What happened
Shares of Salesforce (NYSE: CRM) popped on Thursday after the cloud software leader announced a sharp increase in operating profits and issued an upbeat forecast for the coming year. As of 3:12 p.m. ET, Salesforce's stock price was up more than 11%.
So what
Salesforce's revenue jumped 14% year over year to $8.4 billion in its fiscal 2023 fourth quarter, which ended on Jan. 31. That bested Wall Street's estimates, which called for revenue of $8 billion.
Investors were even more pleased by Salesforce's sharpened focus on profitability. The tech titan's adjusted operating margin improved by a whopping 14.2 percentage points, to 29.2%.
Activist investors have pressured CEO Marc Benioff to slash costs. Salesforce reduced its workforce by 10% earlier this year, as part of a restructuring plan designed to offset a deceleration in the company's growth during the current economic downturn. Those expense-reduction efforts contributed to a steep rise in Salesforce's adjusted operating income, which more than doubled to $2.4 billion.
All told, Salesforce's adjusted earnings per share came in at $1.68. That, too, surpassed Wall Street's expectations. Analysts had forecast per-share adjusted profits of only $1.36.
Better still, Salesforce continues to strengthen its ability to convert sales into cash for its shareowners. "We closed FY23 with operating cash flow reaching $7.1 billion, up 19% year over year, the highest cash flow in our company's history, and one of the highest cash flows of any enterprise software company our size," Benioff said in a press release.
As an asset-light software business, Salesforce had relatively minimal capital expenditures of less than $800 million in fiscal 2023. Thus, its free cash flow checked in at $6.3 billion, which allowed it to return $4 billion to shareholders via stock buybacks.
Now what
Salesforce sees its revenue and operating cash flow growing by approximately 10% and 16%, respectively, in fiscal 2024. The company also boosted its share repurchase program to $20 billion.
Looking even further ahead, Benioff made one of his characteristically bold, yet often accurate, predictions during a conference call with analysts.
"Our goal is to make Salesforce the largest and most profitable software company in the world, and that is what we are doing," Benioff said.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce. The Motley Fool has a disclosure policy.
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