Salesforce CRM is scheduled to release third-quarter fiscal 2024 results on Nov 29.
For the fiscal third quarter, the company projects total revenues between $8.70 billion and $8.72 billion (midpoint $8.71 billion). Non-GAAP earnings are expected between $2.05 and $2.06 per share.
The Zacks Consensus Estimate for revenues is pegged at $8.71 billion, indicating an increase of 11.1% from the year-ago quarter’s reported figure. The consensus mark for earnings is pegged at $2.06 per share, implying a year-over-year increase of 47.1%.
Salesforce’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 14.2%.
Let’s see how things have shaped up before this announcement.
Salesforce Inc. Price and EPS Surprise 
Salesforce Inc. price-eps-surprise | Salesforce Inc. Quote
Factors to Consider
The growing demand for generative artificial intelligence (AI)-enabled cloud-based solutions is anticipated to have aided Salesforce’s top-line growth in the third quarter. The company is currently focusing on incorporating generative AI tools across its products as it looks to keep its business ahead of rivals.
CRM forayed into the generative AI space with the launch of Einstein GPT in March 2023. Einstein GPT is the world’s first generative AI CRM technology, which delivers AI-created content across sales, service, marketing, commerce and IT interaction at hyperscale. With Einstein GPT, the company will transform customer experience with generative AI.
Upping its ante in the space, Salesforce launched its AI Cloud service in June 2023, which the company claims is a one-stop AI-powered solution for enterprises looking to enhance productivity. Salesforce stated that its AI Cloud is a suite of services that delivers enterprise-ready real-time, open and secure generative experiences across all applications and workflows. The suite will power new capabilities across CRM’s products, including Einstein service, data analysis software Tableau and workplace-messaging app, Slack.
Furthermore, Salesforce’s quarterly performance is likely to have benefited from the robust demand environment as customers are undergoing a major digital transformation. The customer relationship management (CRM) software provider’s focus on introducing more aligned products per customer needs is expected to have boosted its top line in the quarter.
The company’s ability to offer integrated solutions for customers’ business problems is likely to have been a key growth driver. The firm’s products, like Trailhead and myTrailhead, are helping companies through their transformation processes and increasing business scale with modern technology.
Additionally, Salesforce’s third-quarter performance may have gained from its focus on building and expanding relationships with leading brands across industries and geographies. Also, significant growth opportunities in the public sector are expected to have been a tailwind in the fiscal third quarter.
Also, the acquisitions of Slack, Mobify and Vlocity are anticipated to have aided CRM’s top line during the to-be-reported quarter. Growth across its cloud service offerings — Sales, Service, Platform & Other, Marketing & Commerce and Data — is anticipated to have boosted Salesforce’s subscriptions and supported its revenues.
Our third-quarter revenue estimate for Sales, Service, Platform & Other, Marketing & Commerce and Data cloud services is pegged at $1.86 billion, $2.01 billion, $1.7 billion, $1.24 billion and $1.19 billion, respectively. We expect the company to report revenues from the Subscription and Support segment of approximately $8 billion and the Professional Services division of $701.8 million.
However, a decline in software spending by small and medium businesses amid the macroeconomic uncertainty due to the pandemic and geopolitical issues across different parts of the world may have affected Salesforce’s fiscal third-quarter performance. Further, stiff competition from Oracle and Microsoft is a concern, along with forex headwinds.
However, the ongoing restructuring initiative, which includes trimming the workforce, is likely to have boosted Salesforce’s profitability in the third quarter. The company’s second-quarter non-GAAP operating margin expanded by 11.7% to 31.6% from 19.9% in the year-ago quarter, mainly driven by an improved gross margin and the benefits of restructuring initiatives.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for Salesforce this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.
Though CRM currently carries a Zacks Rank #3, it has an Earnings ESP of -0.16%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, Micron Technology MU, Snowflake SNOW and Marvell Technology MRVL have the right combination of elements to post an earnings beat in their upcoming releases.
Micron carries a Zacks Rank #3 and has an Earnings ESP of +26.69%. The company is scheduled to report first-quarter fiscal 2024 results on Dec 20. Its earnings surpassed the Zacks Consensus Estimate twice in the trailing four quarters while missing on two occasions, the average surprise being -67.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Micron’s first-quarter earnings is pegged at a loss of $1.02 per share, way higher than the year-ago quarter’s loss of 4 cents. The consensus mark for revenues stands at $4.43 billion, suggesting a year-over-year increase of 8.5%.
Snowflake is slated to report third-quarter fiscal 2024 results on Nov 29. The company has a Zacks Rank #2 and an Earnings ESP of +67.33% at present. Snowflake’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 244.5%.
The Zacks Consensus Estimate for third-quarter earnings is pegged at 16 cents per share, suggesting an increase of 45.5% from the year-ago quarter’s earnings of 11 cents. Snowflake’s quarterly revenues are estimated to grow 27.6% year over year to $710.5 million.
Marvell carries a Zacks Rank #3 and has an Earnings ESP of +0.18%. The company is scheduled to report third-quarter fiscal 2024 results on Nov 30. Its earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing on one occasion, with the average surprise being 1.7%.
The Zacks Consensus Estimate for Marvell’s third-quarter earnings stands at 40 cents per share, indicating a year-over-year decline of 29.8%. It is estimated to report revenues of $1.4 billion, which suggests a decrease of approximately 8.9% from the year-ago quarter.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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