0.92, higher than the market expectation of $0.82. This indicates that momentum is expected to continue in the second half, with the upward revision in revenue exceeding that of the second quarter, suggesting a better-than-expected trend. On an annual basis, the company projected revenue of $26.3 billion and an operating profit margin of 18.5%.

Researcher Jaeim Kim commented, “Despite margin pressure from the Slack acquisition, it is encouraging that the adjusted operating profit margin guidance was raised to 18.5%,” adding, “The synergy effects from collaboration with Slack also brighten the outlook.” He further analyzed, “Based on this year's and next year's revenue forecasts, the PSR is 11 times and 9 times respectively, which is relatively low compared to the software group average of 20 times and 16 times with similar growth rates, indicating relatively low valuation pressure and high investment attractiveness.”

This content was produced with the assistance of AI translation services.