Why Salesforce Stock Soared Today

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.

10 stocks we like better than Salesforce
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now... and Salesforce wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of February 8, 2023

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.