Salesforce Results (Image credit pixabay/Geralt) has announced strong results for its Q1 fiscal 2024 period. After activist investors put the company under pressure, Benioff quickly turned things around by cutting costs and increasing profitability.

In the analyst call Marc Benioff, Chair and CEO of Salesforce, commented, “As I said in March, we’re just getting started with this incredible transformation. We continue to scrutinize every dollar of investment, every resource, and every spend. And we’re transforming every corner of our company. Our progress over the last five months, well, it’s very impressive, and I cannot be more grateful to our entire team for their leadership… Our transformation drove our Q1 financial results. As I said on our last call, well, improving profitability is our highest priority.” (Source: The Motley Fool)

The results

Marc Benioff - Salesforce CEO Source Salesforce (Source Salesforce)
Marc Benioff – Salesforce CEO Source Salesforce

Even after a single quarter, the results are impressive. In the press release, Benioff stated, “Salesforce significantly exceeded our non-GAAP margin target for the quarter — up 1,000 basis points year-over-year, and we are raising our FY24 non-GAAP operating margin guidance to a 550 basis point increase year-over-year.

“At the same time, we are leading the next major revolution in CRM — infusing trusted, secure generative AI across our entire product portfolio. Salesforce’s generative AI ecosystem wields Einstein GPT, Slack GPT, and Tableau GPT, delivering trusted power across our product portfolio. Our Salesforce GPT Trust Layer will shield customer data, enabling productive automation and intelligent enterprise enhancements securely.”

Other key figures from the results included:

  • Total Revenue from Q1 was $8.25 Billion, up 11% Year-Over-Year (“Y/Y”), up 13% in Constant Currency (“CC”)
    • Subscription and support revenues were $7.64 billion, an increase of 11% Y/Y
    • Professional services and other revenues were $0.61 billion, an increase of 9% Y/Y
  • First Quarter GAAP Operating Margin of 5.0% and Non-GAAP Operating Margin of 27.6%
  • Current Remaining Performance Obligation of $24.1 Billion, up 12% Y/Y, 12% CC
  • First Quarter GAAP Diluted Earnings per Share (“EPS”) of $0.20 and Non-GAAP Diluted EPS of $1.69
  • Cash generated from operations for the first quarter was $4.49 billion, an increase of 22% Y/Y. Free cash flow was $4.25 billion, an increase of 21% Y/Y. Restructuring impacted first-quarter operating cash flow growth by (910) bps
  • Returned $2.1 Billion in the first quarter to stockholders in the form of share repurchases

Growth is almost everywhere across the board

During the quarter, Salesforce continued to win new customers and expand its footprint in others. Notable “wins” included Northwell Health, Paramount, Siemens, Spotify, NASA, and the U.S. Department of Agriculture Rural Development.

The recent announcements around generative AI are also making their way into the field. Benioff called out the work at Gucci. He said, “A great example already deploying this technology is Gucci. We’re working with them to augment their client advisors by building AI chat technology that creates a Gucci-fied tone of service. Well, incredible new voice, amplifying brand storytelling and incremental sales as well. It’s an incredibly exciting vision for generative AI to transform what was customer service into now customer service, marketing, and sales, all through augmenting Gucci employee capabilities using this amazing generative AI.” (Source: The Motley Fool).

Other customers adopting AI enabled Salesforce tools AI, included the California Office of System Integration, Paramount Global, Revel, and OpenAI itself. Impressively eight of the Salesforce industry clouds grew ARR above 50%, with Data Cloud being one of its fastest-growing products.

Looking forward

The growth is set to continue, with the company also raising its guidance for the full year to a range of $34.5 Billion to $34.7 Billion, an increase of 10% Y/Y. It also estimated its FY24 Q2 revenues in the range of $8.81-$8.53 billion.

Amy Weaver, CFO, concluded her forecast by saying, “We are hyper-focused on delivering the next wave of innovation led by Data Cloud and Einstein GPT. And Salesforce is well-positioned to remain the market leader in this new AI-first world. We are committed to delivering long-term shareholder value. And I personally want to thank our shareholders for their continued support.” (Source: The Motley Fool).

This is just the first quarter of restructuring and rehoning the Salesforce revenue engine. Brian Millham, Salesforce President and Chief Operating Officer, noted, “Not as many of our AEs, NSCs, and leaders were as enabled as we would like. We’ve made those changes, and we’ve really invested in the time to make sure our AEs understand our product portfolio, the entire Customer 360. And we’re on sort of the next generation of enablement.

“And we need to make sure that we’re investing in the enablement to bring our teams along. It’s been a very short window around this innovation, and we’ve got some work to do on this. But we’re very, very excited with our path for a position in the market. All that we’re doing with our customers, the demand we’re feeling from our customers.” (Source: The Motley Fool).

If the results are strong now, the inference is they will only get better. The danger is whether a recession emerges at the tail end of the year to dampen growth. There is also the question of what happens following the Bain operational review that is being conducted. Weaver noted that this would be moving to an implementation stage. Whether that means restructuring or further job cuts is unclear.

Enterprise Times: What does this mean

Another set of strong results from Salesforce with a bullish view of the future. Sales seem reinvigorated by ChatGPTm even more impressive is the 20-30% boost in engineering productivity that Salesforce has seen from its use of generative AI already. This bodes well for future releases with even more enhancements.

There are some considerations, though. Will the implementation phase of the Bain review lead to a period of change and disruption within the business? If a recession does occur in the coming months, what will be the impact on revenues? If that recession is global, where will Salesforce suffer most? Having said that, automation and the drive to digitise through technology, such as Salesforce, should help protect many of its revenue streams. At the same time, FY24 looks to be another good year for Salesforce, with an increased profitability level.

What was missing from this announcement was any update on ESG. For a change, Benioff spoke less about giving back, sustainability and the environment than in other quarters. It does not mean that Salesforce is doing less, as recent announcements have shown. However, following the investor activism, there has been a shift.


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